The Comfort That Comes With Planning Ahead
July 28, 2010
Everybody thinks it won’t happen to them. Or rather, everybody knows it’s going to happen to them eventually, but nobody thinks it’s going to happen tomorrow, or next week, or even next year. The “it” of which I speak is, of course, death. It is this perceived immortality that allows so many people to put off their estate planning until it is too late.
But today’s blog post is not a cautionary tale about a family who put off their planning and regretted it, today’s post is about the peace and relief that forethought and planning brings not just to your family, but to you as the person making the plan.
In this article in Market Watch Chuck Jaffe tells the moving story of his brother Rob, who insisted 2 years ago on creating an estate plan even though he and his wife were both healthy. As Jaffe puts it, “While not pleasant subject matter, it was not morbid… you’d rather be drinking lemonade on the veranda, but it wasn’t a sharp stick in the eye.” However, when Rob became unexpectedly ill in May of this year the estate plan turned out to be a comfort to Rob and his family—such a comfort, according to Jaffe, that Rob “made me [Chuck] promise that I would write about him… when his time was up, because his story would help others.”
“People need to understand… how big a blessing it is to know — when their time comes — that they have everything in order, that they don’t need to stress or worry about how things they worked their whole life for are going to turn out. … I would not want to waste a minute of my life now having to do estate planning or worrying that I live long enough to get documents filed or whatever garbage comes with it… Focusing on death and dying while you are living, that’s easy; having to focus on death when you are dying, that would be unimaginable.”
In our business we frequently see how much easier it is for people to create a plan when they’re healthy, as opposed to the stress that comes with creating a plan when they are sick. Thank you Mr. Jaffe for sharing your brother’s moving story. We hope that your (and your brother’s) words will help motivate others to take comfort in planning ahead.
Estate Planning Advice for Ex-Pats and World Travelers
July 26, 2010
Estate planning can be a pretty involved affair, even for people whose lives are fairly straightforward; but if you are an ex-patriot, have dual citizenship, or plan to leave assets to family members in another country the estate planning process can by downright mind-boggling. This is because each country is going to have its own laws regarding heirs and distribution, while some governments (according to this article in the New York Times) will even “require their citizens or residents to pass assets on to people other than those whom they would choose.”
The United States has avoided these “forced-heirship” laws (although your state’s laws regarding distribution of assets in the absence of a will or estate plan may feel like forced-heirship), but these laws “are prevalent in many parts of the world, notably the Middle East, where Islamic law predominates, and continental Europe.” If you are a United States citizen residing in one of these “forced-heirship” countries—or if you are a citizen of one of these countries residing in the United States—you will definitely want to talk to your attorney about how best to protect your family and your assets.
Just how you will go about building your web of protection will depend on a number of variables, including your citizenship, your country of residence, and in which country the assets were acquired or are held. Most estate planners agree that a trust is generally the best way to go about protecting your assets, but a trust may not work in every situation. “The legal systems that have forced-heirship rules tend not to recognize trusts.” You may find that you’ll have to set up a will or estate plan in two places: one in your country of origin and one in your country of residence.
And of course international estate planning is not all about heirs and distribution—especially if you have young children. International guardianship documents should be carefully drafted and should include provisions for temporary guardians, travel arrangements, and medical powers of attorney for minors.
Living in a global community has its pros and its cons—the best way to successfully span two countries or cultures is to be flexible… and be prepared!
Falling Through the Cracks
July 23, 2010
Our country may be facing a simultaneous growth and recession… unfortunately, according to journalist John Leland, the two seem to be at odds. What we are referring to is the growth of the elderly population and the recession of funds available to help this aging community pay for the care they need.
The economic downturn of the past few years has hit the elderly with a double-whammy. Many of them lost close to all of their savings when the stock market bottomed out, and now budget cuts to state-funded home-care services threaten to force many of them out of their homes and into hospitals or nursing facilities.
“’I’m not getting a cost-of-living adjustment, and now I’m not getting food,’ said Joyce Plennert, 83, who is on a waiting list for Meals on Wheels in Palatine, Ill. ‘Now I’m worried my home services will be cut. Without that, I’d be in a nursing home, if I could find one with room.’”
According to the above-mentioned NY Times article, a number of states have already made cuts to home-care services, including Alabama, Arizona, California, Colorado, Florida, Kansas, Mississippi, Missouri, Nevada, New Jersey, New York and Texas. “The situation is grim, and it’s safe to say that present trends are expected to continue,”
These budget cuts impact more than just senior citizens—they affect the professional caregivers and home aides who lose their jobs when state programs are cancelled, as well as the families of the elderly. When these seniors lose their ability to live at home it’s their families who will have to pick up the slack either by contributing to the costs of care or more often by becoming the caregivers themselves.
If you or a loved one is facing a loss of benefits due to budget cuts don’t be afraid to explore your options. Geriatric care managers can help families through confusing times, and other advisors such as elder lawyers, estate planners, financial planners and others can offer valuable advice when creating your plan for the future.
One Man’s Trash is Another Man’s… Heirloom?
July 20, 2010
Families have a way of acquiring great numbers of treasured objects and mementos: photo albums, antique books, Wedgewood China… a mounted deer head? You just never know what’s going to end up in the trash-heap and what will be kept and passed on to the next generation. Ellen Lupton mentions in her recent article in the New York Times that she and her husband kept the Wedgewood China and (surprisingly enough) the deer head. But the question she puts forth is… why?
Lupton’s article, entitled How to Lose a Legacy, makes the point that the difference between old stuff as trash and old stuff as treasure lies largely with you and how you choose to leave all this stuff to your heirs. “You can’t buy an heirloom at Pottery Barn or IKEA. It comes via gift, bequest or a heated sibling brawl.”
Lupton says early on in her article that “Even folks in the ‘die broke’ crowd, determined to enjoy their remaining assets rather than leave them to the ungrateful grandkids, may secretly hope the family will love and honor their dearest possessions.” But secret hopes aren’t of any use to your children or grandchildren after you’ve passed away. Part of the job of an estate planner is to help you express these secret hopes to your heirs and leave your treasured possessions in safe and appreciative hands.
Of course your heirs are going to have minds (and memories) of their own, and your treasured silver cake platter could still end up in the local antique store; but the best way to keep your treasures in the family is to make sure your family knows your wishes. If they know how much your grandmother’s English tea set meant to you (and why it meant so much to you) it’s going to mean that much more to them.
You may share a life and history with your heirs, but you can’t expect them to read your mind. If you can put your stuff into context—let each heirloom tell a part of your story and reflect a meaningful relationship—the legacy you leave will be priceless.
No Estate Tax Means No Need to Plan, Right? . . . Wrong.
July 19, 2010
Since the estate tax was repealed at the beginning of this year many people have rejoiced in the thought that there’s no need to create an estate plan. While it may be true that for the moment, at least, your assets don’t need to be protected from outrageous estate taxes, there are still a number of reasons why it is not only beneficial but essential to have a plan in place for your finances after you pass away.
Attorney and accountant Bob Carlson has written an article in InvestingDaily.com in which he enumerates four reasons to create an estate plan even without the motivating factor of estate taxes (he calls this Legacy Planning):
- Financial Security
- Continuing management and caretaking
- Protection (from creditors, predators and lawsuits, if not from taxes)
- Other tax burdens (such as state taxes, capital gains taxes, gift taxes, etc.)
There are many things we do in our lives not because we have to, but because we know it’s the right thing to do. Estate planning is no different. Creating an estate plan is not just about taxes, it’s about you and your family planning for the future. Creating an estate plan is about being there for your children even after you’ve passed away; it’s about protecting them, providing for them, and even teaching them fiscal responsibility.
Will the lack of estate taxes in 2010 lead you to ignore these other important reasons to protect your family and plan for the future?
Is Medicare Headed for a Crisis?
July 17, 2010
If you are among the wave of Baby Boomers about to begin enrolling in Medicare you may be in for some tough times. Recent stories in Financial-Planning.com and USA Today report that the number of doctors refusing new Medicare patients is reaching a record high—and it’s not expected to improve anytime soon, especially since last month “Congress failed to stop an automatic 21% cut in payments that doctors already regard as too low.” Doctors simply feel they cannot afford to treat Medicare patients anymore.
Here are some of the distressing details you’ll find in the USA Today article:
- The American Academy of Family Physicians says 13% of respondents didn’t participate in Medicare last year, up from 8% in 2008 and 6% in 2004.
- The American Osteopathic Association says 15% of its members don’t participate in Medicare and 19% don’t accept new Medicare patients. If the cut is not reversed, it says, the numbers will double.
- The American Medical Association says 17% of more than 9,000 doctors surveyed restrict the number of Medicare patients in their practice. Among primary care physicians, the rate is 31%.
What this means for seniors is that although you may be able to qualify for Medicare you may not necessarily be able to count on it. But you can take action to ensure that a crisis for Medicare doesn’t mean a crisis for you. Your financial advisor or estate planner can help you determine what options you have regarding long-term care, asset protection, and even using alternate strategies in conjunction with Medicare. For example: it may be possible to re-design your trust and estate plan to facilitate access to a nursing home subsidy from the government in the event of future need. See our articles, “Spousal Protection Planning: Creating A Plan for Each Other”, and “Developing a Plan for An Incapacitated Spouse“
The days of being able to count on the government to take care of you in your old age may be coming to an end. It’s time to make your own luck and plan for your own future. Our firm may be able to help.
Will Billionaire Steinbrenner’s Death Inspire Congress to Reinstate the Estate Tax?
July 15, 2010
Common superstition says that famous deaths come in threes, but the death of New York Yankees owner George Steinbrenner on July 13 makes four billionaire deaths in 2010. It’s hard to deny the significance of such events in a year when there is no estate tax.
According to the Associated Press Steinbrenner’s family is set to receive a tax break of “about $328 million” because of the estate tax repeal this year. This number, along with the millions of dollars saved (that would otherwise have gone to pay estate taxes) by the families of Dan L. Duncan, Walter Shorenstein, and Mary Janet Morse Cargill may inspire Congress to take action on the issue of the estate tax before the year is over. The Washington Post quotes Senator Bernard Sanders of R.I. as saying, “In the midst of this terrible recession, the idea of giving billionaires a massive tax break is obscene… Already we have four billionaire families who are not paying taxes — Steinbrenner’s being the last one. Many billions are being lost. We have to address that reality right now.”
Although there is still some talk of the possibility of the estate tax being reinstated retroactively, most lawmakers and attorneys agree that the further into 2010 we get the less likely this becomes. But missing out on the estate taxes of four billionaires has to hurt, and the members of Congress are not likely to drag their feet much longer. One way or another, we can soon expect to see the issue of the estate tax become a hot topic of debate in Washington. Our firm will keep you abreast of any changes to the law that could affect you, your loved ones, or your estate.
How to Plan for the Future While Estate Tax Debate Continues in the Senate
July 13, 2010
With all the estate tax proposals currently floating around the Senate the future of the estate tax is anybody’s guess… but that doesn’t mean we’ll stop trying to figure it out. A recent article in the Wall Street Journal touches on some of the more recent (and more controversial) proposals floating around Washington.
The proposal that is currently getting the most attention comes from Vermont independent Sen. Bernie Sanders and three Senate Democrats who say that “It’s time for multi-millionaires and billionaires to pay their fair share.” And pay they would! According to Sanders’ proposal “the [estate tax] exemption would be $3.5 million for an individual or as much as $7 million for a couple, with a tax rate of 45%. But estates with taxable assets between $10 million and $50 million would pay a 50% rate, and estates valued above $50 million would pay 55%. A further 10% surtax would apply to assets above $500 million.”
Of course, it’s too early to get worked up just yet, Sanders’ proposal is just one of many right now, and the debate still rages in the Senate with no clear winner in sight. Of course, if no action is taken the estate tax will come back in 2011 with a 55% tax rate on estates above a mere $1 million.
Either way, you’ll want to be prepared, and the only way to do that is to keep in contact with your estate planner and make sure that your plan is designed to handle anything. Although it may be tempting to wait to update your estate plan until a clear decision is made, all that really does is leave your family unprepared if something should happen to you while the tax is in flux. Contact our office to find out what adjustments should be made to your estate plan to keep your family protected while lawmakers continue to debate the future of the estate tax.
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