RobertPBergman, Estate Planning Attorney

Estate Planning For Women (And the Men Who Love Them)

2011-12-15T12:23:00.001-08:00

A fellow attorney (and award-winning journalist) Deborah Jacobs authored the book, “Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide”. In her recent Forbes article titled “Estate Planning for Women (And the Men who Love Them)” she indicated the below question is a question every financially savvy woman should be able to answer.

Question #4

Who would raise your children?

Few prospects are more wrenching than the possibility that young children will be orphaned. Often, parents put off writing a will because this particular thought is unbearable or couples cannot agree on a potential guardian. Some assume--incorrectly--that it is enough just to ask a relative or trusted friend to step in if the need arises.

But not formalizing the arrangements and doing some estate planning along the way could leave your children in a vacuum. For example, let's say you are a single or surviving parent--in this group too, women predominate. If you do not have a written document outlining your wishes, a court usually decides who will fill your shoes. A custody battle might erupt or, awful as it sounds, no one may want your children. And without financial planning, there may not be enough money for your child's support.

When choosing a guardian, people typically look first to relatives, starting with their own siblings--the child's aunts and uncles. A second choice for some people is their own parents, if they are young enough. Even if certain family members seem like obvious candidates, take into account all the factors involved. Key questions to ask: Am I comfortable with the individual's lifestyle and values? Would my child have to relocate? Can the prospective guardian incorporate my children into his or her household? If I have more than one child, would the guardian be able to keep them together? Does my child already have a relationship and a good rapport with the person?

Here too, you can build in checks and balances--by putting a different person in charge of the money you leave for your child's support. You can name a guardian for the funds, or put them into a trust and designate a trustee to spend the money on your child's behalf. While financial guardianships are a matter of state law and require court supervision in some states, trusts are a private matter. A trust also gives you much more say over how the money is spent.

Questions like this one can often trigger even more questions in your mind. Please accept my invitation to schedule a meeting where we can discuss this topic and others that might be relevant to your estate planning. Give my office a call to set a meeting.

Government Cuts Affect Nursing Homes

2011-12-07T10:08:00.001-08:00

One of my WealthCounsel colleagues posted a comment on the potential for concern about nursing home care levels. Lizette Sundvick targets this concern that appeared in this article: “Medicare Cuts Could Up Nursing Home Costs” SmartMoney.

Nursing home residents may soon face higher costs and reduced services, as planned Medicare spending cuts take effect this fall.

The last few months have been a wild ride on multiple levels, to include concerns over Medicare and the “debt crisis.” While many more challenges lie ahead in terms of budget cuts, some cuts already have been made under the radar screen. Several you should know about actually go into effect this fall, as reported in a recent SmartMoney article.

According to SmartMoney, nursing home residents could face higher costs or reduced care once these cuts kick in.

Background

On July 29, The Centers for Medicare and Medicaid Services (CMS) decided and announced that they would be compensating for last year’s $4 billion shortfall by cutting reimbursement rates to nursing homes by 11.1%. In real terms, the shortfall is going to reduce government reimbursements to nursing homes. In 2010, nursing homes increased charges on residents by an average of 5%. Bad news: These reduced government reimbursements likely will trigger even higher nursing home costs for residents beginning this fall. Alternatively, it might trigger a reduction in services to nursing home residents. Either way, the forecast is not pleasant.

Perhaps I am wrong. Perhaps nursing home residents won’t see increases in costs or decreases in services. After all, the CMS actually justifies the 11.1% cut by pointing out that it is simply a more accurate reimbursement amount based on a government report indicating that Medicare has been overpaying. In fact, a spokesperson for the CMS maintains, “We do not believe that nursing homes will respond to the payment changes by decreasing the quality of care furnished to patients. However, we intend to carefully monitor changes in utilization and staffing patterns to ensure that patients continue to receive high quality care.”

Still, the nursing home industry appears to be monitoring the situation with caution. Bottom line: If you have a loved one in a nursing home, then you, too, should take notice. Keeping abreast of current economic changes keeps you prepared for changes you may need to make on behalf of your loved one.

The potential for drastic changes in long term care environment serve as reminders that our power of attorney and healthcare directives need to be up-to-date and relevant. If you want assurance that your plans are up-to-date, then let’s get a meeting scheduled to review your plans.

Estate Planning For Women (And the Men Who Love Them)

2011-11-14T14:11:00.000-08:00

Question #3

Whom can you trust?

Advancements in medical science and care may enable us to live fuller, longer lives. But that also means more women are likely to suffer from a diminished mental state--a harsh reality that's difficult to accept. In case that happens, you should have a durable power of attorney, appointing a family member, friend or adviser as an agent to act on your behalf in financial and legal matters. Also make sure you have a health-care proxy, a separate document that authorizes an agent to make medical decisions on your behalf.

Choose carefully: A power of attorney, though necessary for all of us, is unfortunately also a license to steal. The best person to put in charge is a close family member--preferably one who lives nearby. Most financial advisers do not want this responsibility, nor is it cost effective to pay their hourly fee to handle routine tasks like paying bills. Naming joint agents, which is allowed only in some states, is one way to provide checks and balances. Or you can appoint another person, like an attorney, an accountant or a family friend, to supervise the arrangement. Before selecting an agent, it is important to determine whether that person is willing to take on the duties.

If you're nervous about giving the signed document to your designated agent right away, you could leave it with your lawyer with instructions on when to turn it over. In that case, remember to tell your agent whom to contact.

Or, instead of making the power of attorney effective from the moment you sign it, you can specify that it be activated by a specific event, for instance, if you become incompetent. The problem with this approach, known as a springing power, is that someone must decide when you have reached that state. Traditionally, this has required a medical opinion.

Don't fall prey to the 2011 "Dirty Dozen" tax scams

2011-11-07T16:50:00.001-08:00

The IRS has identified the "Dirty Dozen" tax scams of 2011. Participating in or falling victim to them can result in real harm to your pocketbook and your freedom. My WealthCounsel colleague, Scott Makuakane, practices in Hawaii and he recently posted five of the Dirty Dozen. He noted that he did not list them in any particular ranking of "dirtiness":

Hiding income offshore

People used to be able to get away with this because of the IRS' former inability to track offshore accounts. Things have changed, and penalties have been increased. Any tax strategy that requires secrecy as an element for success is highly suspect and probably should be avoided.

Identity theft and "phishing"

It is absolutely critical to protect your personal information. All an identity thief needs are your name, birthdate, and social security number to make your life a living hell. Watch out whenever anyone asks for those bits of information, and protect yourself by shredding documents that may contain sensitive information about you before you discard them. Also beware that identity thieves are out there trying to gather your personal information any way they can--through email, by posing as government personnel, by spyware programs that can steal passwords from your computer, and a variety of other nefarious means.

Return preparer fraud

Be careful who you trust with preparing your returns. If you have a fairly complicated return, it would behoove you to work with a CPA. In any event, be sure to work with trustworthy professionals in whatever you do.

False or misleading forms

Some folks claim refunds to which they know they are not entitled. Obvious no-no. Don't file a return that does not pass the smell test.

Frivolous arguments

People sometimes make the darndest arguments. Here is one that will land you in the pokey. Premise 1: there are ample declarations by the IRS in a variety of publications that our income tax system is "voluntary." Premise 2: I have the right to opt out of any "voluntary" income tax system. Conclusion: by golly, I will opt out of the U.S. income tax system and there is nothing anybody can do to me if I do.

Please don't get caught up in any "strategy" that would seem to enable you to evade taxes. Tax avoidance or minimization through recognized legitimate means (such as deductions for charitable contributions and mortgage interest) is good stewardship. Tax evasion is a crime, and it will eventually catch up with you.

You can check out the rest of the "Dirty Dozen" on the IRS website. For some information on legitimate approaches to estate planning, please contact me and we discuss the legal path offering confidence in your estate planning.

Estate Planning For Women (And the Men Who Love Them) Question #2

2011-10-19T11:30:00.001-07:00

Question #2

Is there money in the bank?

In the process of dividing assets into "yours," "mine" and "ours," couples should make sure there is enough money to cover immediate expenses if one of them suddenly passes away. These reserve funds can be held in each of your separate accounts or in a joint one. Just be aware that when you die, your spouse or partner will probably not have access to your individual account right away, and you will each need the discipline to keep the fund flush. A better approach is to maintain a joint account designated for emergencies that can also be available for this purpose.

With bank and brokerage accounts, the most frequent form of joint ownership is joint tenancy with rights of survivorship. It is available to any two people who want to own assets together. Both owners have access to the assets during life, and when one joint tenant dies, the survivor immediately becomes the sole owner of the whole property, regardless of what the will says, or whether there is a will. These features make this type of ownership appealing both to spouses and other couples.

Despite these advantages, joint tenancy has a serious drawback: it exposes each owner to the other's potential liabilities. Unmarried couples also need to be aware that state laws on joint tenancy for non-spouses may vary. Consult a lawyer who is familiar with the rules of the state where you live.

Potential Portability Problems

2011-10-07T09:15:00.001-07:00

Portability has become a popular topic among the estate planning set, and I found this recent post to be valuable. The author of the commentary is Lizette Sundvick, who practices in the sate of Nevada. And her comments are based on the article “Wealthy Take Estate-Tax Exemptions Beyond Grave Until 2013” Bloomberg (8-6-11)

The Bloomberg article notes that: Wealthy individuals in the U.S. will find it easier to cut their estate-tax bill as a result of a provision for using their deceased spouses’ exemption credit.

Much ado has been made about this new power in estate planning known as “portability,” and for good reason. Nevertheless, it’s also prudent never to put all your eggs in one basket. So it is with the matter of estate tax exemption portability.

As you may know, “portability” is the new ability for a deceased spouse to transfer their unused gift and estate tax exemption amount to their surviving spouse. Provided all the required paperwork is timely filed with the IRS, that effectively allows a married couple to exempt an astounding $10 million from federal taxes for their loved ones without the use of trusts or legal devices.

Bloomberg suggests that it is better to think of portability as a “safety valve” for married couples, especially those whose assets would be entirely covered by the doubled exemption, but not something to be relied upon. The biggest limitation, for one, is that portability exists at the whim of lawmakers. After the budget showdown last December, existence of portability is only guaranteed until the end of 2012 (if that, Congress being the politically fickle animal that it is).

But there is another important caveat Bloomberg touches upon that is worth mentioning. Portability is a power that exists between spouses, but in a world of shifting marriages, divorces, and remarriages that also creates strange limitations. Portability only applies to the last deceased spouse. Accordingly, if a widow remarries, then they could potentially lose that massive exemption (even after their own estate has doubled, creating an estate tax liability). Indeed, if portability isn’t lost and if the widow’s new spouse predeceases after using their own exemption by gifting, then the widow’s estate is in the same tricky situation.

We all know (or should know) that relying on fickle politics is addressing the temporary. On the other hand, we encourage you to investigate every opportunity that arises for your use here and now.

Portability can be a worthwhile tool to consider. On the other hand it can be a daunting issue to incorporate into your long-term estate tax plans. As these new planning tools surface, it is advisable to make sure your estate plan is up-to-date and fully addresses your desires regardless of what "portability "may or may not offer. Please call to schedule a meeting.

Estate Planning For Women (And the Men Who Love Them)

2011-09-16T10:25:00.001-07:00

While important to both sexes, estate planning often affects women more profoundly. Women live longer on average and tend to marry older spouses, making them three times as likely as men to be widowed at 65. So for women, estate planning is a crucial part of retirement planning. And since they usually survive their spouses, women more often have the last word about how much wealth goes to family, charity or the taxman.

A fellow attorney (and award winning journalist) Deborah Jacobs recently authored an article in Forbes titled “Estate Planning for Women (And the Men who Love Them)” she indicated the below question is one every financially savvy woman should be able to answer.

Question #1

What key deadlines apply when a spouse dies?

Starting in 2011, a surviving spouse can add any unused estate tax exclusion of the just deceased spouse to her own $5 million exclusion--this is called portability. So a widow can pass on as much as $10 million, untaxed, through either lifetime gifts or her will. But portability is not automatic. To get it, the executor of the estate of the first spouse to die must file an estate tax return, even if no tax is due. Surviving spouses should see to it that the form is filed even if they have nowhere near $5 million of their own, because who knows what the future holds?

Nine months is also the deadline if you plan to disclaim (turn down) any portion of what you inherited from a spouse so that it can go directly to your children or other family members or into a trust for their benefit. The new tax law makes it more likely that spouses will leave everything to each other outright. Other couples may want to give the survivor the right to disclaim at least some money and have it go into a family trust or bypass trust, as it is also called. This allows the survivor to make an informed decision based on her own financial resources and federal and state estate laws at that time. If you want to use this postmortem tax planning strategy, you need to keep an eye on the calendar.

Amy Winehouse got her will right

2011-09-08T11:03:00.001-07:00

This commentary is taken from an article authored by Karen Datko in MSN Money on July 27, 2011. It gets right to the core of a will and its potential importance for your estate. I wanted to share this with you.

The late soulstress reportedly wrote a will that excluded her ne'er-do-well ex-husband.

The late Amy Winehouse was many things to many folks -- fabulous talent, an inspiration to Lady Gaga, an addict who couldn't quite shed her demons all come to mind. Add to that list: wise estate planner.

Winehouse's revised will reportedly prevents any of her fortune, estimated at $16 million and most assuredly growing, from going to her ex-husband, Blake Fielder-Civil, widely regarded as the person who introduced her to hard drugs. Instead, her millions will be divided among her father, Mitch; mother, Janis; and older brother, Alex.

"Let this be a lesson to both the famous and the obscure: A will is a good idea at any adult age," Ron Dicker wrote at DailyFinance.

Fielder-Civil, now serving a sentence for burglary and possession of an imitation firearm, might have inherited everything had Winehouse not put a new will in place. Tim Worstall wrote at Forbes:

However, the one thing, under English law, that divorce does not do is undo the presumption that the natural inheritor is the spouse. In the absence of a will the surviving spouse will inherit at least the bulk of any estate.

Even in the presence of a will written pre-marriage which states otherwise the surviving spouse, or ex-spouse, will again be the natural inheritor.

How would it work in the United States? It varies from state to state, but generally if you die intestate, your estate will go to spouse and kids, or parents or siblings if you are single and don't have children.

Do you have a will? There's a good possibility you don't, even if you're well past 27. "According to an AARP survey, more than one third of Americans over 50 lack a will, living trust, or power of attorney," Kimberly Palmer wrote at U.S. News & World Report.

If you're a parent of minor children, consider yourself negligent if you don't have one. Liz Weston of MSN Money wrote: "No matter how icky you feel about planning for your own demise, you owe it to your kids to spare them the potentially ugly and drawn-out custody battle that could ensue if you don't make these decisions now."

Whether you are older than 27 or younger than 27, it may be worth meeting to discuss a will. After all, it was a very smart move by Amy Winehouse and it could be equally beneficial to you. I’m available to schedule a meeting.

Uncovering Dementia and Alzheimer's Cover-ups

2011-08-26T15:52:00.001-07:00

One of my estate planning colleagues, Lizette Sundvick, who practices in Nevada recently penned this comment on dementia cover-ups. Her post occurred after reading this “The Danger of Your Aging Parent Covering Up Dementia” article in Forbes (August 11, 2011)

Here’s what’s important: it doesn’t matter if you have a diagnosis for your aging parent or not. It matters how your aging parent functions. It matters how you deal with what you see.

Dementia and Alzheimer’s are becoming increasingly common, but even if we are beginning to become more and more aware of how to spot them, it doesn’t make it any easier. Many a reader will be familiar with the terrible uncertainty and concern over their elderly parent’s thinking. Fortunately, Carolyn Rosenblatt of Forbes has more advice to give in her recent article.

Among the many dangers to keep in mind when an elderly loved one starts “slipping” is that they may begin “hiding” it. For one thing, it is not something with which any senior looks forward to acknowledging, even if they are aware of some telltale symptoms. It is human nature.

We all compensate or distract when there is something to hide, both from ourselves and from others. But when something like Alzheimer’s is at stake, it can be all the more difficult to get past, and it is harmful to hide. Indeed, since there is no actual test for dementia or Alzheimer’s, it is possible that a doctor will be unable to diagnose those conditions.

It is important, therefore, to observe how your loved one functions. Keep a keen eye on them and know what you are seeing, for their own sake. The original article has more advice and anecdotes to offer, but Ms. Rosenblatt sums up the steps in four points. As soon as you begin to worry you must, first, persuade your loved one to visit a doctor, and a specialist if possible, to detect it early. Second, you must secure their estate planning documents while they have legal capacity to know and understand what they are doing. Third, you must secure proper care for them. Fourth and last, you have to discuss the circumstances openly with all family members, so all may be aware of the circumstances and can work together to protect your loved one.

Good estate planning should take into consideration the healthcare and power of attorney documents needed to insure a smoother transition for proper care in this type of situation. As articles, like this one in Forbes, raise our awareness of the growing painfulness of dementia and Alzheimer’s, you or your loved one may want to update your existing plan or design a new plan. We can help. Our office is available to take your call to schedule an appointment.

Back to Basics with Estate Planning

2011-08-05T15:24:00.001-07:00

Fundamental Estate Planning

The fundamentals are the same across all sizes of estates. A recent post by my estate planning colleague, Scott Makuakane, who practices in Hawaii reminded me once again that it is important to review the basics. Below is Scott’s blog posting on the fundamentals. I think you will find them a brief, but worthwhile, read.

No one enjoys a conversation about death. And, with the estate tax exemption now set at $5 million for an individual and $10 million for a couple, many people may believe they have no reason to consult an attorney about their estate planning. But avoiding the topic of estate planning can mean unnecessary expense, confusion and conflict.

SmartBusiness recently highlighted the fundamentals of a “well-thought-out estate plan,” with topics that everyone should consider – whether prince or pauper.

Why do you need an estate plan? A comprehensive estate plan ensures that your estate will distributed according to your wishes, provides protection for yourself in the event of your own disability, and allows you to plan for minor children, pets, and charitable causes. You can also make sure that the assets you leave behind will be there for your intended beneficiaries - and not their creditors or ex-spouses.
Can I write my own will? You certainly can, and there are many online sites to help you do so! However, remember that you get what you pay for. Improperly drafted or last-minute, hand-written wills frequently are contested and invalidated in court. If you don’t know what you’re doing, the outcome could be much different than what you expect.
What should every estate plan have? SmartBusiness recommends two powers of attorney and a living will. That's not a bad start, but I would expand the list to include a will, powers of attorney for financial affairs and for health care, and an authorization to your physician to share your health-care information with your health-care agent.
What about trusts? Many people choose to create trusts, not only to reduce estate taxes, but also to help their heirs avoid probate. Trusts also can help shield assets from loss to due to unforeseen circumstances, such as the bankruptcy, divorce, or lawsuits of your heirs.
What mistakes do people tend to make in estate planning? The writer points out two common mistakes: failure to plan for their personal effects, and failure to review and update their plans over time. Reviewing and updating your estate plan is particularly important in light of the frequent changes that have characterized our estate tax law of late. Although the estate tax "coupon" (the amount you can pass estate tax-free) is $5 million for the next two years, the coupon is set to go down to $1 million in 2013, and the estate tax rates are set to go from 35% to 55% at that time. Another mistake that we see is failure to implement an estate plan by making sure all assets are properly titled. Many people create trusts but then do not make sure that title to their assets is transferred into their trusts.

If you have questions, let’s get together and get them answered. My goal is to provide you with helpful information for creating, implementing, and updating your estate plan to serve your wishes. And our mutual goal will be creating an estate plan that will succeed when it is called upon to take you and your loved ones through life’s inevitable transitions.

Top 10 Icebreakers offer guide for blogging

2011-07-11T11:17:00.001-07:00

Another subject that I wanted to bring to your attention is a recently published book recommended by one of my colleagues. It helps with the starting points for getting and keeping good relationships. My goal as a legal counsel is to connect as well as to deliver good legal counsel. I thought you would find these “icebreakers” to be helpful suggestions.

Debra Fine, author of The Fine Art of Small Talk offers a lot of helpful advice on networking and connecting with people while networking. In her book she includes a list of her top 10 icebreakers. She suggests using them at any occasion where you have few established relationships. We’ve all been at those types of events – school meetings, business events, fundraisers, cocktail parties, dinners, and conferences/conventions where you need to start a conversation with people you don’t know well or those “strangers” you would like to meet.

Top Ten Icebreakers

1. What is your connection to this event?

2. What keeps you busy outside of work?

3. Tell me about the organizations you are involved with.

4. How did you come up with this idea?

5. What got you interested in … ?

6. What do you attribute your success to?

7. Describe some of the challenges of your profession.

8. Describe your most important work experience ….

9. Bring me up to date.

10. Tell me about your family.

According to Fine, the theme to these ten icebreakers is that they are personal, but not too personal. “Your goal is to build a business relationship,” she says, “while still getting to know more about a customer or potential customer. If you are talking to an existing customer, they probably already know you are good at what you do, so you just want them to see you on a more human level.” Thinking about this –when you establish that comfortable connection on the human level, they are more likely to refer you to a friend or associate.

The other thing to note about these icebreaker guidelines is that they give the new person control to decide just how much information they are willing to share and where they want to set the parameters of the conversation. On your part, your job is to help the other person feel comfortable with you as a person. You never want to overwhelm them with complex topics. You never want to slip into insider jargon. And you never want to put your audience on the spot regarding religion or politics.

Many of our friends and acquaintances could be more effective using these 10 icebreakers, so I encourage you to forward this link to them. Let’s all communicate more effectively. And you are invited to contact me, so we can get better acquainted.

ESTATE PLANNING: Planning for your children's education

2011-06-21T15:41:00.001-07:00

Recently a fellow attorney in Indiana penned a thought provoking post on planning for your children’s education. I enjoyed it, and I share it below with you. The author is Chris Yugo writing a column for The Times in northwestern Indiana.

I just finished reading a book by Michael Schumacher called the "Mighty Fitz: The Sinking of the Edmund Fitzgerald."

As the title implies, the book chronicles the story of the Edmund Fitzgerald, a huge ore caring vessel that sank in Lake Superior in 1975. Except for what I learned from the Gordon Lightfoot song, "The Wreck of the Edmund Fitzgerald," I really knew very little about the ship and its sinking.

Although you might imagine that book about a shipwreck would end with the ship's sinking, the book actually picked up from there to discuss the investigation and how the families of the men who were lost came to terms with the tragedy.

One thing that caught my attention was a section dealing with the children of the sailors. In particular, it discussed how Eugene "Red" O'Brien, a wheelsman, encouraged his son to attend college and get an education by establishing a trust for his education. According to his son John, "It made me stay in college because it was my job. I was getting paid. Here was my dad, a guy with limited education, working on the lakes. Yet he had the insight to do these things"

The book didn't go into too much detail about the terms but according to John, he received a monthly stipend as long as he remained in school.

The great thing is each of you can do the same thing to encourage your children and grandchildren to attend school. Now some of you might be saying, "I'm having trouble just keeping the mortgage current. There is no way for me to establish a trust fund."

In today's economic environment, I certainly understand that. However, you can still plan now without actually setting anything aside. You can set up a trust for your loved one's education within your will. A trust established within a will is a testamentary trust.

By using a testamentary trust, you don't have to fund it until your death. At that time, it can be funded with the savings account or the proceeds from the sale of the home or from life insurance or retirement accounts. If the funds are available at your death, the trust will fund. If the funds aren't available at your death, then the trust won't fund and you haven't lost anything.

Since you create the trust, you can choose the terms. For example, you can restrict the funds to only be used to pay for tuition, fees and books or it can pay any legitimate educational expense including room and board and perhaps a living allowance. You can make the terms as restrictive or unrestrictive as you please. So be creative.

I'm pretty sure Red didn't plan on being lost at sea. However, he did have the foresight to plan, which enabled his son to get an education. Even if you don't work the ore carriers on the Great Lakes, you should still have a plan.

Please note: Opinions are solely the columnist's, and his information is meant to be general in nature. Specific legal, tax, or insurance questions should be referred to your attorney, accountant or estate-planning specialist.

Remember, I am the attorney who is available to address specific issues related to planning for your children’s education and other estate planning matters. Please call me or post a request to meet in the COMMENT section of this blog post.

It doesn't have to have monetary value to be important to your estate

2011-06-07T09:24:00.001-07:00

SmartBusiness recently highlighted the fundamentals of a “well-thought-out estate plan,” with topics that everyone should consider – whether prince or pauper.

One of their interesting points was that if you are working with an estate planning attorney, most likely the important areas are going to be properly addressed, including the impact of pending changes in estate taxes. However, I’ve found that many people overlook making arrangements for their personal effects, including jewelry, art work and collectibles. They simply assume that their loved ones will be able to agree on how to divide it all up. In my experience, these things are what people argue over the most.

Not long ago, there was a case involving two brothers who litigated for three years over the ‘stuff’ left in their mom’s house. They ended up spending over $50,000 on attorney’s fees fighting over items that were appraised for only $5,000. To avoid this happening in your family, draft a Memorandum of Understanding and attach it to your will. The Memorandum can be very simple, but it should also be very specific in detailing your wishes. Hold a family meeting to identify what your children want, and incorporate that into the memo.

As your circumstances change and evolve over the years, your plans need to be kept current. Don’t forget about external factors such as tax law changes and fluctuations in the value of real estate.

Few people sit down, annually, and take stock of their estates. But if you do, millions of dollars can be saved and much heartache can be avoided.

If you have questions, let’s meet and talk. My goal is to provide you with helpful information for creating, implementing, and updating your estate plan to serve your wishes. And our mutual goal will be creating an estate plan that will succeed when it is called upon to take you and your loved ones through life’s inevitable transitions.

Hiring a caregiver is trickier than you think

2011-05-25T09:20:00.001-07:00

Recently my estate planning colleague in Hawaii, Scott Makuakane, posted these helpful comments on engaging caregiver(s) for those needing such services. As with so many things in today’s world, it is not as simple as it seems. I share this information with you as a “heads up” for when such a need may arise within your family.

If you are hiring a caregiver for yourself or another loved one, you may be tempted to try to make the process as simple as possible by treating the caregiver as a "private contractor." You tell the person "I will pay you so much an hour, and you deal with the IRS and the State when it comes time to pay taxes." After all, taking on the responsibilities of withholding taxes (and then paying the taxing authorities), buying Worker's Compensation insurance, paying Social Security and Medicare tax, and all the rest, may seem daunting if you have never done it before. Be aware, however, that the IRS and the State when it comes time to pay taxes." After all, taking on the responsibilities of withholding taxes (and then paying the taxing authorities), buying Worker's Compensation insurance, paying Social Security and Medicare tax, and all the rest, may seem daunting if you have never done it before. Be aware, however, that the IRS and the State will probably take the position that the caregiver is an employee, that you are an employer, and that all of the legal obligations that attach to those labels are applicable to your situation.

IRS Publication 926 gives very helpful guidance to those hiring household employees, including caregivers. You would do well to go through that publication and consider all of the questions it poses, several of which might never occur to you. For example, can your prospective caregiver legally work in the U.S.? How do you verify that, and what records must you keep to prove that you satisfied your obligation to verify the caregiver's status? On that subject, you can find all of the information and forms you will need at the U.S. Citizenship and Immigration Services website.

Depending on your budget and the number of caregivers you will need, it may make sense to look into local employment or caregiver agencies. This simplifies your job, because you can contract with the agency, and the agency will be the caregiver's employer and will deal with all of the details of being an employer. You will pay a premium for this kind of service (in other words, you will have to pay significantly more per hour for the caregiver's services if you deal with an agency than if you dealt directly with the caregiver), but the agency's experience and employment expertise may make the extra cost seem like a bargain.

Another set of issues arises if you opt to be the employer of a caregiver, and then your employee is injured on the job. If you have made sure to carry the right kinds of insurance, you will be fine. However, the consequences of failing to do so can be financially disastrous. An agency will probably carry Worker's Compensation insurance, but you should be sure to talk with your personal insurance professional to find out if there is anything else you should do to protect yourself through your homeowner's and umbrella policies.

The bottom line is that you should not hire a caregiver without carefully considering your legal responsibilities and potential liabilities, and making sure they are addressed. Ask your trusted advisors--your CPA, your lawyer, and your insurance professional--for guidance, and check out the resources cited above. You will be glad you did.

I would hope you would give me a call prior to your engaging a caregiver. A few precautions can be very beneficial for the longer run…..and likely protect your estate. Please call me, or email me, or post a request to meet in the COMMENT portion of this blog.

FINAL INSTRUCTIONS

2011-05-10T10:20:00.001-07:00

Recently one of my estate planning colleagues, addressed the importance of "Final Instructions". This type of information is similar to an instruction manual that steps us through arrangements that we should address in advance of the inevitability of our passing. We rarely get an instruction manual at birth, but we surely can leave one before our departure from life. My thanks for this post goes to Ellen Gay Moser who practices estate planning in the state of Illinois.

Your “instruction manual” for your children or survivors should begin with the basics. First, do you have a Trust and Will? If so, have you written instructions for your kids (survivors) to follow at your death or disability?

In regards to your estate, are you concerned about probate and taxes? If so, you have done a good job to provide for your heirs and save unnecessary costs, fees, and taxes. If not, you may be leaving your kids with no clues as to what to do and no instructions for them to follow. It's a well known habit that when all else fails, we read the instructions. But if we are left with no clues or instructions, what do we do? We waste a lot of time and money that tends to diminish your estate.

If you have a Trust, then you likely already have an instruction manual stating your goals as to who gets what and when they get it. The duties of your Successor Trustee are set forth in your Trust document and it is his/her fiduciary responsibility to abide by the law and the Trust. The Trustee must collect and manage assets, pay your debts and taxes and seek advice of counsel. Your goals to protect your loved ones can be carried out, if you state your goals loud and clear in your Trust.

Your “Final Instructions” may include specific distributions of special stuff /memorabilia/heirlooms/investments/etc to go to certain people. Instructions will often include tax planning for married couples, disability planning when you become unable to manage your financial affairs prior to death, and who you want to be in charge of your property when you die or are disabled. Provisions may be made in your trust for protecting your children from predators and special instructions will protect your disabled children.

Do you have a plan to protect your children in the event your surviving spouse remarries? Do you care if a child is disinherited? Do you want to protect a spendthrift? If you plan your Will and Trust with lots of “baby sitter” instructions, your children may be protected for life, and your grandchildren too. At the minimum, Final Instructions are important to avoid the consequences of doing nothing. I encourage you to take the time now to meet with an estate planning attorney such as myself to create or review your Final instructions.

Give me a call, send me an email, or leave a comment on this posting, so I can respond in a helpful manner with information or to set a meeting discuss your manual for “Final Instructions.”

Three Classic Estate Planning Blunders

2011-04-20T10:09:00.001-07:00

As we push our way through Tax Month, we are reminded of the importance of the basics of estate planning. My estate planning colleague in Hawaii, Scott Makuakane, recently posted the following article to revisit three areas we should avoid in estate planning. His article reflects the practical experience that comes his practicing estate planning and trust law in Hawaii since 1983.

Three Classic Estate Planning Blunders

Too often, estate plans fail. Here are the three most common reasons.

1. FAILURE TO PLAN. You have heard that failing to plan is planning to fail, and it is true. People procrastinate with their estate plans for a variety of reasons, one of them being the refusal of some of us to accept our own mortality. Not to rub it in, but passing into the Great Beyond is not an “if,” but a “when.” It will make a tremendous difference to your loved ones, your pets, and your favorite charities, if you have made a plan for what happens to your stuff (everything you own) when you assume room temperature.

Your estate plan should also take into the account the possibility of your becoming incapacitated someday. This is an issue that has become more and more important as advances in medical science have made it possible for us to live longer lives. Unfortunately, medical science is still working hard to find the causes, and come up with solutions, to the various forms of dementia. Although we live longer today than in years past, a growing number of us ends up needing long-term care. It is absolutely critical to plan for how you and your loved ones will deal with the issues of long-term care, not the least of those issues being how you will pay for it.

2. FAILURE TO IMPLEMENT. Having a plan is great, but failing to implement your plan renders it all but worthless. One of the primary ways people fail to implement their plans is to neglect to transfer their assets into the right “buckets.” If you have a revocable living trust, it should probably hold most, if not all, of your assets. Yet many people die with assets in their own names, which, in turn, results in costly and time-consuming probate proceedings that could easily have been avoided with some simple asset transfers.

3. FAILURE TO UPDATE. Once you have set your course with your estate plan, you have to remember that even the best of plans will require course corrections. Your health will change. Your stuff will change. The law will change. The list of people you like and trust will change. It is important for your estate plan to change so you can be sure that it will work as intended. The best way to do this is through a regular discipline of reviewing your estate plan and updating it when necessary.

I’m here to help you avoid all three of these “blunder” traps. If I can help, please contact me or leave a “comment” on this blog post. As a trained estate planning professional, my goal is to guide and support you through the estate planning process.

Financial Parenting Tips

2011-03-29T15:45:00.001-07:00

Every parent is challenged to prepare their children for living meaningful lives and managing their affairs responsibly. Here are a few parental tips to help set the tone for your children and their approach to handling the money you provide.

My thanks to my WealthCounsel colleague, Wayne Ball, for turning my attention to these financial planning tips first shared by his legal colleague in Little Rock, Arkansas - Dee Davenport of Delta Trust.

· Make money meaningful: Good financial parenting could begin with an allowance that is tied to the completion of specific chores. It’s important to teach children that money is the result of performance or effort. It must be earned.

· A sense of sharing: Give young children holiday gifts in three pieces: one piece to spend, one piece to save, and one piece to give to someone who is in need. Families report great results with this simple plan, and heirs remember the lessons learned and speak of them gratefully for a lifetime.

· Give just enough: The sage of Omaha, Warren Buffet says “Give your children enough so they can do anything, but not enough so they do nothing”. At the same time, mature children whose values are intact could do so much good in the world, not only for themselves and their families, but also for their communities.

· Think long range: Some of the most successful families have constructed “100 year plans” (four generations) to pass on both the family values and the family financial assets. Increasingly, families are engaging community members in their legacy development processes to assure the effectiveness of the gifts made.

These are just a few guidance tips for instilling many of the basic tenets of financial planning. I hope you find one or more that you can incorporate into your parenting activities.

For more formal estate planning strategies, I would enjoy meeting with you and sharing my experience and knowledge. We can meet – just give me a call, or you can leave a comment on this post.

Estate planning for the rest of us

2011-03-07T21:24:00.001-08:00

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.

Compensating Caregivers

2011-02-15T09:40:00.001-08:00

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.

Filing for Bankruptcy: What Can You Protect?

2011-01-24T15:24:00.001-08:00

With 1.6 million Americans expected to file for Bankruptcy this year, we know that at least these 1.6 million and very likely many more researching the bankruptcy option have been asking the same basic questions. “What can I protect?” “What will be left?”

A recent article in the Wall Street Journal Digital Network addressed these very questions. My colleague in Nevada, Lizette Sundvick, offers a summary commentary on this article.

Some may opine that we are climbing out of the recession, but the effects are still wearing on us. According to estimate by the American Bankruptcy Institute, more than 1.6 million Americans are expected to file for Bankruptcy this year, with 42% of filers citing “job loss” and another 65% citing “income reduction” as the determining factor. Against this backdrop, it’s unfortunate that bankruptcy hits responsible persons the hardest because they likely have the most to lose. If you are filing this year, then you may have a great deal you wish to protect. I thought I’d share some tips from a recent article on SmartMoney about what you can protect.

A Home: The protection afforded your home depends on your state of residency. In addition, different states offer different acreage allowances for city and rural properties. Beyond that, the equity you have in your house also can be important to protect, because most states have an exemption allowing a certain amount of that equity to remain with the homeowner in the event that the home is sold by the bankruptcy trustee.
Tax-Exempt Retirement Funds: These are usually safe, and IRAs usually can be protected up to $1.17 million per person. Don’t, however, try to dump other assets (i.e., from investments that are not protected) into the retirement fund. This is a no-no.
A Car: Trying to retain the car is similar to retaining the house, since your level of protection depends on the laws of your state of residency. If the value of the car is below the exemption limit, and it is owned by the filer, then it can be kept. Otherwise, equity up to the exemption can go to the filer in the event of sale. Of course, in the 16 states that allow the federal “wild-card” exemption, the rest of the value of the car may be covered and the car itself retained, but this itself depends on state laws and exemptions.
Life Insurance Policy: If the policy is term-life insurance, then it is generally safe. Whole-life policies are generally regarded as investment vehicles, however, and in that case it will depend on state exemption levels.
College Savings: If college savings are held in a 529 plan or a Coverdell account, there are a couple of factors you need to know. If the account is only 2 years old, it is only protected up to $5,000. However, if the account is older than 2 years, it will be safe for so long as the beneficiary is not also the filer.

Generally speaking, the biggest factors are the state-specific exemption levels and allowances. Be sure you obtain competent professional advice to protect your interests (and stay out of hot water).

If you're worried about the future and how you can guard against economic fallout, we can give you some reassurance. Give me a call to discuss your options. If you have a question or two, please submit as a comment to this blog post, and I’ll respond in the comment thread or address in a fresh blog post.

"My Mother took care of me, so I'm going to take care of her."

2011-01-06T11:19:00.001-08:00

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.

The Tax "Deal" - the Forecast is Dark Clouds on the Horizon

2010-12-16T12:14:00.001-08:00

My fellow member of WealthCounsel, Richard Wohltman of Alexandria, VA, posted this relevant commentary on the Tax “Deal” currently being ushered through Congress.

There has been a lot of talk this month about the "deal" to extend the Bush tax cuts. That "deal" also includes a substantial increase in the amount that can pass to your heirs without paying any federal estate tax. The 'exemption amount' will be increased to $5,000,000 per person.

The stated reason for that increased exemption amount is to help 'small' business owners and family farmers pass the business or farm to their heirs without having to pay estate taxes. It also means that all but a very limited number of multi-millionaires will have to file and pay federal estate tax.

Dark Clouds are Forecast.

There really are dark clouds on the horizon even if the "deal" is passed by Congress before the end of the month. The increase in the exemption is going to add billions of dollars to the federal deficit. The Treasury is going to have to borrow that money and we are all going to have to pay taxes or have benefits reduced just to pay the interest on those loans. And the day will come when the loan will have to be paid in full.

There is a more pressing problem, however, for estate planning. The "deal" only lasts two years! At the end of 2012 we will find ourselves right back where we are now -- facing a stupendous increase in the number of estate tax returns and tax payments when the exemption amount falls to just $1,000,000 starting January 1, 2013. The problems from the end of the Bush tax cuts (and the increased exemption amount from the "deal") return in 2o13. The uncertainty of how all of the estate and gift taxes will be interpreted once the large exemption disappears is the big grey cloud on the horizon for estate planners.

Estate planning attorneys have been hoping for some stability in estate tax policy so plans can be designed based on a clear expectation of how estate taxes will be calculated when death occurs. That stability disappeared with the Bush tax cuts. Estate planning attorneys all knew we were faced with the potential return to the 'old rules' with only a $1,000,000 exemption in 2011 and had to plan for the return of the middle class taxable estate. The same lack of stability continues since we can only look at what happens at the end of the next two years.

What does all this mean to you?

Don't think that the "deal" will make your estate planning easier just because you don't have Five or Ten Million Dollars. The vast majority of our clients require extra tax planning if the exemption returns to 1 Million Dollars.

Your estate planning lawyer must assume that the lower exemption will return and is forced to include options to address the substantial estate tax liability that will return in 2013. Your estate plan will continue to require more complication just to protect your family and your business with the automatic termination of the "deal" in 2013.

Where's the silver lining?

Just remember, if there is a silver lining in every grey cloud, that doesn't mean that the grey cloud is gone. Don't let the proposed silver lining blind you to the limits inherent in any "deal" that lasts only two years!

The Federal Estate Tax Lapsed for 2010

2010-12-07T14:33:00.001-08:00

The federal estate tax lapsed for 2010, and barring no action by Congress it was scheduled to return on Jan. 1 with an exemption of $1 million per person and a maximum rate of 55 percent.

I have good news to share with you. The long wait for action to address the unknown status of the federal estate tax may be approaching an end. In a December 6, 2010 online posting by the New York Times, they reported that President Obama announced a tentative deal with Congressional Republicans on Monday.

An excerpt of the article appears below, and a link to the full article is included. The accompanying photo by Joshua Roberts of Reuters appeared with the article.

Mr. Obama made substantial concessions to Republicans. In addition to dropping his opposition to any extension of the current income tax rates on income above $250,000 for couples and $200,000 for individuals, he agreed to a deal on the federal estate tax that infuriated many Democrats. The deal would ultimately set an exemption of $5 million per person and a maximum rate of 35 percent — a higher exemption and far lower rate than many Democrats wanted.

http://www.nytimes.com/2010/12/07/us/politics/07cong.html?pagewanted=1&_r=1&nl=todaysheadlines&emc=a2

But the NY Times article also cautioned that the deal is not supported by all parties. So resolution may be within sight, but it is not yet a finalized deal.

“The House Democrats have not signed off on any deal,” Representative Chris Van Hollen of Maryland, who has been representing House Democrats in formal negotiations on the tax issue, said Monday night. “We will thoroughly review and discuss the proposed package in the caucus.”

Some senior Democrats said an agreement by Mr. Obama to accede to Republican demands on the estate tax could lead to a revolt among lawmakers.

With this positive news in the air, it may be time to schedule a meeting to adjust your estate plans to maximize the impact of this likely change in the federal estate tax law. Call me for an appointment, or leave a comment with a question below.

NEWS FLASH: Yankees Beat the Miami Dolphins!

2010-11-29T11:01:00.001-08:00

Yes I know, that's impossible. But the heirs of George Steinbrenner, who died recently at the age of 80, certainly came out ahead of the heirs of Joe Robbie, the former owner of the Miami Dolphins who died in 1990.

Steinbrenner's timing couldn't have been better. His heirs will inherit the team without having to pay any estate taxes on a $1.1 billion estate. See “How Steinbrenner Saved His Heirs a $600 Million Tax Bill” from the Wall Street Journal here.

Contrast this with Joe Robbie. When he died in 1990 the heirs had to sell the football team and the stadium at fire-sale prices in order to pay a whopping $47 million estate tax bill.

Unlike most owners Joe Robbie built his own stadium entirely with private capital. The stadium had to be sold along with the team and it no longer bears Joe Robbie’s name. For more details see “Yankees vs. Dolphins: Steinbrenner’s Final Victory”

You could say, "Yeah, but his heirs are still wealthy." True. But it really isn’t just about money. Robbie's intentions were defeated; his family was removed from the success he worked so hard to build from his very modest depression-era beginnings. Estate planning affects the heart as well as the pocket book.

(What happens to the ultra-wealthy can happen to any small business owner…often with more devastating results. I’m always available to share my experience and knowledge to create a better estate plan.)

My thanks to my associate Greg Turza who practices in the state of Illinois for this clever commentary on estate planning.

Benjamin Franklin does estate Planning

2010-11-08T17:04:00.000-08:00

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.

Disabled and no Medicare to help!

2010-10-15T10:27:00.001-07:00

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.

**********

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.

Can a DIY Will cost you a bundle?

2010-10-06T16:28:00.001-07:00

In this age where all the information you ever wanted can be found on the internet, it is no surprise to encounter articles like the one in Forbes magazine raising concerns for those who save now on a Do-It-Yourself Will only to leave an expensive nightmare for their heirs. I enjoyed this brief commentary by my WealthCounsel associate, Suzann Beckett. I hope you also enjoy it.

Punctuation is important. For instance, consider the difference between a period and a comma. Sure you might think of one as a point of ink, as opposed to a point of ink with a tail. But if you misplace that comma and insert a period instead – that little error of grammar could just cost your heirs a legal tussle like you never dreamed was possible.

It's true. I swear.

Then again, filling in the blanks can be a nightmare in disguise, too. Imagine using a DIY Will package that innocently asks you to, “Insert Name Here.” No problem, right? Well, no problem unless you attach a dollar figure to that line, and fail to include a name. You might just inadvertently have directed a substantial sum of money to, “Insert Name Here,” whomever that might be. If nobody catches the error, your heirs just might be stuck with a battle royal over what you meant to write, as opposed to what your Will actually says.

Deborah L. Jacobs outlines these two disasters of DIY estate planning, as well as some notable others, in an intriguing column featured on Forbes.com. You can find the full Forbes story here.

Jacobs makes some excellent points about the importance of taking estate planning seriously, whether you are wealthy or not, famous or anonymous, a DuPont or a Miller. We all suffer the same tendency to put off the inevitable – sometimes until the inevitable beats us to the punch.

Anyone who even dreams that estate planning doesn't matter should read Jacobs excellent article if for no other reason than to understand better how a rancher could have lost $3.5 million in estate taxes, as a result of an effort to economize on the cost of having a will drawn up. You may also be entertained, or horrified by the story of how a simple note from the late CBS reporter, Charles Kuralt, could have led to a legal battle that lasted 6 years.

It's a subjective question, to be sure. But it's one worth asking ourselves. Where is the real savings found, up front in the estate planning phase of life, or possibly later, assuming no legal wrangling results from using DIY legal forms and software packages?

The author of the Forbes article on DIY Wills is a lawyer who took a turn to writing and journalism. The Forbes article is likely a precursor to her new book that is being released soon. There are many horror stories of people who took a shortcut in their estate planning. Rather than dwell on these wills gone bad, I’d rather talk about the wills done well where I assisted people to truly plan their estates in a way that met their objectives. Call me if I can help you in pursuit of your estate planning objectives.

Do It Yourself Estate Planning

2010-09-24T10:24:00.001-07:00

Forbes Magazine’s September 7 issue had a thought provoking article on “Do It Yourself Wills”. My WealthCounsel colleague in Montana, Mark Josephson, took the conversation one step further with the commentary he shared. I hope you find this informative.

Josephson begins, “My Larsson estate commentary and a recent article on Forbes.com regarding the pitfalls of do-it-yourself estate planning, The Case Against Do-It-Yourself Wills got me thinking about some additional comments. I could not agree more with the overall point made in the Forbes article. I do disagree with some of the details.

The Forbes article talks about the famous Montana court case involving Charles Kuralt (remember he was the famous CBS broadcaster who labeled Montana's Beartooth Highway as the most beautiful drive in America) and his handwritten love letter to his mistress. In a case that went to the Montana Supreme Court FOUR times, his handwritten love letter was ruled to have given his valuable Montana property to his mistress and to add insult to injury Kuralt's family had to pay the estate taxes due on the Montana property because the handwritten letter did not coordinate with the tax clause of his professionally drafted Will.

The article reminded me of another Montana case, The Estate of Dern, in which case Mary and Clifford Dern, who each had children from a different marriage, bought a trust package from a non-lawyer and also attempted to amend it themselves four times -- sometimes having proper signatures, sometimes not. In the end, the children ended up suing Mary with the case ending up in the Montana Supreme Court. I think Justice Nelson in that case summed up the whole do-it-yourself thing as best as I've ever read. He said:

Given the facts of this case, it is appropriate to make a further observation. If nothing else, our decision here should serve as a warning of the pitfalls of the "canned," "fill in the blanks," "one size fits all" trust instruments that are increasingly being sold to unsuspecting members of the public, particularly senior citizens, by salesmen, many of whom have no professional qualifications whatsoever and some of whom are little better than scam artists. ... In truth, few areas of the law are more technical, complicated and prone to financial disaster than estate planning and trusts, nor more demanding of the sort of individually tailored advice and assistance that can best be obtained from a competent attorney and tax professional. This case, unfortunately, proves that point. [my emphasis added]”

From his position on the bench, Justice James C. Nelson of the Montana Supreme Court certainly offered a stern warning on the “DIY Wills”. The Judge’s views seem to have been formed long before the Forbes 9/07/2010 article, but his sentiments seem to parallel the Forbes article. I’d like to serve as the ounce of prevention by serving as your “competent attorney” that the Judge refers to in his above commentary.

Estate Planning Traps

2010-09-15T15:35:00.001-07:00

This is a helpful bit of information that my fellow estate planning colleague, Mark Josephson, posted from his law offices in Montana. He’s relatively new to blogging, but I think he’s done well with this information in a summary format. I am reposting his information to share with you.

I seem to be on a roll this morning over the pitfalls of do-it-yourself estate planning. Here is list of Common Pitfalls and Traps I've had in my basic estate planning handout for clients:

1. “I’m too young to worry.” Reality: If you die young with a spouse and/or children you need to protect your loved ones. Also, by planning early you have the power of leverage/appreciation.

2. “My estate is too small.” Reality: If not planned, a smaller estate can suffer greater percentage shrinkage than a large estate due to increased administration costs necessary in a non-planned estate.

3. “I’m leaving everything to my spouse, so estate tax doesn’t matter.” Reality: Leaving everything to a spouse just postpones tax and wastes the dead spouse's estate tax “coupon”: Wasting a coupon meant wasting $1,575,000 in tax savings in 2009.

4. Believing one size fits all. Corollary: You get what you pay for.

5. Not paying attention to who you have on what and how: Beneficiaries of life insurance, annuities and retirement accounts. Wrong people get the wrong property.

6. Failing to consider trusts as vehicles to pass wealth during life or at death. Convenience trusts, irrevocable life insurance trusts, “Crummey” power trusts, intentionally defective grantor trusts, GRATs, QPRTs (for cabins or vacation homes).

7. Not planning for your disability; not avoiding a “living probate”.

8. Not having any will or trust, handwriting it yourself, or having them prepared without proper analysis for your situation.

9. Too much in joint tenancy with right of survivorship; disproportionate ownership by husband & wife. Joint tenancy is convenient but it can ruin an estate plan if not used correctly.

10. Failing to name guardian of minor children.

11. Failing to prepare business succession plan.

12. Failing to plan for estate liquidity and/or tax payment alternatives.

13. Having too little life insurance. If you, the money maker dies, what is your family going to live on? Often life insurance is the only affordable way to solve the problem.

14. Not realizing life insurance you own on your own life is included in taxable estate for federal estate tax. While the proceeds may be income tax free, they are not necessarily estate tax free if you own a policy on your life.

15. Not considering lifetime gifting program: Children, grandchildren, charitable techniques.

16. Not considering alternative operating entities.

17. Procrastination: Letting indecision lead to inaction. Usually, doing something is better than doing nothing. See my post below on How to Avoid Vapor Lock

18. Lack of Communication. While your estate is private, you should discuss matters with those you intend to have care for you or handle your affairs after your death. Often better planning happens when the younger generation is included and aware of what's going to happen.

19. Not keeping estate plan up to date. You should review your estate plan at least every few years.

20. Believing a magic bullet exists or “This won’t happen to us.”

21. BEWARE of “constitutional,” “pure,” or “common law” trust schemes.

Remember: If it sounds too good to be true, it is.

I enjoy having Mark as a colleague. For your information Mark does good work, and his firm, Josephson Law Firm, has received the highest rating through Martindale-Hubbell and is listed in the Bar Register of Preeminent Lawyers. Additionally, Mark Josephson has recently been selected by his peers for inclusion in the 2010 edition of The Best Lawyers in America.®

If you have questions about any points Mark makes in this post, please leave them as a “comment” below, or call my office.

"Dragon Tattoo" Estate Drags On

2010-09-01T12:06:00.001-07:00

A recent post by fellow estate planning attorney, Greg Turza offered an interesting commentary illustrating the need to clearly identify who your heirs are. I hope you find this an interesting story about this famous author and his death without a will.

Stieg Larsson, the author of the best selling novel “The Girl with the Dragon Tattoo” (now a movie), died in 2004 without a will. His heirs are still fighting it out with Larsson’s live-in girlfriend of 32 years. She and Larsson never married which leaves Larsson’s heirs as the sole beneficiaries of his estate.

Swedish law is the same as many states on this issue. If you die with no spouse and no children your heirs are your siblings and your parents. In Larsson’s case this means his father and his brother. Apparently, the basis for the girlfriend's claim is that she was involved in the editing of his novels. For more details see the story here.

You may be surprised to see who your “heirs” are if you died without a will. It depends on the relationships you have by blood or marriage who survive you. To determine who your heirs are under our state laws, you might want to spend a quick hour with me to get up to speed on this.

One other interesting aspect of the case is that all three of Larsson’s novels were published after he died so the value of his estate at the time of his death was probably nil. But as it turns out, even if he had great wealth at the time of his death Sweden repealed its estate tax in the same year of his death, 2004! If only the United States would follow suit.

If Steig Larsson had spent an afternoon with me, he would have avoided many of these problems. And the lives of his heirs would have been considerably less stressful. If you want to avoid Steig Larsson’s fate, please contact me, and let’s meet. If you’d like to read Larsson’s trilogy, you can find it here: Millennium Trilogy.

ILL WILL calls for a WILL with special terms

2010-08-12T14:51:00.001-07:00

Not surprisingly situations occur that drive a person to disinherit a child or heir. My colleague in Wealth Counsel, Greg Turza , offered the following comments, and I am sharing them with you.

Has one of your children run off and joined a religious cult where he was taught to reject his parents? Or become a compulsive gambler--or even worse -- a criminal?

Disinheriting a child who has become estranged from his family is often understandable. Knowing how to do it right is critical if you want to avoid court battles over your estate when you are gone.

Generally, children have no right to inherit under a will or trust. In Illinois you can exclude a child from your will or trust simply by omitting the disinherited child’s name. But this can lead to costly litigation.

Suppose after you die the disinherited child claims that the omission was inadvertent? Or a product of “undue influence” by the children who were included? Costly litigation will erode their inheritance.

To avoid this calamity the best policy is to specifically mention the disinherited child and state explicitly your decision. For example: “I acknowledge the existence of my son Michael Smith but have decided to make no provision for him as beneficiary.”

Remember, sometimes children are disinherited simply because they are wealthy or because the other children need more help. In such a case consider as an alternative: “It is not for lack of love and affection that I have decided to make no provision for Michael Smith in this instrument.”

Not surprisingly, to disinherit a child or heir requires attention to detail. Knowing how to do it right is critical to preserve your estate from expensive court battles when you are gone. If this is a topic we should discuss, call me or leave a comment here.

Bankruptcy can be an estate management tool

2010-07-27T14:32:00.001-07:00

Bankruptcy can be a vital estate planning tool for some. My colleague Suzann Becket is a fellow member of Wealth Counsel. She recently posted the below suggestion that bankruptcy is one tool that fits into your estate management tool set.

What do Abraham Lincoln, MC Hammer, Johnny Unitas, and Walt Disney have in common? They all filed bankruptcy at some point in their lives. These men were all at the top of their field at some point in their professional lives. In some cases, such as Lincoln and Disney, the bankruptcy came relatively early. By taking stock of their situation, and availing themselves of the legal remedy to shouldering a debt they felt they could never recover from, Mr. Lincoln and Mr. Disney were able to start fresh. They both went on to great things afterward.

Johnny Unitas was a superstar quarterback for the Baltimore Colts, while MC Hammer was an entertainer with a highly lucrative career. But having a substantial income does not guarantee that business mistakes, lawsuits, or bad investments won't take their toll. In the case of Unitas and Hammer, their peak earning years were behind them when their financial troubles became insurmountable. Each of them sought bankruptcy protection and both of them were able to recover from their fiscal woes…..

It is likely that much of the public is not aware that bankruptcy can take multiple forms, depending on whether it is filed under Chapter 7, Chapter 11, Chapter 12, or Chapter 13. You may be able to determine which option is best suited to your circumstances by doing a little independent research. But you should never fear the process based on the feeling that you are on your own with no where to turn for help. That is just not the case.

There is also at least a slim possibility that part of the reason some people are resistant to the idea of filing for bankruptcy protection is the fear of embarrassment. The idea of being perceived as a deadbeat who is trying to run out on their obligations may cause some people who would benefit from the law, to continue to struggle and suffer the stress of serious monetary shortfalls month after month. Perhaps it would be worth reminding those people that the intent of the law is to provide options and solutions, not to ridicule an individual who has fallen on hard times, in many cases through no fault of their own.

Henry Ford, Mickey Rooney, Kim Basinger, Debbie Reynolds, and Donald Trump have all filed for bankruptcy protection. Yet their fame and their accomplishments are not diminished by the fact that their finances have left them suffering through sleepless nights, and mounting stress levels at one time or another.

Seeking bankruptcy protection is certainly nothing to be taken lightly. But it can be argued that it shouldn't be avoided unnecessarily, either. Perhaps it is of comfort to some when they realize that they may feel admiration for others who have found themselves in difficult times and sought the legal protection afforded by bankruptcy law. Maybe it is worthwhile to know that we are truly not alone during some of the more stressful and worrisome periods of our lives.

You may not consider bankruptcy as a first option tool in estate planning, but you should always keep it in mind as a potential tool. Times have changed, and bankruptcy is no longer a sign of failure. Rather it has become a business tool as well as a personal tool in managing your estate. If you wish to explore the benefits of bankruptcy, be aware that knowing how and when to use this tool can be critical to preserving your estate from expensive court battles. If this is a topic we should discuss, call me or leave a comment here.

Include your Digital Assets in your Estate Planning

2010-07-13T17:11:00.001-07:00

Before we leave the topic of Digital Assets, I have one more excerpt from an article by Dennis Kennedy, who is an information technology lawyer and legal technology writer who publishes a monthly column in the ABA Journal. You can find the full text of the article at http://www.abanet.org/lpm/lpt/articles/ftr03103.shtml. The rapid explosion of digital information and accounts is making this a topic of interest to nearly everyone of us.

Inventory Your Digital Assets.

I spent a large part of my early legal career as an estate planning lawyer. In the case of either death or incapacity, the first important step is to track down and identify all of the assets, liabilities and other concerns that must be addressed. Once an inventory is created, you can move forward with marshalling and collecting assets, identifying outstanding liabilities and paying them in a timely fashion, and dealing with outstanding issues, such as turning off utilities, canceling credit cards, arranging for storage or disposal and the like.

In the real world, your family and designated successors (personal representative of your estate, trustee of your trust or attorney-in-fact under a durable power of attorney) will be aided immensely by any list of assets and liabilities that you can prepare for them and leave in a place that is easy for them to obtain.

In your digital world, you also want to help your successors by creating an inventory. The more detailed and accurate the better, of course, but even a small start can be of help. Here are some of the things I suggest that you inventory:

Hardware. Inventorying your hardware seems like an easier project that it actually will be. I suggest that you create a list of your hardware with a summary overview of what is on it. Creating the inventory is likely to be an eye-opener for you. You are likely to find that you have important information not only on the computer system you use everyday, but also on multiple other computers. Many of us have at least one laptop and one or more desktop computers. Many people keep copies of vital information on their work computers. Where do you back up information? You might have many USB flash drives, USB hard drives, backup CDs or DVDs. There might be important pictures still on digital cameras and even information on iPods or other devices.
Software. Do you use Quicken or another financial program? What income tax preparation programs do you use? Do you create spreadsheets or Word documents with important financial information? If you blog, is there a program that someone would need to use to post news to your blog?
File structures. Your inventory should sketch out the main folders and places where you keep personal, financial and client files and documents. For someone like me, I also have audio and video of presentations and podcasts that I’d want someone to be able to locate and deal with. You might have important collections of family photos or videos or work in progress.
Online presence. Create a list of your Web site(s), blog(s), Facebook and other social media accounts, online backup sites, online sites where you store documents, photos or other files, and listservs, groups or other sites to which you belong.
Online accounts. Amazon and other shopping sites make it easy for you to create accounts and include credit card information. You might also have online access to bank and investment accounts. In fact, in many cases, you might no longer be receiving paper statements for accounts. If you don’t identify these accounts, it will be difficult for your successors to even know that they exist because there simply will be no paper trail. Also, make a list of all the e-mail accounts you have and use. Many of us have several e-mail accounts these days.
Work information. Lawyers might have access to client sites, collaboration sites, online document repositories or other information that no one else knows about. In addition, they might have access to software, online tools or online databases that someone taking over their work will need to have. In some firms, lawyers might have important network passwords, backup media or other digital assets the existence or value of which is not realized until they are gone.

At this beginning point, you really want to gather and collect as much information as you can for your inventory. You can work on organizing and prioritizing later.

This is a new area of estate planning, and this information is helpful to trigger our thinking about our digital lives…..and which parts of our internet interaction, our home computer, and our business computer have become our digital assets that should be part of our estate planning. My suggestion is that digital assets are well worth organizing and treating as assets of your estate. Your comments or suggestions are welcomed to this blog. And I am available to discuss steps for managing your digital assets beyond the above list…..if advisable, let’s talk.

Who takes care of your Estate's Digital Assets?

2010-06-28T15:55:00.001-07:00

The following is an excerpt from an article by Dennis Kennedy, an information technology lawyer who authors a monthly column in the American Bar Association Journal. You can find the full text of the article at http://www.abanet.org/lpm/lpt/articles/ftr03103.shtml

Andy Olmsted was a rare individual, in no small part because he is one of the few who thought carefully about what would happen to his online presence if he were to die. A popular blogger, Olmsted wrote a post before he left for service in Iraq, along with instructions for his survivors to post it to his blog in the event he was killed in action. Unfortunately, it had to be posted. I read the post on the day it appeared in 2008, and I re-read it when I prepared to write this article. It remains for me one of the most moving posts in the history of blogging http://obsidianwings.blogs.com/obsidian_wings/2008/01/andy-olmsted.html.

Tips for Providing Digital Assistance After the Death of Another

It’s also possible that either as a survivor, you might find yourself in a position where you need to handle someone’s digital affairs. I have a few tips.

Find knowledgeable technical and legal help.
In the case of a death, try to get to contact lists, e-mail accounts and social media accounts to notify friends who the deceased would want to be notified.
Change all passwords as soon as possible.
Try to understand the totality of the person’s online presence and identify some of the people he or she has interacted with most for assistance, especially in the social media platforms.
Do not start closing accounts, shutting down hosting and e-mail, or taking other drastic steps until you have a good sense of the individual’s presence and what you are ultimately going to do with it. Keeping a Web site up for a year or more will not be expensive. Shutting it down too early and losing valuable data could be quite expensive.
Be slow to delete, but when you delete or dispose of computers and drives, delete in accordance with forensic standards so data cannot be retrieved by others.
Spend $100 on an external USB hard drive and make a copy of all hard drives, flash drives and other data and keep them in one safe place. Once you start to go through the data, you can keep another drive with the “good stuff.”
Make copies of Web sites and other online accounts.
Locate all the financial information and client records as soon as possible and aggregate and isolate them.
Remove credit card information from shopping accounts.
Err on the side of keeping e-mail, documents and photographs for family members.

Resurrection of the Death Tax?

2010-06-15T12:56:00.001-07:00

The absence of rules for the estate tax is concerning. Greg Turza is a fellow estate planning attorney who practices in Skokie, IL. He read a recent article on the estate tax situation, and what follows is his summary. His post also includes a link to the more detailed article. And you are welcome to contact me with any of your questions.

The good news is the estate tax is repealed! The bad news is, not for long. Since Bush's 2001 tax cuts went into effect the exemption from estate taxes climbed year by year from $1 million to a high of $3.5 million in 2009.

This year, 2010, is the repeal year but the Bush administration could never garner the 60 votes he needed in the senate to make the repeal permanent.
The consequence is the so-called "sunset" rule. As of January 1, 2011 the law automatically goes back to the way it was in 2001. In the case of the estate tax that means only a $1 million exemption and a top 55% tax rate.

The Obama administration advocates extending the 2009 exemption of $3.5 million on a permanent basis. This appeared to be where the Senate was headed on May 18th when an agreement was reached that had the support of more than 60 senators.

But the deal fell apart when the Democratic leadership decided that it will not allow the legislation to come to the floor for a vote unless the legislation has the support of more than half of the Democrat's 59 votes. Since the Democrats lack 50% support within their party the legislation failed.

Regardless of what happens there will be an estate tax next year. The only question is whether the exemption will be $3.5 million or $1 million –and $ 2.5 million is a huge difference in the plans for millions of taxpayers.

For the full story click here.

The “up-in-the-air” situation with the estate tax is concerning. It is best to have a plan of action that you can execute quickly once the direction is finally established. If you’d like to discuss ways to assemble a plan in advance, either comment on this blog with your questions or call me to meet in person.

Listening is Key with Aged Adults

2010-06-10T16:21:00.001-07:00

Mary Lynn Pannen is one of the nation’s leading experts on Geriatric Care Management and Home Care for seniors. As President of Sound Options, she has built a very successful home care business in the Puget Sound region. Mary Lynn recently described her company’s service this way: “Able to transform potentially stressful circumstances into readily manageable solutions, Sound Options works with clients with a wide range of needs and medical conditions.” I was struck with how similar her mission is to my mission in constructing comprehensive and well-thought-out estate plans. For those of you wrestling with plans for your older adult parents, I thought you would benefit from this recent blog post by Mary Lynn.

One of the reasons that I am intrigued with working with older adults is their life stories. I really like listening to how a person summarizes their life or how they remember the simplest detail. Listening is a pleasure and it is so important while helping older adults live out the last chapters of their lives. One can learn so much by listening. As an adult child you may hear things you never knew before and that may allow you to see your parent in a different light. You may learn the very reason for why your parent made decisions – good or bad. I find listening creates for me more understanding and that at the end of the day we all have similar wishes and desires.

If possible have your older parent participate in planning their care
Create a safe environment for your parent
Provide quality of life- this will be different for each person.
Talk about the old times. Reminiscing can be very satisfying to both your parent and you.
Do not make promises you cannot keep
Make sure that their end of life desires are fulfilled
Do not forget that your parent is an adult – not a child
Provide ways for your parent to remain as safely independent as possible

Planning and sensitivity becomes even more important with age. And it is even more important to address the personal as well as the factual elements of the situation. If I can be of assistance in “transforming your potentially stressful circumstances into readily manageable solutions”, please, let’s talk. Call me.

A word or two about ethics brings the comfort of confidentiality

2010-06-01T14:08:00.001-07:00

Meet one of my fellow Wealth Counsel attorneys, Suzann Beckett. Suzann is a colleague who practices in Connecticut, and she recently posted to her blog this reminder of ethics guidelines as they apply to sharing confidential information.

Perhaps one of the least talked about aspects of working with a lawyer
is the fear some of us have of exposing our personal lives to a total
stranger. That reluctance takes a back seat in criminal law, where the
process you are thrust into isn't voluntary. But when considering the
larger decisions in life, opening the books on a lifetime of financial
acquisitions, debts, and concerns to a total stranger can lead some
people to avoid involving a lawyer when making long term plans.

Like most fears, the emotional reaction we have can be profoundly
counter-productive. Sadly, it isn't all that unusual for costly,
irreparable mistakes to be the result of our attempts to keep prying
eyes out of our business.

The key is to be selective. When you plan for the future, you don't
necessarily want to show the records of your financial holdings to your
hairdresser, or the guy who mows your lawn. But it would be a good idea
to come clean with the IRS on an annual basis. And although it may seem
counter-intuitive, the best way to maintain control of your wealth and
property over the long haul is to have an open, honest discussion of
your plans with a legal professional who has your best interest at
heart. Whether you are buying a home, building a business, filing for
bankruptcy protection, or planning for the handling of your estate, you
want to be the person in control - and you want the decisions you make
to be based on solid legal grounds, not a gut feeling that may or may
not stand up when you need it to.

Keep in mind that you are the customer, and the law is in a very real
sense, a service industry.

So rest easy when you think about laying open your books, and your plans
to a lawyer. The Bar Association holds lawyers to a very high ethical
standard. Like your doctor, your lawyer is required by law to keep your
confidence. A responsibility that we take very seriously, and one that I
find comforting whenever I sit with a client who indicates the slightest
concern for the security of their personal information.

When serving as your legal counsel, it is my responsibility to act with your best interests at heart. This posting by Suzann Beckett is a concise reminder that my counsel to you is for you and in your best interest. When offering counsel in my professional capacity, it is always confidential and it is specific to your needs.

First String or Second String..They should all be good

2010-05-10T14:22:00.000-07:00

Being a member of the Wealth Counsel organization gives me access to the first string across the country, and recently one of these colleagues addressed what is a concern for many of my clients. So I’m passing along his thoughts. I think you will find them, as I did, to be very relevant and helpful.

“Typically a client builds a team of advisors to pull all the planning and implementation pieces together. We all know that selecting this first team of advisors is very important. Many people are extra thorough in their approach. Getting referrals, researching others experiences, and hopefully assembling a trusted group of advisors in the process. And in most cases, once they pick their advisors they typically stick with the team. Most people don’t like change, so a well chosen team avoids future stress and churn in the team’s makeup.

One the First Team has been built. Then comes the next most important task – choosing the Second String. This is a critical next step, but often people don’t take this “second string” step. What do we mean by “second string”? Just as in sports, these are the “subs” or the ones that come into the game when something happens to the “first string” or starters. These are the ones waiting in the wings to take their place without a loss of momentum.

The same situation occurs in working with your advisors for some of the most important aspects of your life – your wealth, your wills, your trusts, etc. We can all agree that no one is going to live forever. But few people take the next step to minimize their estate risks by picking “successors” to back-up each member of the first team.

When it comes to managing personal risks, a succession plan should be implemented, especially for estate planning. It does take a bit of time, and it is a nominal investment. But it is wise to have that second string in place sharing the “playbook” for your estate. It just helps lower your risks, lowers your stress and allows you to sleep better at night.”

Take your medicine...it's Good For You

2010-04-30T17:35:00.000-07:00

Americans just do not like to discuss estate planning. Supposedly 7 out of 10 of us have no plan. Of the 3 who do, what are the chances that the plan is up to date?

A friend of mine, Michael Stuart, just sent me this article in the NY Times, Estate Planning as Family Conversation, talking about talking. I wanted to share it with you as it paints the picture of what happens with no plan, and even how to open a conversation about one.

When I think about the plans that I have helped clients create, many stories come to mind. One recurring theme is a senior couple who own some investments and real property, with one of their adult children serving full-time as a caretaker. Other kids are not too involved in things… and the caretaker daughter pretty much has her hands full with children of her own and helping out the folks. In this situation, the adult daughter has a full time job or two already… and no outside means of support.

Many parents want to treat children "equally." But what do you do when there is only so much to go around, and the cost to one kid (the helper) is simply going to be too high for that to even remotely be fair? Parents must first plan for their care, then consider being "fair" rather than "equal" to those who follow.

It's often the right thing to do… but without some conversation, and openness, it will likely have a huge cost in terms of relationships down the line. And ignoring this dynamic is unlikely to provide a better result. So start talking, it is a big first step to helping you with your estate planning today and well into the future.

Why Legalzoom.com is better than an attorney

2010-04-13T16:28:00.001-07:00

A legal colleague of mine, Dennis Brislawn, wrote an interesting blog post about the use of LegalZoom.com compared with the services of an attorney, and I thought you might find his perspective interesting.
I recently had an opportunity to check out some LegalZoom documents. One of my friends used the LegalZoom service to prepare some Wills for his kids. They were simple trust planning documents. Each spouse left the estate to the other, but if both were deceased, they had a Common Trust for all kids until they turned 21, then money would split into shares that each child would receive in equal installments at ages 24, 27, and 30. These LegalZoom documents even had powers of attorney and all the trimmings.
The documents looked pretty "legal.” My friend did the plan himself, in an hour or two on the weekend, and only spent a few hundred dollars. He did this lieu of going to an attorney for budget reasons and scheduling difficulty with his activities. At least he did something, which is far better than not covering this important issue – so kudos to my friend.
When he sought my opinion, my comments were that I thought the documents were good from a simplistic technical perspective. I actually kind of liked them as they were well-written and clean. How did that work compare to what I or one of my estate planning attorney colleagues would do? They were simple, not elegant. But the most important missing component is they did not demonstrate insight, personalization, or the awareness of core values important to my friends. The document was clear for the kids after age 21, but there was no meaningful guidance into how a trust would be used by the guardians of children to raise them until age 21. Guidelines create the comfort that their kids will become the adults their parents would be proud of. What about asset protection for adult children to protect their inheritance against divorce or bankruptcy? I think you get my point.
Result? I was retained to do a comprehensive plan to address all the things that were not part of the simple LegalZoom plan. We also looked over their investments, retirement planning, insurance coverage, and the separate inheritances each was to get from their own grandparents and parents. I reached out to my friend's advisers and got their help in relooking at all these things to make sure that they were properly handled too.
LegalZoom provides documents. But I’m reminded by this experience that law is far more than the preparation of documents. It is about listening, discerning, and identifying core values. It is about understanding what can keep your clients awake at night. It is about pulling together resources to resolve those concerns and to put a plan in place. But, even more important, it is about working to keep that plan tuned up so that as things change, it changes. Documents are simple. Wisdom is harder to come by.
My experience is similar to this post by Dennis. In a couple of cases so far, I have corrected major problems with the LegalZoom documents that people had prepared for them, simply because they did not know that there were legal issues that were not addressed at all in the LegalZoom documents.
I help people with information that will lead to good decisions and workable estate plans. The forms that I prepare are a secondary part of the services I provide. Using LegalZoom may be better than doing nothing, and an attorney providing good advice offers more than just a set of forms. If you agree – or disagree – I’d welcome your comments.

The Repeal of the Federal Estate Tax

2010-04-03T06:41:00.001-07:00

Well, it's the end of the first quarter of 2010, and Congress still has not dealt with the repeal of the federal estate tax. It's beginning to look like Congress may not actually deal with the estate tax here in 2010 at all. Each of the major parties actually has a vested interest in not dealing with the repeal of the estate tax, and the coming reduction of the federal estate tax exclusion to $1 million beginning in 2011. The members of Congress with a "D" after their names are interested in raising more revenue to support all of their programs that they have enacted so far this year, and intend to enact in the future as well. Members of Congress with an "R" after their names will want to use the issue of the federal estate tax to raise revenue for the November midterm elections.

It would appear that one of the more likely outcomes will be that neither party will do anything about the federal estate tax this year, which will lead to a rollback to the exclusion levels to $1 million next year. Because of this, anyone holding large amounts of life insurance in their estates should consider moving that life insurance out of their estates into any revocable life insurance trust before next year arrives. With proper planning, the entire value of the life insurance would not be subject to the increased estate tax coming next year.

Just a few random thoughts.

The Children get Stuck with the work

2010-04-02T10:53:00.001-07:00

I wanted to share a story with you that a good friend of mine and associate, Dennis Brislawn of Brislawn Lofton LLC, recently shared with me about one of his clients. It was very applicable to what I see all the time.

"I had the incredible opportunity to attend my aunt’s birthday party and take this photo. It was indeed a happy occasion for all – especially when she invited everyone back for her 100th birthday party in 2011.

While enjoying the celebration and festivities, I was reminded of the sobering thought of all the financial and legal plans that her only daughter has been saddled with as her mother aged. As the children of aging parents, we never know if we will be buying a celebration balloon like this for their 99th birthday – and it is usually the least of our challenges as the years creep forward for a centenarian parent.

While attending her birthday party, my mind drifted to the many issues her only child has had to deal with for nearly 25 years. Getting to this 99th birthday has been a lot more work and worry for the daughter than for the birthday mother. The daughter has had to manage finances, coordinate moves, work with doctors, screen assisted living homes, and of course, work with the attorneys.

I was personally relieved, knowing I could attend the celebration, wish my aunt a “Happy Birthday”, and return home. My cousin, on the other hand, would be at the party to the very end. She would be cleaning up the leftover cake, policing the party room at the assisted living facility, etc. And she still has to deal with all the fiduciary responsibilities that continue long after the party has ended."

People deal with these types of real issues every day – most of which are neither easy nor pleasant. Working with attorneys and other professionals should be the least of their worries. After all, they have to start planning for the next big birthday party for their mom!

How to eat an elephant

2010-03-24T08:39:00.001-07:00

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…

Where's the Personality in the Yellow Pages?

2010-02-19T15:22:00.003-08:00

When the Yellow Pages first came out it was really great an innovative – and really the only place that was easy to go to find something you needed. And we usually made our purchases based off the size of the ad the business had placed. Why? We figured if they could dump a ton of money into something like an ad in the Yellow Pages they must be stable enough and reputable.

I even ran a Yellow Page ad myself, but I neglected to note that the Internet had come and the world had changed. My ad was lost in a blizzard of hundreds of attorney ads, and nothing distinguished my ad from the others.

Today, who needs the Yellow Pages? Who cares about the size of your ad? Who actually goes to it and looks anything up anymore? For most, it goes from doorstep to recycle bin. Why? Because it is faster and more informative to do a Google search and get a list of options for anything and everything we need.

Now, we have an even stronger way to accomplish this – social media. Social media takes the internet and websites to a whole new level – again – just like the move from Yellow Pages to the website. Now, we don’t just want information, we want to know what others are saying about the law firm or business and what “experiences” have others had with them. Then, based on what others have experienced, we can make a much more informed and accurate buying decision.

This is awesome for attorneys. Now, through the use of simple blog, I can share with you my thoughts, ideas, issues and stories to help you both “learn” and “experience” what we do for our clients and how we solve their problems. So no longer do you need to pick the biggest ad in the Yellow Pages and hope they meet your need. Now you get to “hear” what others “experienced” and can decide (with a ton more information) whether we are right for you and you are right for us. The world just got easier and better.

I hope that the information I offer to you will enhance and enrich your life.

Top Areas of Focus - based on Client Needs

2010-02-19T15:22:00.001-08:00

One of the great things about belonging to an organization like WealthCounsel (http://www.wealthcounsel.com/) is that they regularly do industry surveys.
I mentioned in an earlier posting that WealthCounsel did their Third Annual WealthCounsel Survey of Attorneys in Estate Planning. I promised to share some of the more relevant nuggets with my readers. Here is another nugget...
Attorneys were asked what areas they were seeing as the highest growth areas for their clients over the next five years. Based on feedback from their clients and the increase in demand, here is a listing of the top areas most estate planning attorneys will most likely be focusing on in the next five years:

Business Entity Planning for Estate Planning Purposes
Beneficiary Inheritance Asset Protection Planning
Elder Law Planning
Post Mortem Administration
Business Succession Planning
Lifetime Planning
Tax Avoidance Strategies

Notice any patterns? First, they are indicative of the aging population we will all be experiencing and facing. Second, there is a lot of "planning" needing to take place. Third, there are more "business" related issues than in the past. Finally, and always on the list, how to I get to keep more of what I have and not pay as many taxes.

I'm seeing a very similar pattern in our geography as well and our clients are facing many of the same issues. I guess the survey was pretty accurate.

Even though these are the trends, I still focus my practice on working with those families like mine that have younger children, which is the second item on the list. I have found that these families are not being served as well as they could by the estate planning community.

When Grandma won't leave...

2010-02-19T15:21:00.004-08:00

I met with Frank and Joy the other day and they described a problem that is not only very common but more and more of my clients are wrestling with the same issue. So I thought I would share their story.

Grandma is a feisty, spirited personality who has been living in her same home for that past 40 years. It is what she knows and it is where she raised her kids and where she spent her best years with her now deceased husband. She wants to stay in her own home.

The problem isn't the house - it is being able to function in the house on her own now that all her kids have grown up and started their own lives. She unfortunately doesn’t really have the ability to function safely on her own, day after day. She isn’t necessarily a danger to herself at this point but there are things that go on that make this a difficult situation. There is the issue of physical security, getting around to the store for food and supplies, basic upkeep of the house and a host of other day to day issues. Not overwhelming - yet - but she is headed in that direction.

She has several children including Frank and Joy, who are trying to grapple with grandma's situation. They came to me looking for an experienced voice to give them a heads up on how to deal with this very sensitive and personal issue - not to mention the accompanying financial issues. And as with many in this situation, it is a a first experience for both the adult children as well as the Grandma. Sound familiar??

In this case, Frank and Joy were able to put together a plan over the next few years, include Grandma in the planning and allow her time to "get used to" the idea of not being in her home. There were a lot of emotions and issues to deal with but eventually Grandma moved out, one of the children took over living in and caring for her house and it had a happy ending.

The "Envelope" Please...

2010-02-19T15:21:00.002-08:00

Some of you know that I belong to WealthCounsel, but don't really know that what that means.

Well, WealthCounsel is one of the largest and most respected attorney organizations in the country, with about 2000 estate planning attorney members across the country. They just released their Third Annual Survey of Industry Trends and there were some "Ah-ha's" and interesting results that I thought you might be interested in hearing about. Since this group is exclusively used "by attorneys" and "for attorneys" it isn't very often the general public gets to see this information. Let's take a peak...

While many businesses are down, 40% of the attorneys said their business had increased - at least in the estate planning area. Why? More people were focused on updating and getting some plans in place to hold onto more of what they had after many had lost a bundle due to the economic crisis. This was not only good for the attorneys but was very good for their clients to get an update and better plans in place.

Here is an "Ah-ha" from the study. They asked the number one reason why clients plan - any guesses? The number one reason was to "avoid probate" and minimize estate taxes. Not the first response most would have thought. Along the same lines, another major factor that motivates clients to do their planning is to answer the question, "What would happen if they don't plan?" Most attorney's expect to see an increase in activity as the population of baby-boomers starts aging - which is happening right now.

Very interesting results from this years survey...I will share more in another post later.

Special Forces or the whole Army?

2010-02-19T15:21:00.000-08:00

I was in a meeting the other day with some clients and they asked me a very interesting question, “What should I tell my friend that is looking for an attorney and trying to decide between a smaller law firm and one of the larger, multi-state firms?” Good question and one that always makes you a bit nervous to answer. By the way, this is not the first time I have been asked this question.

Not knowing any of the circumstances around their friend, I decided the best way to answer it was to refer them to a blog post from a fellow WealthCounsel attorney,Dennis Brislawn of Brislawn Lofton LLC. I thought Dennis had one of the best and simplest answers to this question I have seen in a long time. His post was titled, Special Forces or the whole Army. I would encourage you to click on the title and read his description.

What more can I say – this is perfect. We are the “Special Forces” group and whether we are Rangers or any other Special Forces team, we are all about “expediency”, and “efficiency” in getting done what our clients need. We aren’t encumbered by red tape and politics or a host of other barriers that exist in larger firms. We just simply get it done. Thanks Dennis, well said.

Would you choose an Attorney for their CROSSWORD PUZZLES?

2010-02-19T15:19:00.001-08:00

One of my colleagues, Dennis Brislawn of Brislawn Lofton LLC, wrote a very timely and “spot on” post in his blog the other day that I wanted to share with you. It was so perfect for exactly what we deal with all the time in deciding the best way to bring value to our clients.

In Dennis’s posting, Would you choose an attorney for his RECIPES?, Dennis described a universal dilemma all attorney’s have in how to best communicate and provide information to their clients and prospective clients. We tend to focus on the “newsletter” and as such have spent countless time and dollars on producing these “works of art.” Dennis found the real truth behind the “attorney newsletter” and I wanted to share his story with all of you.

Suffice it to say we have the same experience – only we use Crossword Puzzles in ours – how appropriate. I am now on a quest to find out if what Dennis and his firm experienced is what our clients feel as well. If you are willing, we would love to hear from you and see if one of the main reasons you read or like our newsletter is because of the crossword puzzles instead of the content. Don’t worry, we won’t offended – in fact, we will be very appreciative. Thank you in advance for your comments and/or e-mails letting us know how you feel.

Audio Blog Post

2010-02-16T15:17:00.001-08:00