Estate Planning For Women (And the Men Who Love Them)

Question #6

A fellow attorney (and award-winning journalist) Deborah Jacobs authored the book, “Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide”.  In her recent Forbes article titled “Estate Planning for Women (And the Men who Love Them)” she indicated the below question is a question every financially savvy woman should be able to answer. 

 

What's a tax dowry?

Starting in 2011, the tax-free amounts you can give to no-spousal heirs during life and at death are combined into a single $5 million exclusion. So, for example, if you have used $1 million of the exclusion to make lifetime gifts, the unused exclusion when you die will be $4 million, rather than $5 million.

Married couples get a new, special break: They can share each partner's $5 million exclusion during life (this process is called gift-splitting) and give more to the kids now, tax-free. But of course this also reduces how much of the tax-free amount will be available when they die, either for their own use or to be carried over by the survivor.

This can pose some tricky issues when at least one member of a couple is wealthier than the other and has been married before. Soon after the new tax law passed, I heard about a situation in which the poorer spouse (a woman) with an unneeded $5 million exclusion agreed to combine the two exclusion amounts for lifetime gifts so that her husband could give more to his kids from a previous marriage, tax-free. Warning: Don't give up your tax dowry without legal advice, and make sure it comes from your own lawyer--not one your spouse hired.

Questions like this one can often trigger even more questions in your mind.  Please accept my invitation to schedule a meeting where we can discuss this topic and others that might be relevant to your estate planning.  Give my office a call to set a meeting.

 

The Odds are worse for finding a Nursing Home for Dad

Liz Sundvick is a member of WealthCounsel who practices law in the state of Nevada.  I found her commentary about gender differences in nursing home availability to be valuable.  Her comments are based on the article article “Fewer Beds For Men Entering Nursing Homes” The New York Times The New Old Age Blog (January 30, 2011)

Finding a nursing home for an ailing loved one, and a good nursing home that is affordable, is already a fairly difficult task. Unfortunately, it’s only likely to grow in difficulty as the number of elderly in need of care begins to peak. Unfortunately, too, there are some factors that you just might not think of. Like this: it is disproportionately difficult to find a nursing home for a male patient.

This fact was recently pointed out over at the New Old Age Blog and I thought it was worth sharing. What is working against our male elderly loved ones is not much more than simple math, with a bit of Medicare policy work at play. As you are likely aware, women have a longer life span on average and therefore there are more women in nursing homes to begin with; that’s already a bottleneck based on population statistics. Then you throw in the fact that, under Medicare rules, most rooms in nursing homes are no more than “semi-private”, a delicate euphemism, and co-ed rooms aren’t allowed either. Thus, with more women already in such rooms the more that only women can be admitted into a facility. The math is fairly easy to figure out, but it’s a strange and unintended consequence nonetheless.

Topics like this one can often trigger even more questions in your mind.  Please give me a call to schedule a meeting, then we can discuss this topic and others that might be relevant to your estate planning.

 

Estate Planning For Women (And the Men Who Love Them)

Question #5

A fellow attorney (and award-winning journalist) Deborah Jacobs authored the book, “Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide”.  In her Forbes article titled “Estate Planning for Women (And the Men who Love Them)” she indicated the below question is a question every financially savvy woman should be able to answer. 

What's the difference between a will and a living trust?

There is widespread confusion about the differences between these two documents, and when you need one rather than the other. A common misconception is that living (revocable) trusts avoid estate taxes, which is not true. Both a will and a living trust can be used to transfer assets, but each has unique uses. For example, a living trust can hold assets for your benefit while you are alive--say, in case you are suffering from dementia. Only a will can be used to appoint a guardian for a child.

In some states, living trusts are also used to avoid or limit the cost of probate--the process through which a court determines that a will is legally valid and approves the distribution of assets covered by that will. Whether probate is costly or burdensome will depend on the state. Still, there are times when you might want to use a revocable trust to limit how much of your estate goes through probate or to avoid it altogether. For example, if you are concerned about publicity over your net worth or the identity of your beneficiaries, you might transfer assets through a trust--which, unlike a will, is not a public document. Someone leaving assets to a domestic partner might use a revocable trust, because it is harder for family members to challenge a trust than a will.

A living trust is also useful if you own real estate in a state that is not your primary residence. Real estate is governed by the probate rules of the state in which it is situated. Unless the property is in a living trust, an Illinois resident who has a home in Florida, for instance, would need to probate the property separately there.

Questions like this one can often trigger even more questions in your mind.  Please accept my invitation to schedule a meeting where we can discuss this topic and others that might be relevant to your estate planning.  Give my office a call to set a meeting.

 

Five Documents Most Need

I’m sharing this post by my WealthCounsel colleague, Scott Makuakane, who practices in the state of Hawaii.  People’s situations vary, and I am not suggesting that you need all five of these documents.  But almost everyone needs to put plans and documents in place to achieve the goals covered in this post.

"Estate planning" is far more than a set of documents.  It includes the plan behind the documents and the goals that the documents are intended to advance.  That being said, there are certain documents that just about everybody should have in place.  Not having these documents will virtually guarantee that your wishes will not be carried out if you are incapacitated or if you die.

1. Your Will.  If you don't have a will, the law of the State (or States) where your assets are located and/or where you reside will dictate where your assets go after you are gone, as well as who will be in charge of making sure your bills are paid and your assets are properly distributed.  This process will almost always involve the courts.  Having a Will does not avoid sending your family to the courthouse, but at least it gives them a set of instructions to follow.  If your instructions are clear, the court will help your family carry them out.
2. Your Revocable Trust.  The single most effective way to bypass the courts is to create and fund (transfer your assets into) a revocable trust.  This can avoid a court proceeding if you are incapacitated, and it can avoid your family's having to go to court to settle your estate after you die.  If you have a revocable trust, you will still need a special kind of Will, called a "Pourover Will," to serve as a safety net to funnel assets into your trust if you don't put all of them there during your lifetime. 
3. Durable Power of Attorney.  A durable power of attorney can serve a similar function to your Pourover Will.  That is, as a safety net to enable your hand-picked helper to put assets into your revocable trust if you are unable to do so yourself.  A durable power of attorney can also help your loved ones make sure your estate plan works as it was intended to work.
4. Your Advance Health-Care Directive.  This document enables you to say who will make health-care decisions for you if you are unable to communicate them yourself.  It also enables you to make the ultimate decision about your medical care--when to stop trying to keep you alive by artificial means.
5. Your HIPAA Authorization.  HIPAA is a federal law that has far-reaching implications.  One of them is that if your medical providers do not zealously protect the privacy of your medical information, they can be subjected to substantial penalties.  Thus, if you want your doctor to be able to discuss your medical condition with your family and your hand-picked decision-makers, you have to specifically authorize the release of your medical information to your specified recipients.  Not even your spouse or your adult child can get information about you from your doctor without your permission, which could be a real problem if those are the people you are relying on to make medical decisions for you.

Since many of these documents would be referred to in life-changing, life-threatening, or life-ending events; you want to have these documents thought through and executed to avoid confusion and decision paralysis during one of these events.   I am available to meet to counsel you on these or other documents that keep you confident if facing any of these type of events. 

 

Estate Planning For Women (And the Men Who Love Them)

A fellow attorney (and award-winning journalist) Deborah Jacobs authored the book, “Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide”.  In her recent Forbes article titled “Estate Planning for Women (And the Men who Love Them)” she indicated the below question is a question every financially savvy woman should be able to answer. 

Question #4

Who would raise your children?

Few prospects are more wrenching than the possibility that young children will be orphaned. Often, parents put off writing a will because this particular thought is unbearable or couples cannot agree on a potential guardian. Some assume--incorrectly--that it is enough just to ask a relative or trusted friend to step in if the need arises.

But not formalizing the arrangements and doing some estate planning along the way could leave your children in a vacuum. For example, let's say you are a single or surviving parent--in this group too, women predominate. If you do not have a written document outlining your wishes, a court usually decides who will fill your shoes. A custody battle might erupt or, awful as it sounds, no one may want your children. And without financial planning, there may not be enough money for your child's support.

When choosing a guardian, people typically look first to relatives, starting with their own siblings--the child's aunts and uncles. A second choice for some people is their own parents, if they are young enough. Even if certain family members seem like obvious candidates, take into account all the factors involved. Key questions to ask: Am I comfortable with the individual's lifestyle and values? Would my child have to relocate? Can the prospective guardian incorporate my children into his or her household? If I have more than one child, would the guardian be able to keep them together? Does my child already have a relationship and a good rapport with the person?

Here too, you can build in checks and balances--by putting a different person in charge of the money you leave for your child's support. You can name a guardian for the funds, or put them into a trust and designate a trustee to spend the money on your child's behalf. While financial guardianships are a matter of state law and require court supervision in some states, trusts are a private matter. A trust also gives you much more say over how the money is spent.

Questions like this one can often trigger even more questions in your mind.  Please accept my invitation to schedule a meeting where we can discuss this topic and others that might be relevant to your estate planning.  Give my office a call to set a meeting.

 

Six Celebrity Estate Planning Mistakes

One would think that with their access to money and advice, celebrities with large estates would avoid costly estate planning blunders.  Well, some do and some don't.  

1.  Poor Choice of Executor/Trustee:  Heiress Doris Duke chose her butler to manage her $1Billion foundation.  When he was accused of self-dealing, the foundation lost hundreds of thousands in litigation fees that should have instead benefited the charities named in the foundation.  Jerry Garcia made the same mistake, naming his third wife as his estate administrator.  This led to a protracted legal battle after his death.

2.  Poor Choice of Guardian:  Michael Jackson named his aging mother as the guardian of his three children, with Diana Ross as a backup.  What would happen if his mother were to die or lose capacity before the youngest of these children reached the age of majority?  They would either have to move across the country to live with Diana Ross - who isn't even related to them - or Diana Ross would have to resign, which would place the children at the mercy of  California guardianship proceedings.

3.  Doing Nothing:  What do Jimi Hendrix, Sonny Bono, Pablo Picasso, Bob Marley and Steve McNair all have in common?  They each died without a will, and in each case their estate was the subject of expensive, embarrassing and protracted litigation.  Even Abraham Lincoln (a lawyer!) died without a will.  Drafting estate planning documents takes some time and attention, but not so much that you should be afraid to tackle it.

4.  Leaving Unfinished Business:  Michael Jackson formed a trust, but never funded it.  This left a large portion of his estate subject to the very public probate arena.  "Funding a trust" simply  means assigning assets to the trust so the trust can govern the distribution of the assets.  Without funding, a trust won't work.  Check your life insurance policies, deeds and retirement plan statements for evidence that they are governed by your trust.  If you aren't sure, ask a lawyer.

5.  Not Updating with Important Life Events:  Heath Ledger and Michael Crichton neglected to update their documents following the birth of new children, leading to public family infighting.  Updates need to be made with every new marriage, divorce, birth, death and change of state residency.  A thorough review should be undertaken every three years.

6.  Disorganization:  Michael Jackson left assets scattered to the four winds.  Not only were they unassigned to his trust, but they had separate income streams and challenging valuations.  If you have a business, you need to gather information and organize it cleanly, so your family knows what they are dealing with.  Organization is not difficult, especially with the guidance of an estate planning professional.

Unfortunately, costly mistakes that turn families against one another and squander wealth on legal fees are not restricted to celebrity estates.  I've seen examples of nearly each one of these mistakes with ordinary people who have loving families.  Each mistake has cost the family money and good feelings.

If you'd like to make sure your estate plan is up to date and complete, come see me.  There's no fee for a first meeting, and never a bill until both you and I agree on the work to be done, and the appropriate fair, flat fee to see it completed.  You can learn more about me and my practice at Jamestown Estate Planning's website.

Government Cuts Affect Nursing Homes

One of my WealthCounsel colleagues posted a comment on the potential for concern about nursing home care levels.  Lizette Sundvick targets this concern that appeared in this article: “Medicare Cuts Could Up Nursing Home Costs” SmartMoney.

Nursing home residents may soon face higher costs and reduced services, as planned Medicare spending cuts take effect this fall. 

The last few months have been a wild ride on multiple levels, to include concerns over Medicare and the “debt crisis.” While many more challenges lie ahead in terms of budget cuts, some cuts already have been made under the radar screen. Several you should know about actually go into effect this fall, as reported in a recent SmartMoney article.

According to SmartMoney, nursing home residents could face higher costs or reduced care once these cuts kick in.

Background

On July 29, The Centers for Medicare and Medicaid Services (CMS) decided and announced that they would be compensating for last year’s $4 billion shortfall by cutting reimbursement rates to nursing homes by 11.1%. In real terms, the shortfall is going to reduce government reimbursements to nursing homes. In 2010, nursing homes increased charges on residents by an average of 5%. Bad news: These reduced government reimbursements likely will trigger even higher nursing home costs for residents beginning this fall. Alternatively, it might trigger a reduction in services to nursing home residents. Either way, the forecast is not pleasant.

Perhaps I am wrong. Perhaps nursing home residents won’t see increases in costs or decreases in services. After all, the CMS actually justifies the 11.1% cut by pointing out that it is simply a more accurate reimbursement amount based on a government report indicating that Medicare has been overpaying. In fact, a spokesperson for the CMS maintains, “We do not believe that nursing homes will respond to the payment changes by decreasing the quality of care furnished to patients. However, we intend to carefully monitor changes in utilization and staffing patterns to ensure that patients continue to receive high quality care.”

Still, the nursing home industry appears to be monitoring the situation with caution. Bottom line: If you have a loved one in a nursing home, then you, too, should take notice.  Keeping abreast of current economic changes keeps you prepared for changes you may need to make on behalf of your loved one.  

The potential for drastic changes in long term care environment serve as reminders that our power of attorney and healthcare directives need to be up-to-date and relevant.  If you want assurance that your plans are up-to-date, then let’s get a meeting scheduled to review your plans.