What Does “Do Not Resuscitate” Mean to You?
January 29, 2010
Everybody seems to know (from popular TV shows, if nothing else) that DNR means “Do Not Resuscitate”, but do you know what “Do Not Resuscitate” means in your own personal healthcare directive or living will? Too often, when talking with clients about the healthcare documents in their estate plans, they don’t know the extent of their own (or their parent’s or grandparent’s) instructions.
“Do Not Resuscitate” can cover a wide array of options, which is why it is so important to define what “life-saving procedures” means to you, and exactly when you would like your DNR to go into effect. Here are some examples of “life-saving procedures” that you (or your elderly relatives) should talk about with family, medical staff, and your estate planning attorney:
Artificial Nutrition and Hydration When grandma decides to stop drinking fluids orally and begins to dehydrate, does the nursing staff have permission to keep her hydrated via IV fluids? What about if you are in a non-reversible coma and unable to drink liquids on your own?
Antibiotics or Other Medicines Do you include antibiotics in your definition of “life-saving procedures?” Do you still if you have been declared irreversibly brain-dead by two independent physicians? When you are 102 and confined to a bed in a nursing home, do you want to be given medicines to combat pneumonia or other illnesses?
Chemotherapy A point similar to the paragraph above; if you are 102, afflicted with dementia and confined to a bed, do you want to receive expensive and painful chemotherapy treatments if the doctors discover cancer?
Blood Transfusions Blood Transfusions are fairly universally considered “life-saving procedures”, and they should be addressed in your healthcare documents. Do you have religious reasons for refusing a blood transfusion? Do you still want one if you are severely and irreversibly disabled?
Organ Donation Though obviously not considered a “life-saving procedure”, organ donation is a topic you should discuss with your family, medical providers, and estate planning attorney to prevent any misunderstandings or delays in treatment if and when the situation arises.
A healthcare directive is one of the most important documents in your estate plan. State-specific healthcare directives or living wills can often be found for free online or at your doctor’s office, and in a pinch these will work; but they cannot take the place of a conversation with a knowledgeable estate planning or Elder Law attorney who will ensure that all aspects of your decision-making process are addressed and put down in writing. After being discussed and incorporated into your Advance HealthCare Directive, you should then discuss them with your agent, which is usually a member of your own family. Be proactive in this effort, and it will save grief for the family and help ensure that your wishes are followed.
The Importance of Being Earnest
January 27, 2010
Do you have a will or a trust?
Has your will or trust been reviewed or updated in the past 3-5 years?
If you answered yes to these questions then you are two steps ahead of 2/3 of the rest of Americans. But the next question is the big one:
Does your family or executor know where your legal documents are stored, and are they able to access them?
Having a will or a trust is essential, but it doesn’t do any good if nobody can find it after you’re gone. Olympic medalist Florence Griffith Joyner (“Flo-Jo”) supposedly had a will when she tragically passed away at the age of 38, but because her husband was never able to locate the original document, a neutral administrator had to be appointed by the court to execute the estate; and whether her estate was executed according to her wishes is anybody’s guess.
A will or a trust often contains sensitive and emotional information, and for that reason many people (understandably) want to keep these documents private; but spending any amount of time or money on your estate planning documents won’t help your family if they can’t locate—or don’t have access to—those documents after your death.
We suggest having an earnest conversation with your family (or one or two select members at the very least) about the existence and location of your personal documents. Although they don’t have to know what is in your will or trust, knowing where those documents are can ensure that the time and money you spent creating them isn’t wasted.
Part of the Family: Planning for Pets
January 24, 2010
Creating an estate plan often involves serious discussion with your advisors about tax planning, asset protection, and charitable giving; but it is important to remember that at its core, estate planning is about protecting your family—and as this article in the Wall Street Journal reminds us, for many people the word “family” also includes our four-legged friends.
Some people will be tempted to roll their eyes and joke about Leona Helmsley at the mention of including your pet in your estate plan, but most will agree with article author Max Alexander that ensuring your pet will be taken care of after your death is not a frivolous indulgence but a simple matter of responsibility.
Providing for the care of your cat or dog does not necessarily mean leaving millions of dollars in a pet trust, what it really means is taking steps to ensure your pet doesn’t end up out on the street or in a cage in the local animal shelter. The Wall Street Journal suggests four simple steps pet lovers can take when planning their estate, including:
- Choosing a “pet guardian”
- Deciding whether or not to provide financial assistance for the care of your pet
- Adding language to your will or trust regarding the care of your pet
- Writing down a list of instructions for your caregiver
Over 50% of U.S. households own a dog or a cat. Those pet owners know that in return for companionship, love, and devotion pets rely on their owners for the basic necessities: food, shelter and protection. Why gamble with the future when ensuring their care can be so easy?
Another Kind of “Bucket List”: the New “Carry-Over Basis” Rule
January 20, 2010
Among the many changes in tax law to go into effect in 2010 was the change in cost basis for inherited assets. Previously, all inherited assets were “stepped-up” from their original value at date of purchase to their fair market value at date of death. In this way, if inherited assets were sold shortly after death, litttle or no capital gains tax was owed. However, in 2010 inherited assets do not receive this automatic “step-up”; instead they will be valued at the lesser of the decedent’s basis or the fair market value as of date of death. The result is that for decedents dying in 2010, the decedent’s tax basis and the fair market value as of date of death will have to be determined for every asset. As you can imagine, this will cause paperwork nightmares for heirs.
What we suggest is making a list of your assets and their values and tax basis information now, while you are still alive and your memory is fresh. This is not a list that has to be shared with anybody until after your death, but the mere existence of your list of assets will save your family and heirs hours of headaches (and heartache) later on.
If the thought of taking the time and energy to sort through files and records to gather this information makes you want to run for the hills, imagine how your heirs will feel! To ease the burden, try making your list one asset at a time, over the course of many days. However you choose to create your list, you can be sure your heirs will thank you.
(Note: There is some cushion to this harsh new rule: There is an exemption amount of $1.3 million of gain from this carry-over basis rule, and another $3 million exemption applying to assets inherited from a spouse. Any excess, however, will be subject to to the new carry-over basis rule. The duty to allocate this exemption among assets going to different persons will be that of your executor or successor trustee. Choose that person wisely. )
Will You Take Advantage of New Roth Rollover Rules?
January 17, 2010
January of 2010 has brought with it a lot of change that is keeping financial and estate planners on their toes. In addition to the repeal of the estate tax (discussed in a previous post), we have been presented with new Roth IRA rollover rules that took effect January 1st, and which now allow anybody, regardless of income, to convert their traditional IRA to a Roth IRA. The question now is: Is it worth it?
The answer to that question will be different for everybody, because the amount that will be taxed upon conversion depends entirely on the kind of contributions you have made to your traditional IRA in the past. If you have made more non-deductible contributions than tax-deductible contributions to your traditional IRA you will almost definitely want to take advantage of the conversion opportunity. If you have made fewer non-deductible contributions you may be looking at a higher tax bill. However, the fact that the tax bill can be spread out over two years (but only if the conversion is made this year) should give even those who have made mainly tax-deductible contributions reason to consider the switch.
If you think you may want to make the switch, talk to your advisor. Your financial specialist can tell you the pros and cons of switching based on your personal IRA history. The nice part is that if you do decide to take advantage of the new rules, the decision doesn’t have to be permanent. Those who convert their traditional IRA to a Roth IRA in 2010 will have until October 15, 2011 to change their minds and switch the account back to a traditional IRA.
Keep Your Estate Safe in 2010
January 11, 2010
Now that it’s 2010 and congress has failed to take action regarding the repeal of the estate tax, we see a lot of articles discussing whether the lack of taxation for a year is a good or bad thing; sometimes these articles go even further, arguing whether estate tax in general is a good or bad thing. These are all interesting discussions, but our firm is more concerned with how your estate plan will hold up this year when it was likely designed to weather very different circumstances.
To this end, we have found that CBS’s Money Watch.com has published a very useful article about what the lack of estate tax in 2010 could mean for you and your family. The entire article is educational, but if you scroll about 1/3 of the way down the page you get to the crux of the article, a section titled “Steps to Take Now.” This section provides you with practical advice on what you can do, and what in your estate plan may need to change in order to keep up with the changing times and taxes:
- Keep good records
- Have an attorney review the “formula clauses” in your estate plan
- Be aware of the tax laws for your state of residence
- Give your estate plan a “check-up” as soon as possible!
As you and your attorney are reviewing your estate plan, keep in mind that the estate tax situation is likely to change again in 2011 (and may even change before 2011, effective retroactively), and try to plan accordingly. As Money Watch author Deborah Jacobs writes, “Whatever might be happening in Washington, no one should postpone the necessary steps. Just because Congress is inefficient and disorganized doesn’t mean that you must follow suit.”
Estate Tax Repeal Creates Dilemma: Some Spouses May Now Be Left Out in the Cold
January 2, 2010
With the New Year has come a dramatic change in the estate tax: for persons dying in 2010, there is suddenly no estate tax no matter how large the decedent’s estate. Although that may sound good, you had better think again. Many couples set up their estate plans years ago on the assumption that at least a portion of their estate would be subject to tax upon the death of the 1st spouse. They then designed their trusts or wills so as to allocate the tax free portion to the children, allocating only the remainder to the surviving spouse. That often made sense when the tax free portion was only a part of the estate and there was substantial additional value to allocate to the surviving spouse. But for 2010, the tax free portion is suddenly 100% of the estate! Thus, for estate plans that still describe the children’s portion in terms of the tax free portion (or use legal formulae with similar effect), that may now suddenly require that– for the estate of a parent who dies in 2010 — the children may now get the entire estate! This is of special concern where the parent has remarried and the bulk of his / her estate is the decedent spous’s own separate property.
As noted in the Wall Street Journal article entitled “Repeal of Estate Tax Creates Planning Dilemmas“,
“You could be in a situation now where everything would go into a trust downstream to the kids and nothing is left to the spouse,” said Greg Rosica, a tax partner at Ernst and Young. “There is a need to revisit the basic estate planning documents to make sure that what you intend to have happen really does happen.”
There are more surprises waiting: the estate tax is scheduled to return with a vengeance in 2011. Beginning in that year, only the first One Million Dollars will be free of estate tax (as compared with $3.5 million in 2009). Complicating the matter still further is that Congress could enact remedial legislation later this year to address these concerns. If it does so, Congress may attempt to make the changes retroactive to the beginning of this year; but, whether this effort at retroactivity will be upheld will likely ultimately be decided by the courts, perhaps years down the road. In a word, there is suddenly much uncertainty in the estate planning arena, and this uncertainty may be with us for a long time. Couples concerned about this should have their plans reviewed by a competent professional. At a minimum, they might revise their plans to build in flexibility mechanisms in order to address future changes in the law as they unfold.
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