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  • Archive for January, 2010

    What Does “Do Not Resuscitate” Mean to You?

    Friday, January 29th, 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 attorney who will ensure that all aspects of your decision-making process are addressed and put down in writing.

    Your Estate Is Ready For The Kids, But Are The Kids Ready For Your Estate?

    Wednesday, January 27th, 2010

    Many parents spend a lot of time and money ensuring that their estate will go to their children exactly when and how they want it to; they work with the best advisors to create a plan that will transfer their assets as smoothly as possible to their children and grandchildren when the time comes. Ninety-nine percent of the time these parents have in mind that the inherited estate will be used responsibly to help their children and grandchildren pay for schooling, make it possible for one parent to stay home with young children, be put away for retirement, etc. But according to Pamela Black at financial-planning.com, “while estate planners are 98% effective at preparing these assets to be passed on, that preparation goes to waste in 70% of the cases… [because] no one is preparing the heirs for assets.”

    When considering how to pass your estate on to your heirs, it is important to take the time to consider how your heirs are likely to handle the new responsibility. While many parents have numerous discussions with their advisors about how they would like their money to be handled, they neglect to have these important conversations with their children because they assume (often erroneously) that they and their children share the same financial values.

    Death and money are two of the most uncomfortable subjects for discussion between parents and children, and many families will simply avoid these conversations. But financial advisors and estate planners have seen too many cases of families and carefully crafted estate plans falling apart in the wake of the death of a parent; we know how important it is to have these difficult discussions.

    Do you need to spend more time preparing your children for their eventual inheritance? Pamela Black has included in her article a preliminary “Wealth Transition Checklist” to give you an idea of how well prepared your family is for the transition. Bring your kids in with you to your next appointment and let them share in the process of planning for their future. The more they know the better prepared they will be.

    The Importance of Being Earnest

    Monday, January 25th, 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.

    Your Will May Be a Ticking Time Bomb

    Saturday, January 23rd, 2010

    The recent repeal of the estate tax is having unintended consequences for responsible husbands and wives who already had a will or trust in place to protect their spouse and family—instead of protecting them, that existing will could now end up leaving surviving spouses with nothing. Jonnelle Marte at the Wall Street Journal has this to say:

    “It’s a common practice for people to use formulas in their wills designed to send the maximum amount of assets not subject to the estate tax into a trust, often for their children. The remaining assets are usually left to the surviving spouse. But this year, there’s no limit on the assets people can pass to their heirs without being subject to federal estate tax. So all of the assets could go into a trust and the surviving spouse would get zero.”

    Does this mean you’ll have to get your will or trust updated every year? No. But it does mean that you’ll want to get your will or trust reviewed by an estate planning attorney this year. A review of your estate planning documents is a quick and easy process, especially if you don’t have any other significant changes to make. One thing is for sure, the small amount of time you spend making sure your documents are current is well worth the protection and benefit your spouse and family will receive from it.

    Where Can Seniors Find “Home Sweet Home”?

    Thursday, January 21st, 2010

    Where you live is a defining aspect of your character throughout your life. Your “hometown” often plays a large part in the formation of your character; as adults we decorate our homes to reflect our interests, hobbies and loves; and the neighborhoods in which we choose to raise our children (city, farm, suburb) tell us a lot about our underlying values and where we feel safe and secure.

    The idea that where you live is an important part of who you are doesn’t diminish as you get older—in fact, the longer you’ve lived in a place the more it seems to become a part of who you are, and vice-versa—so it’s no wonder that seniors are as choosy about where they live as any of the rest of us. What follows are some of the options for senior living arrangements. What you and your loved one will choose will depend on health, finances, community support, and of course—your family.

    Most seniors would prefer to stay in the home they’ve known and loved. A senior or retirement community may look perfectly nice to a son or daughter; but mom or dad may see the retirement community as a first step toward losing their independence and being forgotten. Many senior citizens can stay in their homes for quite some time so long as they have the support of family and community and perhaps the help of an in-home caregiver.

    Another option for housing is a senior or retirement community. These are often independent communities which provide age-segregated living opportunities for seniors who are still active. They usually provide social activities, regular transportation around town, and some personal care or nursing services. These communities can be the perfect solution for a still active senior who is unable to drive anymore, but be very cautious when choosing a community; with no regulation or governing body the non-social services they provide can be suspect.

    A nursing home is the most drastic option for senior living, and is usually reserved for chronically ill people who need medical care and regulation in addition to help with the most basic of daily tasks. The decision to use a nursing home is a difficult and emotional one, and should not be put off to the last minute. Not only because nursing homes are expensive, and require as much advance financial planning as possible, but also because finding the right nursing facility for your loved one can take time.

    Whatever housing option you are looking for, don’t be afraid to ask for professional help or advice. A Geriatric Care Manager, Elder Care Support Services, or an Estate Planning or Elder Law Attorney can help your family make and implement this tough decision.

    Another Kind of “Bucket List”

    Tuesday, January 19th, 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, 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 an exemption amount of $1.3 million of gains from this carry-over basis rule, and another $3 million exemption applying to assets inherited from a spouse.)

    Will You Take Advantage of New Roth Rollover Rules?

    Thursday, January 14th, 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.

    Part of the Family: Planning for Pets

    Tuesday, January 12th, 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?

    Keep Your Estate Safe in 2010

    Friday, January 8th, 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.”

    Who Cares About Medicare?

    Wednesday, January 6th, 2010

    One of the main concerns of anybody who is retired or nearing retirement is how to pay for medical expenses. Research shows that a healthy 65 year old couple can expect to pay somewhere around $305,000 in out of pocket medical expenses during the course of their retirement—and that’s a healthy couple! With expenses like this staring them in the face, it’s no wonder senior citizens are concerned about Medicare.

    For those who don’t know, Medicare is a government administered insurance program providing health insurance coverage to people aged 65 and older, or to disabled persons who meet certain qualifications. The Medicare program has many parts which variably cover hospital insurance, medical insurance, and more recently, some prescription drug costs. The Medicare program has proven to be a valuable resource for senior citizens since it was signed into law in 1965, but the program is far from perfect or comprehensive. This, plus recent developments with the health care reform bill have many people asking questions about the future of health care insurance for retirees.

    To help answer these growing concerns about health care costs and the Medicare program, Time Magazine has published a special article about how to navigate the Medicare maze. One of the most valuable portions of this article is “When—and How—to Enroll in Medicare”, but the article discusses other important issues such as:

    • Medicare’s Part A, B, D and More
    • How Medigap Policies Can Help
    • When to Buy Long-Term-Care Insurance

    Still, the best way to assure that you are getting the right medical coverage for yourself or your spouse during your retirement is to talk to a professional. Federal and State sponsored health insurance programs offer necessary help and coverage—but they can be fraught with confusing procedures and enrollment difficulties. Your estate planning or elder law attorney will be able to help you with the process. Don’t wait until it’s too late.