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  • Archive for March, 2011

    A Caregiver Agreement Provides Benefits for All

    Wednesday, March 30th, 2011

    A recent article in the VOA News.com brought to our attention the fact that while many adult children are serving as caretakers for their aging parents, very few may be receiving monetary reimbursement for their time or trouble. Our firm is not surprised by this at all. Many children and grandchildren feel that helping their aging relative is a privilege, or perhaps a responsibility, and not something that they would ever dream of taking money for. What these families don’t realize is that creating a caretaking agreement between relatives is something that benefits both the caretaker and the elderly relative.

    The reaction of David Fowler, the subject of the article mentioned above, when his brother suggested David get paid for caring for their mother, reflects the views of many adult children who have elderly parents to care for. “At first [I was] kind of uncomfortable with what he was talking about because… I don’t want to make a profit off of my mother,” said David. “That’s just not in our way of thinking.”

    But a financial arrangement between a caretaker and elderly relative can actually be “a way to protect the older person. There may come a time when they have to go into a nursing home, have very little money left, and should qualify for Medicaid, the government’s medical assistance program for poor Americans.”

    The catch is that this financial arrangement must be an official one. Any money given to a caretaker outside of the legal caretaker agreement could be construed as simply a gift. “The monies you paid to the family caregiver absent an agreement in writing will be deemed to have been gifted by you to the family caregiver… causing a period of delay wherein which you will not qualify for the Medicaid benefit.” A caretaker agreement could easily prevent this disqualification or delay.

    Although you may feel that you would gladly care for your mother or father for free, consider the benefits of a caregiver agreement and talk to your attorney about whether a contract of this kind could be useful to your family.

    Icon, Businesswoman, Philanthropist—What Happens Now to Elizabeth Taylor’s Fortune?

    Monday, March 28th, 2011

    The recent passing of Elizabeth Taylor has many wondering what will now happen with Ms. Taylor’s sizeable fortune? According to this article in Forbes Ms. Taylor’s fortune includes not only the millions she made in the Hollywood movie industry, but the even greater amount made she made with her fragrance line.

    “In her most savvy business move, Taylor licensed her name to Elizabeth Arden and came out with several perfumes, including Passion, White Diamonds, and Black Pearls. Her fragrances have reaped a reported $200 million in sales over the years. Perfumes are one of the highest margin products out there, which is why celebrities love them. Taylor was doing it before anyone.”

    Furthermore, a recent article in ABC News reports that Elizabeth Arden has no plans to discontinue the Taylor brand anytime soon. “White Diamonds remains a best seller almost 20 years after its 1991 introduction, a testimony to her transcendent and enduring appeal… Our best tribute to Elizabeth Taylor will be to continue the legacy of the brands she created and loved so much.”

    The question now is, what will happen to this sizeable (and growing) fortune now that Ms. Taylor has passed away? ABC News has some guesses: “On the question of what could happen to her estate now that she has passed away, many speculate it will be distributed to her four children and 10 grandchildren [with whom she is reported to have been on good terms]… And Taylor most likely bequeathed a substantial amount of money to her charitable work. Taylor was a devoted AIDS activist, helping form the American Foundation for AIDS Research in 1985 and the Elizabeth Taylor AIDS Foundation in 1991.”

    Thus far no last will and testament has been released, which suggests that Ms. Taylor may have had a trust, an extensive document which protects your family and assets while remaining private. But given what we do know about Ms. Taylor, it is not unreasonable to believe that her estate will be split between her family and her charitable endeavors, especially the AIDS Foundations to which she gave so much in life.

    Prenuptial Agreements Help Protect Your Assets AND Your Marriage

    Wednesday, March 23rd, 2011

    Marriage is not just a mingling of hearts and households; it’s also a mingling of assets and property. This may not seem like a big deal if both partners are young and have little to their names yet, but if either partner (or both partners) is well established, with a career or business of their own a prenuptial agreement is particularly well advised. A prenuptial agreement can also be a good idea if one partner has children (or assets, or debt) from a previous marriage, or is an expectant heir or heiress.

    Contrary to what many people may think, a prenuptial agreement isn’t just for the rich and famous, and a prenuptial agreement doesn’t mean you aren’t sure your marriage will really make it. In fact, this article in the Huffington Post details 10 reasons why a prenuptial agreement is a good idea—and not one of those reasons is “You don’t think your marriage can make it.” Here are just some of the reasons why you should consider a prenuptial agreement:

    • Writing a prenup will help you learn about each other.
    • Separate property before you marry should often remain separate property when you married.
    • A prenuptial agreement can help keep the peace in your extended families.
    • Prenuptial agreements can provide freedom from each other’s debts.
    • Expectations for the marriage can be addressed in advance with a prenuptial agreement.

    No matter what your age or position in life, creating a prenuptial agreement before you wed can be beneficial to your family, your finances, and your marriage. Don’t let old-fashioned notions about prenups and the rich and famous keep you from protecting your assets. Talk to your partner and consult your attorney before you walk down the aisle.

    New POLST Program Raises Awareness About End-Of-Life Decisions

    Monday, March 21st, 2011

    A recent article in the Wall Street Journal shines the light on a new program being instituted by a growing number of states called “Physician-Orders for Life Sustaining Treatment,” or POLST. “A POLST, which is signed by both the patient and the doctor, spells out such choices as whether a patient wants to be on a mechanical breathing machine or feeding tube and receive antibiotics.”

    Creating a POLST is an important step toward getting the care and medical treatment you want at a time when you may no longer be able to communicate those wishes to your family or medical staff. As estate planners we know just how important it is to communicate these preferences for health care; in fact, creating an estate plan with our office includes drafting a document called an advance directive, in which you specify which medical treatments or interventions you would or would not like, and more importantly, it is the document in which you nominate a health care agent to serve as your proxy if and when you are unable to speak for yourself.

    Keep in mind that although the POLST is an important step in making your wishes known, the POLST is not intended to replace an advance directive. The POLST programs “are meant to complement advance directives, sometimes known as living wills, in which people state in broad terms how much medical intervention they will want when their condition no longer allows them to communicate.”

    The WSJ article states that “A study supported by the National Institutes of Health last year found that patients with POLST forms were more likely to have treatment preferences documented than patients who used traditional documents such as living wills and do-not-resuscitate orders.“ This comes as no surprise, considering that executing a POLST includes getting the document signed by your doctor, thus ensuring that you doctor is not only aware that you’ve expressed your wishes for end-of-life care, but has also likely had a part in helping you understand exactly what your options are.

    Our office recommends that our clients go one step further—in addition to having your doctor sign your POLST, give your doctor a copy of your advance directive as well. Once you have things squared away with your doctor we also recommend sending a copy of your POLST and your advance directive to the person you’ve named as your healthcare agent.

    The more informed you doctors and family are about your wishes for end-of-life care, the more likely it is that you will receive the treatment you prefer.

    Frequently Asked Questions: Does Your Family Need a Trust?

    Friday, March 18th, 2011

    Estate planning attorneys get asked a lot of questions about how to protect every different kind of family and situation, but the questions that are asked the most tend to be about trusts. For this reason, we’d like to take a moment to review with our readers the basic definition and benefit of trusts—which are, for most families, the most comprehensive, most reliable tool for protecting your assets and passing them on to your beneficiaries.

    The primary benefit of trusts is their versatility. Trusts are so useful and versatile, in fact, that they serve as the backbone of just about every different kind of estate plan; from the plan created by an elderly grandparent, to the one executed by the new young couple. This isn’t to say that each trust is the same for every estate plan—far from it! Each person and family will be different; from their property and assets, to the people (or charities) they’d like to name as heirs, all the way down to their values and beliefs (which can be expressed and passed on through a trust.) With all of these differences, each living trust must be customized to suit the individual.

    This is the beauty of trusts, they are indeed highly customizable. Perhaps the most well-known and commonly-used trusts are the living trust or a testamentary trust, but trusts provide far more options than those three mentioned above. Other options include special needs trusts, irrevocable trusts, retirement trusts, education trusts, gifting trusts, and many more . . . even pet trusts!

    If you are considering creating a will or estate plan, or planning to update the one you already have, the best thing you can do is to know your options. Contact our office for more information about trusts, and which of the many trust options may be the right tool to protect your family.

    Tragedy in Japan Inspires Reflection: Are You Prepared for Disaster?

    Wednesday, March 16th, 2011

    Only a few days ago the world was shocked by the terrible earthquake and tsunami in Japan. Our hearts and prayers go out the people affected by the tragedy, and many people are asking what they can do to help.

    The sudden violence of nature has many of us looking at our own situations as well, wondering if we are prepared—as a country and as individuals—should an equally devastating natural disaster strike our own shores. Of course the first thought most of us have in this regard is whether or not we have a well-stocked supply of emergency rations, but as this article from CBS MoneyWatch.com points out, there is much more to surviving a natural disaster than the first 24 hours. “Most people never think about the items to take that help protect your financial assets.”

    Author Steve Vernon includes in his article a list of things you can do to prepare for what comes after the first 24 hours of a natural disaster, including:

    • A stash of cash in case ATMs are shut down for a long period of time.
    • Contact information for family members, close friends, and work contacts.
    • A cell phone and charger, plus batteries and chargers for other necessary electronic equipment.
    • A list of account numbers and contact information for all your regular bills and payment obligations.
    • Your insurance company contact information.

    These are only a few of the things you’ll want to have ready (or at least have thought about) if disaster strikes here at home.

    Some natural disasters are so big in scope they are almost impossible to comprehend, let alone try to prepare for; but preparation is the best way to keep fear and panic at bay. It doesn’t help anybody to dwell too much on what “might happen,” but having a basic emergency plan in place gives you the freedom to go on with your everyday life, knowing that you’ve done what you can to be ready if disaster does strike.

    For more information about disaster preparedness please visit the FEMA website here: FEMA Emergency Planning Checklists.

    For more information about how you can help the disaster victims in Japan please check the Crisis Response Page on Google.

    6 Things to Have on Your First Visit with Your Estate Planning Attorney

    Friday, March 11th, 2011

    Your first meeting with an estate planning attorney can be daunting. Nobody really enjoys talking about their own death with a complete stranger, and many people mistakenly believe it will be sad or difficult. But creating your estate plan isn’t about your death—it’s about your life. In fact, the very first things you will discuss with your estate planner are the things that are most important to you, the issues that will be at the heart of your estate plan: Your family, your assets, and your goals.

    If you want to get the most out of this first visit it helps to be prepared. Of course, every firm will be a bit different, but here are a few universal tips on how to be prepared and get the most out of your first visit to an estate planning attorney.

    Have your financial statements. A large part of what an estate planning attorney does is to help you protect your assets. In order to do this, she needs to know what assets there are and what your general financial situation is. Having actual numbers, rather than vague ideas, is a huge help.

    Know how the deed to your home is held. For most people, their home is their largest asset. How title is held, and in what the state of ownership, will have a large part in deciding what your best course of action will be.

    Have some preliminary thoughts about who you may to be your executor and health care agent. This may change once you know more about what these roles entail, but having one or two people as a starting point will speed the process considerably.

    Bring contact information for financial advisors with whom you work on a regular basis. Having your attorney work directly with your financial advisors, if any, is integral to having an airtight estate plan and financial plan. Not to mention that it makes things much easier on you to not have to act as a go-between.

    If you’re married, or planning with a partner, come to the meeting together. Planning as a couple really needs to be done as a couple. “I’ll have to talk it over with my partner” only means you’re likely to have to have the same meeting all over again. If you’ll both be signing documents, you both should be there for the initial meeting.

    Bring a list of questions to ask the attorney. Even if you only have one or two, and you think they’re naïve, bring your list of questions. Your questions tell an attorney a lot about what your goals are, and will help you get a good read on what the attorney is like as a person and professional.

    A Way to Help Parents and Grandparents in Financial Need

    Wednesday, March 9th, 2011

    Estate planning is often about how people can pass wealth on to their children or grandchildren, but what if a child wants to give financial gifts to a parent or grandparent? This article from Bloomberg discusses just that: how GRATs Let Children Pass Millions to Mom or Granny Free of U.S. Gift Taxes.

    As the elderly population of the U.S. increases, and as the effects of the economic downturn hit, more and more adult children find that their parents or grandparents are not doing as well financially as they had hoped. Many need help paying for medical expenses, home care expenses, mortgage or rent payments, etc. Adult children would like to be able to help, and a properly executed GRAT can be the perfect vehicle for wealthy children to give financial aid to their parents or grandparents without taking away from their lifetime gift-tax exemptions.

    “With a GRAT, a child sets up a trust with a term of at least two years and funds the trust with stock or other investments. The trust pays the principal plus interest back to the child over its term as if it were an annuity, based on an interest rate set by the Internal Revenue Service. Any appreciation of the underlying investments above this ‘hurdle’ rate passes on to the GRAT’s beneficiary, in this case the parents, without being considered a gift for tax purposes.”

    However, this opportunity may not be around forever. The Obama administration has recommended imposing a 10 year minimum term on GRATs, an act which would make the GRAT strategy significantly less useful for many families. Adult children who would like to use a GRAT to pass wealth up to their parents or grandparents should consult with a financial or estate planning advisor sooner rather than later.

    If you do miss out on the GRAT window, however, there are other options for helping elderly relatives, including paying medical expenses for the loved one (so long as payments are made to the service provider directly, rather than to the relative.) Contact our office for other options and more information about helping elderly parents and grandparents.

    Who Owns Credit Card Debt After the Death of a Parent?

    Monday, March 7th, 2011

    Administering the estate of a deceased loved one can be complicated and emotional under the best of circumstances, but executors who take on this overwhelming task may find themselves facing more than just the demands of relatives and heirs—they may also find themselves facing the illegitimate demands of creditors. This article on the New York Times’ New Old Age Blog warns readers to “Be wary of collection agencies that try to convince you that you are responsible for payment on a card owned solely by a deceased parent.”

    After the death of a parent, children and heirs often receive calls from debt collectors looking for someone—anyone!—to pay off the debts of the deceased, even if the heirs have no obligation to do so. In most situations relatives are not required to pay the debts of the deceased from their own assets. “Spouses, children or other loved ones don’t ‘inherit’ credit card debt unless they co-signed the card… When someone dies, credit card companies have to wait near the back of the line to receive payment. If what’s left over after settling the estate isn’t enough to pay the bill, credit card debt is written off.”

    Probate or administration of an estate is a process which follows established steps; heirs and credit card companies alike must wait their turn in line. “Administrative fees (like executors’ fees, filing fees, appraisals of property and tax-preparer fees), mortgages, reverse mortgages, taxes and even funeral expenses have to be paid off before heirs can inherit anything from the estate.” Unfortunately, most bereaved relatives aren’t aware of the laws on this subject, and debt collectors take advantage of that ignorance.

    The best way to avoid this painful interaction is to have a proper estate plan. “Most of the headache can be avoided with a will… If you make it well known who owns what, both in terms of assets as well as liabilities, you can prevent a lot of this from taking place outside of your control.” The article also recommends taking preemptive action. “After the death of a parent, send a letter or call the banks and credit card companies to cancel cards and let them know that the cardholder has died.”

    Tough Decisions Await Executors of 2010 Estates

    Friday, March 4th, 2011

    If you are the executor of the estate of a decedent who died in 2010 you may think you’re in the clear. After all, there was no estate tax in 2010 right? Making distributions should be a piece of cake. Wrong. Because of the estate tax election available on the estates of 2010 decedents, administering those estates will actually be more work than you may think.

    The repeal of the estate tax in 2010 also brought with it a repeal of the “step up in basis,” meaning that heirs selling inherited assets were taxed based on the original acquisition cost of the assets, not on their value as of the date of the taxpayer’s death. This generally resulted in a higher tax paid on assets than the normal estate tax rate—not good for taxpayers. But 2010 estates don’t have to go by these rules. The legislation passed in December of 2010 gave 2010 estates the opportunity to elect whether they wanted to use the 2010 estate tax laws, or the new laws for 2011. This article in Forbes explains what this means:

    “The 2010 Tax Relief Act restored the estate tax for individuals dying in 2010 with a $5 million per person exemption and a maximum rate of 35%. It also repealed the modified carryover basis rules for property acquired from a decedent who died in 2010. However, estates of individuals dying in 2010 can elect zero estate tax and the modified carryover basis rules that would have applied before they were repealed. That means the basis of assets acquired from the decedent would be the lesser of the decedent’s adjusted basis (carryover basis) or the fair market value of the property on the date of the decedent’s death.”

    In general this tax election is a good thing, it allows executors to choose which tax formula will cost the beneficiaries the least in taxes; but it does mean a lot more paperwork and a lot more attention to detail. If you are the executor of an estate of a decedent who died in 2010, don’t hesitate to call us. We can answer your questions and help you explore your options.