As Time Goes By… Part 3
November 28, 2009
Our previous installments on how to review your estate plan discussed how and why to review the more financial portions of your estate plan; for this final installment we will cover how to review the documents that may be closer to your heart: your health care documents and documents pertaining to minor children (such as a nomination of guardian.) Also covered is what is perhaps the most pressing reason of all to regularly review your estate plan—changes in the law.
Health Care- Your health care documents should include: an Advanced Health Care Directive (or Health Care Power of Attorney), a Nomination of Conservator, and a HIPAA Release. If you have minor children you should also have a document giving a close friend or family member authorization to make health care decisions for your child in case you and your spouse are unavailable in an emergency. Take note of the date these were signed, and any changes in your health status. We recommend that Health Care documents be re-signed every 3- -5 years to keep them “fresh”.
Minor Children and Guardianship-Documents pertaining to minor children include your Nomination of Guardian, Exclusion of Guardianship (if you intend to exclude any persons who might otherwise be close family members and have “priority” under the law if you fail to nominate others), and often a Memorandum of Intent. If circumstances or relationships have changed and you are uncomfortable with anybody listed in the documents now serving as guardian, you’ll want to execute a new one. If your minor child is a teen and almost grown he or she may now want to have some input in the process. The Memorandum of Intent is not always an official document; rather, it is your letter of instruction to your guardians and other fiduciaries. As such, this document will probably change the most over the years. The good news is that you probably don’t need to make changes in your Memorandum through our office, however if you do make changes, please let us know or even send us a copy.
Legal Updates-Estate planning is a very fluid area of law. Tax laws have a tendency to change (for example the estate tax law which is slated to expire completely in 2010 and return again in full force in 2011), and incorporating those changes into your documents may be necesssary to keep your plan working the way you intend.
Reviewing your estate plan is not as intimidating as you might think, especially when you know exactly what to look for. Taking an hour now to review your plan may save your loved ones many long hours in the future. Don’t you think it’s worth it? If you feel you need professional assistance, we are here to help.
As Time Goes By… Part 2
November 26, 2009
In our recent blog post we listed 6 essential components of your Estate Plan that should be reviewed on a regular basis and why it’s so important to keep them updated. Today we’ll go into more detail about the first of these components; what they are, and how to review them.
Fiduciaries- Make a list of all the people you’ve named in any fiduciary role in your estate plan, including Trustees, Executors, Health Care Agents, Financial Agents, Guardians, and Advisors. Has your relationship with any of these people changed? What about the person’s own family or financial situation? Do you still feel confident in each person’s ability to carry out your wishes?
Assets- Look at the schedule of assets you have with your Estate Planning materials. If you don’t already have a schedule of assets, make one right now. Don’t forget to include property, bank accounts, stocks, Retirement accounts and Life Insurance policies. Of all the assets on this list, have all of them been put in the name of your trust or has your trust named as the beneficiary? Have all of your new assets been added to your trust? If you refinanced your home, was it put back in the name of the trust? If you answered “no” to any of these questions, it’s time to call your attorney.
Distribution and Beneficiaries- For most people, the whole purpose of a will or trust is to make sure that property is distributed according to their wishes upon death. So take your time reviewing that section of your estate plan. Is your list of beneficiaries still accurate? Do you have any new children or grandchildren? If so, your estate plan should reflect these changes.
In our next blog we’ll have more information about the second part of the list of things to review in your estate plan: Health Care, Guardianship and documents pertaining to minor children, and last but not least, legal updates.
As Time Goes By… Part 1
November 24, 2009
For many people the holiday season brings more than just celebration. Seeing family and friends you may not have seen since this time last year means seeing children who have shot up like weeds, siblings and cousins with noticeably more gray in their hair, and even sometimes seeing an empty place at the dinner table that wasn’t empty last year. In short, for many people the holiday season means facing the passage of time and the changes that passage can bring.
The passage of time is inevitable, as is the change it brings; and when your life changes it’s important that your estate plan change with it. Reviewing your estate plan every 1-3 years is essential to keeping it up to date and working the way you intended it to work. Luckily, reviewing your estate plan can be quick and easy if you know what you’re looking for. Here is a list of 6 key components you’ll want to review regularly:
- Fiduciaries
- Assets
- Distribution and Beneficiaries
- Health Care
- Guardianship and documents pertaining to minor children
- Legal Updates
If we’re lucky, our lives are constantly changing—our families evolve, our finances improve or decline, we meet and form strong relationships with knowledgeable friends and professionals. It only makes sense that your estate plan should change too. What seemed best for your family 4 years ago might not be the ideal situation now. By reviewing and updating these 6 components on a regular basis, and touching base with your attorney, you will insure that your estate plan will continue to protect yourself and your family the way you intended it to when you first created it.
Imagine No Estate Tax
November 22, 2009
The federal estate tax is scheduled to disappear next year (in 2010); and although most people expect lawmakers to pass legislation keeping the estate tax alive, they also vaguely hope that the estate tax (also sometimes called the “death tax”) does disappear—at least for a little while. But this article in the Wall Street Journal asserts that for all the noise that is sometimes made about the estate tax, we may actually be better off with the estate tax than without it.
This assertion is not based on what is best for the government, but what is best for the tax-payer, and has to do with something called the “step-up in cost basis”:
“Step-up means that the property heirs receive is valued as of the date of death. So if Grandma leaves a grandchild stock selling for $75 a share that was bought in 1970 for $2 per share, the heir’s “cost basis” in the stock is $75. If the grandchild then sells the stock for $80, the taxable gain is $5 per share.”
If the estate tax disappears it is likely that the step-up in cost basis will as well. This means that the stock Grandma leaves you would be valued at the original $2 per share rather than the stepped up $75 per share, and when that same stock is sold for $80 per share the taxable gain would be $78 instead of $5! This change will impact many more families than would be affected by the elimination of the estate tax.
The disappearance of the step-up in cost basis is just one of the concerns people have about the possible elimination of the estate tax and Congress’s failure to act. Other concerns mentioned in the Wall Street Journal article include:
- A retroactive estate tax
- A prohibition (or scaling back) of techniques used to trim estate taxes (such as family limited partnerships, grantor retained annuity trusts, and qualified personal residence trusts)
Watch for further developments, which we anticipate after Congress completes its wok on the Health Care Reform Bills, currently occupying its primary attention.
Is All This Really Necessary? . . . Yes, It Turns Out It Really Is
November 17, 2009
Jane Hodges of the Wall Street Journal recently jumped in where few would fear to tread—and lived to write about it. Where most people would prefer not to think about taxes and estate planning at all if they could help it, Hodges went through the process of creating an estate plan not only once, but with four different Do-It-Yourself Will or Trust kits, and shared her findings with her readers.
Although Hodges gives a decent description of her experience with the various kits, her final verdict is inconclusive. But what does come through loud and clear in the article is that a “Do-It-Yourself” (“DIY”) Trust or Will isn’t as easy as it seems, and that anyone with a significant amount of assets (and by significant we mean a house or life-insurance policies) should not be doing it themselves; “the program presented a pop-up note indicating that people with more than $1 million in assets might need an attorney…” One million may sound like a lot, but as mentioned above, just about anybody with a house or life insurance policy is going to fall into this category.
What Hodges and her husband discovered (and we think this would be the experience of most people looking for a DIY solution to estate planning) is that there is a lot more to creating a will or trust than a simple distribution of assets. Most people have specific wishes for leaving their home to their spouse; for ensuring that the surviving spouse has access to joint assets but does not have the ability to bypass your children and leave everything to a new husband or wife if they remarry; for earmarking a certain percentage of the estate for brothers or sisters, nieces or nephews; and so much more. Add to this the complicated and changing state and federal estate tax laws and DIY estate planning kits can be a frustrating recipe for disaster.
The goal of estate planning is not only to distribute your assets, but also to protect them—and to protect and provide for the family and loved ones who are left behind. Ultimately, no program can understand this and help you with it the way a living, feeling, and experienced estate planning attorney can.
Executors Have Options When It Comes to Final Medical Expenses
November 16, 2009
Most people die in a hospital; sometimes after a long and slow decline, sometimes after a quick and unexpected tragedy. If you are an executor of the deceased’s estate this is significant because it means that there are usually final medical bills to be paid. What most executors do not know is that these final medical bills are not necessarily just like all the other final expenses, especially when it comes to filing a final tax return for the estate: they may either be taken as deductions on the decdent’s final Income Tax Return (From 1040) or , if the decedent’s estate is valued at more than $3.5 Million (2009 exclusion), on the Estate Tax Return (Form 706). This article from The Wall Street Journal explains why.
“…When a person incurs medical expenses and dies before they are paid, the executor of the decedent’s estate can elect to treat those medical expenses as if they were paid when incurred – as long as the estate pays the expenses within one year after the date of death. In other words, this election allows those expenses to be deducted on the decedent’s final Form 1040, even though they were not paid by the date of death.”
Many executors may not think of this option because medical expenses can only be deducted if they exceed a certain percentage of the deceased’s adjusted gross income (7.5% to be exact); but health care being what it is, final medical expenses can quite often reach this point. If so, they can be deducted on the Form 1040, even if not paid until after the decedent died.
This sounds easy, but be careful if the deceased’s estate exceeds the $3.5 million estate tax exemption—you may want to look into other options. The Wall Street Journal suggests that in this case it might be beneficial to “forgo the election and count the unpaid medical expenses as liabilities on the estate tax return.”
As the executor of an estate you may have more options than you are aware of when it comes to taxes, probate, and achieving the best results for the beneficiaries. If you are unsure, contact a professional who can help advise you on all angles of the trustee or probate process.
Don’t Take That IRA Withdrawal Yet! New Options for Seniors in 2009
November 14, 2009
If you are a senior 70 ½ or older who owns an IRA we have good news for you. Last year Congress approved legislation that waives the minimum withdrawal requirement for seniors in 2009.
This leaves seniors with more options than usual regarding their IRAs. You can still choose to take the withdrawal, of course; but deferring the withdrawal has the double benefit of allowing your investment to continue to grow within your IRA and lowering your taxable income for 2009.
If you were unaware of this legislation and you’ve already taken your withdrawal for 2009 you’re still in luck—the IRS is allowing seniors who have already taken the withdrawal to change their minds and roll their money back into a retirement account.
Of course, all of this good news doesn’t come without restrictions and exceptions, the first of which is that the deadline for the rollover is November 30th, or 60 days after you receive your withdrawal, whichever is later. Sandra Block explains all of the rules and restrictions—and goes into further detail regarding the benefits to seniors—in her article in USA Today.
The bottom line is that seniors with IRAs have more options this year than usual. You’ll want to explore those options with a trusted advisor and take advantage in whatever way you can. Note: If you are receiving Medi-Cal nursing home benefits, be sure to check with your Elder Law attorney before you opt for this deferral.
The “Second Victims” of Alzheimer’s Disease
November 7, 2009
The “first victim” is the person who is actually diagnosed with Alzheimer’s disease; the person who finds their memory failing, their personality changing, their past and present fading into a sea of frightening and confusing fragments of recognition. But Alzheimer’s disease affects more than just its victims, it touches the lives of their families and friends as well… especially their spouses.
These are the “second victims”; the spouses and caregivers who find their own lives fading away as they sacrifice and struggle to do right by a person with whom they have spent many loving years, who recognizes them—and whom they recognize—with less and less frequency. These “second victims” can suffer from depression and health problems as well, often with tragic results. This article in the Wall Street Journal states that, “A 2006 study published in the New England Journal of Medicine found that spouses of people with dementia and psychiatric diseases were more likely to die themselves within a year of the afflicted spouse’s death, compared with similar cases involving colon cancer, fractures or heart problems.”
The WSJ article details the diminished existence of “second victims”, and exposes the controversy around how some of them are choosing to protect their mental health and find companionship again. Although this is at heart a very personal issue, it touches on some legal issues as well:
- How can you prepare financially for the full-time nursing care a late stage Alzheimer’s victim often needs? How does government assistance fit into the equation?
- How can you ensure that you or your spouse have a loving and trustworthy conservator caring for you when you are unable to understand and make your own medical and financial decisions?
- Is there a way to ensure that the wealth and assets you accumulated during your life together will pass to your children and grandchildren if your spouse chooses to one day remarry?
If someone you love is dealing with Alzheimer’s disease please don’t hesitate to let us help by taking the legal questions off your plate. Alzheimer’s disease creates enough loss and confusion without the added uncertainty that comes with these legal issues; and when you’re living day by day, every little bit helps.
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