NEWS FLASH: Yankees Beat the Miami Dolphins!

Yes I know, that's impossible. But the heirs of George Steinbrenner, who died recently at the age of 80, certainly came out ahead of the heirs of Joe Robbie, the former owner of the Miami Dolphins who died in 1990.

Steinbrenner's timing couldn't have been better. His heirs will inherit the team without having to pay any estate taxes on a $1.1 billion estate. See “How Steinbrenner Saved His Heirs a $600 Million Tax Bill” from the Wall Street Journal here.

Contrast this with Joe Robbie. When he died in 1990 the heirs had to sell the football team and the stadium at fire-sale prices in order to pay a whopping $47 million estate tax bill.

Unlike most owners Joe Robbie built his own stadium entirely with private capital. The stadium had to be sold along with the team and it no longer bears Joe Robbie’s name. For more details see “Yankees vs. Dolphins: Steinbrenner’s Final Victory”

You could say, "Yeah, but his heirs are still wealthy." True. But it really isn’t just about money. Robbie's intentions were defeated; his family was removed from the success he worked so hard to build from his very modest depression-era beginnings. Estate planning affects the heart as well as the pocket book.

(What happens to the ultra-wealthy can happen to any small business owner…often with more devastating results. I’m always available to share my experience and knowledge to create a better estate plan.)

 

My thanks to my associate Greg Turza who practices in the state of Illinois for this clever commentary on estate planning. 

 

Estate planning for the rest of us

An acquaintance asked me about estate planning, not long ago. They weren't asking for professional advice, they were literally asking if I could explain what estate planning is, and how it might affect them. It's a good question, one that I wish more people knew the answer to. So this space seems like a perfectly reasonable spot to address the issue.

First, it's worth knowing that estate planning is not limited to the DuPont's and Carnagie's among us. Admittedly, Bill Gates and Warren Buffet have amassed fortunes so large as to suggest that significant thought needs to go into the planning of their estates. But estate planning isn't just about money. It's also about security, philanthropy, and control of our own interests.

One aspect of estate planning includes our health care plans. Not only can estate planning help determine our eligibility for Medicaid benefits, it can also allow each of us to issue specific directives about our own future health care. Even if a health crisis leaves us unable to speak for ourselves at some point, our prior planning can provide documentation of our wishes, which enables us to maintain control of our own destiny, even if we are temporarily, or permanently incapacitated.

In fact, our estate planning can extend to the appointment of a specific person to act as our health care representative, as well as our desire to donate organs upon your death. It isn't just about our money and holdings. It is in a very real sense about us, as people.

Yes, estate planning allows us to make decisions in our prime that will come into play even after we are gone. And those decisions are legally binding on those who may, or may not agree with our wishes. Remember, this is your own estate and your own life you are planning to protect.

Beyond health care, estate planning allows us to designate who speaks on our behalf should the need arise. Entering into a power of attorney allows us to appoint the person we trust most to oversee our personal business if we are unable to conduct our affairs ourselves. Many people assume that we must appoint our lawyer when we issue a power of attorney. And you certainly can do that if you wish to. But you can also give that authority to your spouse, or a child, or a close personal friend, or anyone else you wish. A power of attorney is yours to give, or revoke, at your discretion. Estate planning can help you enter into, or terminate a power of attorney, on your terms.

Perhaps the most commonly known aspect of estate planning is the drawing up of a will. But even that can be more far-reaching than most people realize. You have the opportunity to not only decide what happens to your holdings after your death, you also have the chance to establish a trust if you wish to, so that you can provide for the care of a family member, or another charitable cause that is important to you. Trusts can also be used to minimize a tax burden, in some cases. Estate planning can even allow an individual to develop a strategy to avoid probate on some holdings. A practice that allows a well planned execution of our wealth, no matter how big or small, that keeps it all in the family, for lack of a better term – rather than running the entire contents of our lives through the court system before it is distributed to our heirs, or whomever we wish it to go to.

The assumption that only the very wealthy have any need, or the even the option of engaging in estate planning, is incorrect. Almost anyone who has something of value to leave behind can benefit from estate planning. And even those who do not have significant wealth can benefit in terms of health care planning.

Each and every one of us has a unique situation to deal with as we walk through life. There is no blanket answer or master plan that will work for everyone under every possible circumstance. Perhaps the practice of estate planning would be more readily understood of we called it Individualized Planning, instead?

It's worth thinking about, at least.

Dollars to donut holes

When I was young, my father would often say, “I'll bet you dollars to donuts...” and then make some wild pronouncement about what was happening in the news. I was thinking about that the other day when I realized two things. One, that I'm not entirely sure what my dad's expression was supposed to mean. I suspect it had something to do with the price disparity between a dollar, and a donut. But now that dollars and donuts are becoming ever closer in value – the meaning may be reversed in the not-too-distant future.

The second thing that came to mind was the fact that many older American's are becoming increasingly focused on...not donuts, but the donut hole. More specifically, how the new health care bill passed by Congress and signed into law by the President, might affect their prescription drug benefits – both now, and in the future.

That's an entirely reasonable concern. So it seems reasonable to touch on the subject, at least momentarily, and in a somewhat generic manner.

The term, “donut hole” refers to a prescription drug benefit, or lack of benefit, that affects many American's who are covered under Medicare Part D. And to those who are affected, this is a serious issue. In fact, there almost 50,000 residents in Connecticut who fell into the so-called donut hole in 2009. So we're not talking about small potatoes, here. The benefits are important, and the dollars being spent are considerable.

In short, if your total drug costs were more than $2,830 for the calendar year, 2010 – you are in the donut hole. The gap in coverage means that you will be required to pay the full price for your pharmaceuticals, until the cost rises high enough for you to qualify for catastrophic coverage. This year that threshold has been set at $4,550.

The difference, for those who do not have a calculator handy, is $1,720.00

The total cost of your prescription drugs is tallied up as the total of what you paid, as well as what your plan paid out, over the course of the year.

The effort to close the donut hole is incremental. Each year the hole is scheduled to get smaller and smaller, until it completely disappears by 2020.

This year the hole closes just a small amount, with a check for a $250 rebate being issued to each Medicate Part D recipient who was impacted. Next year, the plan is scheduled to offer donut hole dwellers a significant discount on name brand prescription drugs (50 percent) and a somewhat smaller discount for generics, which are less expensive to begin with.

So there is a light at the end of the tunnel. The donut hole is getting smaller. Nine years from now, it should be gone completely. I hope that offers some encouragement to those who are stuck in it for the moment.

Have a wonderful Thanksgiving. For all our trials and tribulations, we are still fortunate whenever we get to enjoy the opportunity to spend time with our family and friends.

Who ever heard of a Pooled Trust?

The New York Times ran an outstanding article last week, detailing the basics of Pooled Trusts. Most American's are not familiar with the term, or the tool – but thanks to the Times, a much larger audience had the opportunity to read about a means of caring for aging family members, while intelligently keeping the wolf away from the door.

The unfortunate reality for many of us is that a time may come when we can no longer manage to personally provide appropriate care for a loved one in our own home, or in their own home for that matter. But at the same time, we may not have the financial capacity to afford private care providers that would be able to fill the gap.

Pooled Trusts are designed to bridge that void.

Rather than reiterate the content of a well written and very informative piece, I will simply recommend that anyone with an elderly family member read this piece, if for no other reason that to gain some basic insight into an option that may be available and viable, in certain circumstances.

You can find the story on the Internet at: http://www.nytimes.com/2010/11/05/business/businessspecial5/05TRUST.html?_r=3&adxnnl=1&src=twrhp&adxnnlx=1289307765-CdcouVKW+F0EwVbdadQHMQ

As a woman who has faced these issues in my personal life, with my own family members, I am intimately aware of the emotional and financial drain that advancing age and health issues can impose on a family. In order to deal with these issues to the best of our ability, we need to be aware of our options, and informed regarding the pros and cons of each of those options. This story is a good step in the right direction on that count.

I am so pleased the New York Times published Tara Siegel Bernard's excellent article on this very important topic.

Doctor, it hurts when I do this

It's an old joke. A man walks into a doctor's office and announces, “Doctor, it hurts when I do this.” To which the doctor replies, “Then don't do that.”

Pardon me if I don't tell the joke well. Henny Youngman killed with material like that.

Time's have changed however. In many cities and towns around the country if a patient was to walk into a doctor's office and announce, “Doctor, it hurts when I do this,” the reply just might be, “No problem, I can give you a prescription for that.”

The federal government, several state governments, and more than a few sheriff's departments have taken notice of this change in pharmacological distribution lately. And they're not laughing. It's not that anyone is particularly upset that exceptionally effective pain medication is available through licensed medical professionals working out of established medical facilities. It's that Medicare and Medicaid are footing the bill for much if it, and the volume of prescriptions some professionals are writing appears to be excessive. The combination of those two issues has gotten a spotlight shining on pain clinics and medical specialists, from coast to coast.

How much is too much? Nobody knows for sure, but the discussion is underway. A doctor in Texas wrote more than 14,000 prescriptions for a single anti-anxiety drug in 2009. A Florida doctor wrote nearly 97,000 prescriptions in 18 months. That works out to an average of more than 150 prescriptions a day. In Ohio, another doctor wrote over 100,000 prescriptions over a period of two years.

It would certainly appear that the substantial volume of prescription drug use is on the rise. That may cause all of us who access medical care to have to jump through more hoops, wait longer for care, and pay more for our medical needs than we might have if the use of prescription drugs was somewhat less dramatic in nature.

With the focus on healthcare, fraud, and funding becoming a triple hot potato at all levels of government in recent years, it is reasonable to assume that this issue will be even more a part of our daily lives in the years to come.