Special Needs Children Benefit from Special Needs Estate Planning

The following commentary is extracted from an article written by Laura Shumaker - writer and Autism Advocate - and mother of a special needs child.  It appeared in SFGate.com of the San Francisco Chronicle.  Feb. 14, 2013.

1) Most parents of children with special needs worry about what will happen to their child when they are gone, and they worry so much that they put off planning. How do you talk to parents about their fears?

It is difficult sometimes for parents to discuss who is responsible to take care of their children if they are no longer there to do it. This is even more true for parents of children with disabilities who oftentimes must provide a much higher level of care. The benefits of planning are so enormous in these situations that our clients tend to come to us at a much earlier age. A proper estate plan will include planning for the money that is left for the child with a disability, along with a detailed plan that addresses residential, caregiving, advocacy, and other issues that arise for a child with a disability. Once the benefits of planning are provided, parents are relieved to know that something productive can be accomplished to preserve and enhance their child’s life, even when they are not able to do it themselves.

2) What is the first thing parents should do to prepare for the future?

Prepare their own estate plan and write out their instructions for how to best manage their child and their finances. If that is too much, they should at least prepare a Power of Attorney and Advance Health Care Directive to appoint someone to make these important decisions if they are unable to do so.

3) Parents tell me that they are spending so much on treatment now that it is hard to save for later. Your thoughts?

This is a common problem. One solution is to purchase a life insurance policy. It is one additional bill throughout the parents lifetime, but it will provide cash for the care of their loved one with special needs after they are gone. It is important that they select the right kind of policy, because term life insurance usually is not beneficial because they so rarely pay out a death benefit.

4) What is a Special Needs Trust?

A Special Needs Trust (SNT) is a type of trust where people can leave assets to a loved one with special needs that will not interfere with their eligibility for public benefits like SSI or Medi-Cal. In addition, the SNT is a legal way for a person to leave instructions on how best to enhance the quality of life of a loved one with special needs. This often includes plans on where the person shall live, what caregiving will be required, what type of distributions should be made that enhance that person’s quality of life, and any other benefit the person would like to see accomplished.

5) Will trust income affect SSI Eligibility?

No, any assets held inside a special needs trust and any income generated from a special needs trust will not jeopardize eligibility for SSI or Medi-Cal. These trusts are expressly authorized by the federal and state government to hold assets for persons with disabilities and not interfere with public benefits. However, improper administration of an SNT can still cause a loss (or reduction) in benefits, so it is also important to name a trustee (the person responsible for managing the trust assets) who understands SSI rules, Medi-Cal rules, and the typical rules of managing a trust.

6)Why is it important to hire an attorney who specializes in special needs trusts?

Special needs trusts work to preserve eligibility for public benefits, but only if all of the rules are followed. Many estate planners who do not do a lot of planning for persons with disabilities do not understand all the wonderful things a special needs trust can do to enhance the quality of life of a person with a disability. Thus, it is important that the proper special needs planning attorney is used to make sure all of the legal technical rules are followed along with providing advice on all the options that can be used as part of the special needs planning.

Solid legal planning is highly recommended for individuals with developmental disabilities.  I am available to meet to talk about all types of estate planning needs.  The key words are "estate planning".  Let's get you started now.

Estate planning can be a jungle, and a guide can be invaluable.

There comes a time for a business owner to plan transition of ownership.  Before selling or giving a business to family members, the owner must devote thought to the outcome that he or she wants to accomplish. Regardless of the intended family recipient(s), all parents have to ponder and answer the following questions to determine their exit objectives:

• How much wealth do we want to keep?
• How much wealth do we want the kids to have?
• How much is too much?
• And finally what tools should we use to minimize the estate and gift tax consequences?

It's key that business owners define their financial exit objective, then they can become effective in the designs for the optimum transfer mechanisms for passing the wealth to their children with minimal tax impact. It's the first part that is daunting -- Figuring out one’s wealth transfer objectives.  The transfer of wealth tends to be difficult, as family relationships and business objectives become part of the same equation. For example, if an owner wants to transfer the business to a child but still retain control and authority over all business decisions, it is doubtful the child will be ready to run the business once the transition is complete.
These are a few of the subjects that we can discuss when we meet.  I will take the role of "estate planning guide" most seriously.  So please call me, and let's take on the "jungle" one step at a time to insure your success.

Celebrity Estate Planning goes awry Pt. 8

Whether famous or just regular folks, we are reminded by the following anecdote that a few extra steps in your estate planning will deliver on your intentions. 

Leona Helmsley

Leona Helmsley was famous for being direct in her requests of staff and others around her.  After her death, it was discovered that the hotel tycoon had left instructions cutting two of her grandkids out of her $5 billion estate and leaving $12 million for her dog, Trouble. The stiffed grandkids made their own trouble and sued, claiming that she wasn’t mentally fit to create her will and trust. The case settled, leaving poor Trouble with “only” $2 million.

There is a basic lesson to be learned here: If you’re planning to do anything unusual, especially if it involves anything that would leave unhappy family members, have a lawyer conduct a mini evaluation attesting to your mental competence.

Whether  I'm working on the ordinary or the exotic estate planning issues, I enjoy helping people plan their estates.  Please give me a call, if I can assist you..... or if you just wish to meet and get acquainted. 

Celebrity Estate Planning goes awry Pt. 7

Whether famous or just regular folks,  we are reminded by the following anecdote that a few extra steps in your estate planning will deliver on your intentions.

Heath Ledger

The actor started out being an excellent estate planner for himself.  He drafted a will leaving everything to his parents and sister, but after the birth of his daughter he failed to update his will.  The results were messy family fights in the media.

The lesson is to start well and then maintain the good beginning: Be sure to regularly update your will following life events like a birth, adoption, marriage, divorce, or death in the family.

I work daily with estate plans, and I would welcome the opportunity to discuss how we could develop a plan that would work for you.  Call me, and let's get acquainted.

Celebrity Estate Planning goes awry Pt. 6

Whether famous or just regular folks, we are reminded by the following anecdote that a few extra steps in your estate planning will deliver on your intentions.  

Florence “FloJo” Griffith Joyner

This Olympic sprinter wrote a will (which was a good estate planning act), but she never told anyone where it was.  The result left her husband was unable to file the will within 30 days after her death --- as required by her state's law. As a result, both FloJo's husband and her mother went to court over disputes, and administration of the estate was eventually turned over to a third party.
Basic Lesson to be learned here: Keep copies of your will someplace secure like a safe deposit box, your attorney’s office, or with a reliable third part.  And then be sure to let your family members know where it is and how to access it.

Call me, and we can draft a will and make arrangements for its safe storage. 

Celebrity Estate Planning goes awry Pt. 5

Whether famous or just regular folks, we are reminded by the following anecdote that a few extra steps in your estate planning will deliver on your intentions.


Warren Burger
You’d think the former Chief Justice of the highest court in the land -- the US Supreme Court -- would get this right. But he opted to write is own will.  In fact he tried to write his own will in a mere 176 words.  This succinct will might have been a great accomplishment in his own eyes, but his family may have paid the price for his brevity with over $450k in estate taxes and court fees that could have been avoided.
We can find a lesson from the Chief Justice's will drafting efforts: Don’t try to write your own will or have your cousin who’s a criminal defense attorney write one for you.
Instead, find a qualified estate planning attorney like myself.  I'm a diehard practitioner of estate planning who would welcome the opportunity to assist you.  If you know someone using software to create their estate planning documents, at least have them call me to review them for any problems that may not be obvious to them.  Just call me, I'm always happy to meet and explore ways that would make sense to work together.

Celebrity Estate Planning goes awry Pt. 4

Whether famous or just regular folks, we are reminded by the following anecdote that a few extra steps in your estate planning will deliver on your intentions.


Sonny Bono

A former musician, TV show host, and politician, Sonny Bono was a busy man—apparently too busy to write a will before his untimely death in a skiing accident at age 62. However, it turned out that he wasn’t too busy to secretly father a child out of wedlock who surfaced after Bono's death to claim part of his estate along with ex-wife Cher. 

A life's lesson here: We have no idea how much longer we have to live, so don’t procrastinate. Write a will, especially if you have a complex family situation.  Allocate some time now, so you can avoid the messy aftermath from inadequate planning like Salvatore Phillip “SONNY” BONO.

Call me, let's get you started on a long term estate plan that won't leave loose ends for your heirs.

Celebrity Estate Planning goes awry Pt. 3

Whether famous or just regular folks, we are reminded by the following anecdote that a few extra steps in your estate planning will deliver on your intentions.


Doris Duke

The tobacco heiress died with a fortune estimated to be worth $1.3 billion and thus making her the "world's richest woman" of the time.  Her will included leaving a sizable sum to a charitable foundation.  Per the terms of her will, her butler was named as the executor of the estate as well as the trustee of the foundation. Unfortunately the butler’s spending proved so questionable that he was removed by a probate judge........ only to be reinstated by a higher court. Finally, a settlement led to a board of trustees managing the foundation.

Here's a lesson: Be careful of who you pick as executor, trustee, or guardian. Even your closest friend or family member may not be the most competent administrator. For a large trust, you may want a corporate trustee to at least handle the financial and administrative tasks. For any estate, you may want to be selective in your choice, because you are depending on them to act in your behalf after you've gone.

Call me, so we can work together to avoid your your butler becoming your executor.

Celebrity Estate Planning goes awry Pt. 2

Whether famous or just regular folks, we are reminded by the following anecdote that a few extra steps in your estate planning will deliver on your intentions.

Jimi Hendrix

The guitar legend passed away at age 27 without a will. Although he was very close to his brother, state law awarded everything to his father, who later left everything to an adopted daughter from a later marriage, leaving Hendrix's brother with absolutely nothing.
Jimi offers us a reminder: It’s never too early to plan your estate even if you’re young and single. Dying without a will is a formula for angst and anguish for those left behind. 


I encourage you to now travel in the footsteps of Jimi Hendrix, give me a call today, and I'll help you to get a will done.

Celebrity Estate Planning goes awry Pt. 1

Whether famous or just regular folks, we are reminded by the following anecdote that a few extra steps in your estate planning will deliver on your intentions.

Stieg Larsson

This Swedish writer of The Girl With the Dragon Tattoo novel trilogy may have written gripping stories about women as victims, but unfortunately in his non-fictional world he left his own girlfriend of 32 years a victim when he passed away without a will, leaving his entire estate to be divided between his father and brother according to Swedish law.
The obvious Lesson: Estate planning is even more important when you’re in a non-married relationship since your partner won’t necessarily have the same privileges and protections as a spouse.


If you are cohabiting and unmarried, Stieg Larsson is a reminder that you should call me, because we should talk.

Where did they all go?

That may be how you feel when you are the surviving member of your family, and there is no family members to inherit your estate.   I found the below article to be a short, but helpful guide for those with no heirs

5 Estate Planning Moves For Those Without Heirs

By David Sterman

The whole point of estate planning is to leave your children and spouse in as strong a position as possible in case you die. But that doesn't meanthat those without a spouse or children need not bother.

On the contrary, settling all of your personal matters will prove to be quite burdensome for whatever friend or relative takes on the task. You may be around another 50 years, or you may be gone tomorrow, so you may as well set up a plan right now. As the Beatles once sang "Tomorrow Never Knows."

Would That There's a Will

1. The first, and most crucial step is to establish a will. It should spell out -- in very explicit detail -- how you want your estate to be handled, from the funeral ceremony, to how you want your assets distributed. Your will should list every account number representing all of your investments and loans.

You can go to an attorney that can provide clear counsel as to how to structure a will that is right for your situation. Or you can go to web sites such as Nolo.com or Legalzoom.com to download the right forms, which start at around $40. Remember that you'll need to get it notarized, and should make sure that someone has an easily-accessed copy.

2. Identify a Power of Attorney. Well before you spin off this mortal coil, you may become incapacitated. In that event, a friend or family member will need to be entrusted to oversee your care and your financial matters.

If you have located the right person, sit down with them and discuss your intentions, giving them the opportunity to decline the role. It's a big responsibility, and not for everyone. This person will be entrusted to act in your best financial interest at all times, so be sure that they have the background and experience to do so.

3. Draw up a list of beneficiaries. This is a good time to start getting to know well-run charities. In my experience, some charities are very effective at making sure that donated funds are truly directed to helping the cause. Other charities seem to be a vehicle for enriching its key executives. (As a personal rule of thumb, I ask for executive non-compensation at non-profits. If the key players are making $200,000 to $300,000 a year, then I move on to another charity).

Once you've found the right charities, figure out how you'd like to split the proceeds of your estate with relatives such as nieces and nephews and those charities.

4. Keep it simple and up-to-date. A friend of mine has spent the last six months sorting out the estate of a sibling that suddenly died with vague estate instructions. My friend has been dealing with a range of lawyers, bankers and IRS agents to sort through all of the assets and liabilities.

His sibling failed to keep his will current, and my friend is now pulling his hair out trying to make sure that all is handled correctly. You should look at your will once a year, and have it re-notarized every five years, to be sure it's up-to-date.

5. Continually re-assess your needs. As you age, the amount of money you'll need to live comfortably until life's end may diminish. You may soon have more than you'll ever really need. For example, someone in their 70's with several million dollars in assets is unlikely to ever run out. That's why some people start to wind down their estate while they're still alive. 

You can give up to $13,000 to friends or family without paying any taxes. You can begin to make automatic payments to a favorite charity. Some people own several homes for investment purposes. For the sake of simplicity, it may be wise for someone that is elderly to start selling some of those properties so that the eventual settling of the estate becomes a far simpler process.

Facing theses issues is unpleasant, which is why most of us put them off. Yet a little upfront effort now can make for a much easier path for someone else later on. Once you have a plan in place, you only need to update every half-decade or so (though as mentioned earlier, you should look at it at least once a year to see if changes are needed). This all provides peace of mind as you face the unknowable future.

This article points you in the direction of managing your estate for the least complicated outcome.  I’ve spent years working on estate management issues, and I would enjoy using my expertise to assist you.  As I close many of my blog posts with the request to call me or email me to arrange a meeting.  Advance work will prevent many complications with your estate down the road.

Remove all Doubt

Doubt is a trouble-maker for those who are left behind by your passing.  You are encouraged to reduce or eliminate the room for doubt.  I found the below article to be loaded with helpful suggestions for making things clear. 

Documents you need before you die

Your family members will need to know how to handle your affairs after your passing. To do so, they'll need essential documents that you've prepared for them.

This article was reported by Saabira Chaudhuri and Mary Pilon for The Wall Street Journal, and the article appeared online in the Wall Street Journal Digital Network. 

It isn't enough simply to sign a bunch of papers establishing an estate plan and other end-of-life instructions. You also have to make your heirs aware of them and leave the documents where they can find them.

Consider: At least 10 states have been investigating whether some of the country's largest insurers are failing to pay out unclaimed life policies to beneficiaries. California and Florida have held public hearings on the issue recently.

Insurers say they are behaving lawfully. Under policy contracts, they aren't required to take steps to determine if a policyholder is still alive, but instead pay a claim when beneficiaries come forward.

How to store important documents

You can avoid such problems by securing important documents and telling your family where they are stored.

Jean Parr is grateful that her mother obsessed about the subject. "I really didn't want to think about it," says Parr, 54, a manager at the American Chemical Society in Washington, D.C. But when her mom died in 2005, she knew exactly where to look for the will, the key to a safe-deposit box and documents indicating her mother had paid and arranged for her own funeral.

The financial consequences of failing to keep your documents in order can be significant. According to the National Association of Unclaimed Property Administrators, state treasurers currently hold $32.9 billion in unclaimed bank accounts and other assets. (You can search for unclaimed assets at MissingMoney.com.)

Most experts recommend creating a comprehensive folder of documents that family members can access in case of an emergency, so they aren't left scrambling to find and organize a hodgepodge of disparate bank accounts, insurance policies and brokerage accounts.

You can store the documents with your attorney, lock them away in a safe-deposit box or keep them at home in a fireproof safe that someone else knows the combination to.

That isn't to say you should keep everything. Sometimes people hold on to so many papers that loved ones can't find the important ones easily.

In 2008, Jane Bissler, a counselor in Kent, Ohio, approached her then-87-year-old mother about organizing her documents. Because her mom was a widow with relatively simple finances and two homes, Bissler, 57, says she figured it would be a relatively simple task.

Instead, it took an entire year for Bissler and her mother to go through all of her papers, which included documents from eight bank accounts, utility bills from the 1950s and reams of canceled checks.

The two of them pared down the stash from four four-drawer filing cabinets to one two-drawer cabinet, shredding anything extraneous. Bissler and her mother visited banks and brokerages to ensure she was listed on all of her mother's accounts. Her mother died in May 2009.

"It would have been a total nightmare if we hadn't gone through it all with her," Bissler says. "It was that Depression-era stuff where you keep everything and hide other things." Bissler estimates that having the documents organized ahead of time spared them from ordering an additional 15 copies of the death certificate, and "years" of time.

Here is a rundown of the most important documents you'll need to have signed, sealed and delivered. You should start collecting these as soon as possible and update them every few years to reflect changes in assets and preferences. Some -- such as copies of tax returns or recent child-support payments -- need to be updated more often than others.

The essentials

An original will is the most important document to keep on file. A will allows you to dictate who inherits your assets and, if your children are underage, their guardians. Dying without a will means losing control of how your assets are distributed. Instead, state law will determine what happens.

Wills are subject to probate -- legal proceedings that take inventory, make appraisals of property, settle outstanding debts and distribute remaining assets. Not having an original document means this already-onerous process could be much more of an ordeal, since family members can challenge a copy of a will in court.

Rick Law, founder of estate-planning firm Law ElderLaw LLP in Aurora, Ill., says estate planners increasingly recommend revocable trusts in addition to wills, since they are more private and harder to dispute. "Every will is like a compass that points toward the closest courthouse," he says.

A revocable living trust can be changed anytime during your lifetime. After you transfer ownership of various assets to the trust, you can serve as the trustee on behalf of beneficiaries you designate. Provided you do so, there aren't any ongoing fees.

If your family can't find the original trust documents, you are "basically setting your estate up for litigation," says Duncan Moseley, vice president of Sanders Financial Management in Atlanta.

A "letter of instruction" can be a useful supplement to a will, though it doesn't hold legal weight. It is a good way to make sure your executor has the names and contact information of your attorneys, accountants and financial advisers. While the will should be stored with your attorney or in a courthouse, the letter of instruction should be more readily accessible, particularly if it contains instructions on funeral arrangements.

How to store important documents

Also, make sure your heirs have access to a durable financial power-of-attorney form. Without it, no one can make financial decisions on your behalf if you are incapacitated.

Proof of ownership

You should keep documentation of housing and land ownership, cemetery plots, vehicles, stock certificates and savings bonds; any partnership or corporate operating agreements; and a list of brokerage and escrow mortgage accounts.

If you don't tell your family that you own such assets, there is a chance they never will find out. Moseley says in such an event, clients must perform their own detective work, watching the mail for real-estate tax bills or combing bank accounts for interest payments, for example.

File any documents that list loans you have made to others, since they could be included as assets in an estate. Similarly, keep a list of any debts you owe to avoid surprising your family. Wills and living trusts generally are drafted to include provisions for how debts should be settled, and creditors have a stipulated period of time in which to file a claim against the estate.

Make the most recent three years of tax returns available, too. "Looking at last year's returns offers a snapshot of what assets we should be looking for this year," says Lesley Moss Mamdouhi, a principal at estate-law firm Oram & Moss in Chevy Chase, Md. This also will help your personal representative file a final income-tax and estate return and, if necessary, a revocable-trust return.

Bank accounts

Rick Law recommends sharing a list of all accounts and online log-in information with your family members so they can notify the bank of your death. "If nobody ever takes any more out or puts money in, it becomes a dormant account and then becomes the property of the state," he says.

Be sure to list any safe-deposit boxes you own, register your spouse or child's name with the bank and ask them to sign the registration document so they can have access without securing a court order.

Health care confidential

Possibly the most important health care document to fill out in advance is a durable health care power of attorney form. This allows your designee to make health care decisions on your behalf if you are incapacitated. The document should be compliant with federal health-information privacy laws, so that doctors, hospitals and insurance companies can speak with your designee. You may also need to fill out an Authorization to Release Protected Healthcare Information form.

If you are incapacitated and your family members can't locate a health care power of attorney, they will have to go to court to get a guardian appointed.

Porter Storey, executive vice president of the American Academy of Hospice and Palliative Medicine in Glenview, Ill., says it isn't enough to establish a health care power of attorney unless you have explained to your designee how you would like to be treated in case of incapacity. He also recommends writing a living will detailing your wishes.

Diane Dimond's mother had a series of strokes in 2006, and Dimond knew there was a signed living will tucked away in a safe at home. Dimond, 58 and living in New York, recalls the Sunday she watched her mother in a coma and was able to fulfill her wishes never to be kept on external life support. "It was gut-wrenching," she says, "but I took the physician aside and said, 'I want to take her home.'" Having her mother's living will enabled Dimond to do just that.

The living will and the power of attorney constitute what are called "advance directives"; some states consolidate these into a single form. (AARP offers a state-by-state listing of advance-directive forms on its website.) Terminally ill patients may wish to have their doctors sign a do-not-resuscitate order.

Certain companies, such as Advance Choice's DocuBank, will keep copies of health care documents for a fee. Subscribers get a wallet-sized card, and, in case of an emergency, a hospital will call DocuBank, which will fax over the information.

Life insurance and retirement accounts

Copies of life insurance policies are among the most important documents for your family to have. Family members need to know the name of the carrier, the policy number and the agent associated with the policy.

Be especially careful with life insurance policies granted by an employer upon your retirement, since those are the kind that financial planners most often miss, says David Peterson, CEO of Denver-based Peak Capital Investment Services. New York state alone is holding more than $400 million in life-insurance-related payments that have gone unclaimed since 2000, according to the state comptroller's office.

Estate planners also recommend that you draw up a list of pensions, annuities, individual retirement accounts and 401ks for your spouse and children.

An IRA is considered dormant or unclaimed if no withdrawal has been made by age 70½. According to the National Association of Unclaimed Property Administrators, tens of millions of dollars languish in unclaimed IRAs every year.

If your heirs don't know about these accounts, they won't be able to lay claim to them, and the money could languish. The U.S. Department of Labor estimates that each year tens of thousands of workers fail to claim or roll over $850 million in 401k assets. You can track unclaimed pensions, 401ks and IRAs at Unclaimed.com.

Marriage and divorce

Make sure your spouse knows where you have stored your marriage license. Mary Cay Corr, now 74 and living in Raleigh-Durham, N.C., couldn't locate hers when her husband died. "I had to write to New York, where we got married, and pay for a new marriage license to prove that I had been married to my husband before I could claim anything," she says.

For divorced people, it is important to leave behind the divorce judgment and decree or, if the case was settled without going to court, the stipulation agreement, says Linda Lea Viken, president of the American Academy of Matrimonial Lawyers in Chicago. These documents lay out child support, alimony and property settlements, and also may list the division of investment and retirement accounts.

Include the distribution sheet listing bank account numbers that accompanied the settlement, to avoid disputes about ownership or payments due. Also include a copy of the most recent child-support payment order. In most states, the obligation to pay child support still exists after death.

Viken also recommends filing copies of any life insurance papers. In many states, if you have a policy that benefits your children, it can be set off against the ongoing child support.

You also should include a copy of the "qualified domestic relations order," which can prove your spouse received a share of your retirement accounts.

This is a very useful list for organizing your information and taking steps to remove doubts about your intentions and your affairs.  Like many of my blog posts, I encourage you to print this list, put it in a special folder dedicated to managing your estate.  If you encounter questions from any of the articles in your folder, please contact me.  I like helping people organize their affairs, manage their estates, and ease confusion for family members.  Just call me or send me an email, and we can discuss the likely ways to solve the issues on your mind.

Estate Planning Tips That Prevent Family Feuds

“Family Feud” is a television show, but they often happen in real life after the passing of a loved one.

I think you will find this article an interesting read, and it will likely offer a few sage comments for managing your own life and the relations with some of your family members.

Estate Planning Tips That Prevent Family Feuds

by RANIA COMBS, and attorney at law, who originally posted this article on Texas Will and Trusts online. 

When I was a girl, my mother enjoyed needlework. She would painstakingly sew for hours, crafting beautiful pieces like the one in the image above.  My husband thinks that piece of needlepoint is a bit old fashioned, but I love it. For years it hung in the living room of my parents’ house, welcoming me home from school each day. To me, it represents my mother’s hard work, creativity and attention to detail. Just looking at it brings back wonderful memories of my childhood.

Because she knew how much I admired it, my mother gave it to me several years ago. It now hangs over a gentleman’s chest in my bedroom where I can see it every day. It has very little monetary value, but priceless sentimental value. It is something I will always treasure.

Sentimental Items Can Be Source of Conflict After the Death of a Relative

When people plan their estates, they often take great care in planning for the disposition assets with significant financial worth, such as their homes, 401Ks, IRAs, jewelry and valuable pieces of art. But it’s typically the items that hold sentimental value for many family members that create the most conflict after the death of a loved one.

For example, Deborah L. Jacobs’ article “Little Things Can Cause Big Fights When a Relative Dies” explains how three siblings fought over a glass bowl that their grandmother owned. The bowl was not a valuable antique, but rather a free gift their grandmother had received when she purchased a package of store-bought Christmas pudding.

However, the bowl had sentimental value for all the children because their grandmother used this bowl to serve them breakfast when they slept over at her house.  The siblings’ mother, who now has the bowl, has actually considered burying it to avoid any conflict that may arise when she dies.

Estate Planning Tips That Prevent Family Feuds

If you are concerned that certain pieces of tangible property could be the source of conflict after you die, there are several steps you can take to minimize the changes of that occurring. In her article, Jacobs offers the following tips on how disposing of tangible items with sentimental value:

1.  Talk to your family members about what items hold special sentimental value for them. Include a memorandum with your will directing who should receive each item when you die. Or consider giving them the property during your lifetime, like my mother did.

2.  While you’re still alive, have family members write their names on the bottom of the items they would like.

3.  If you have numerous family members and only one or two valuable possessions, direct that an independent executor sell those pieces and divide the proceeds among your family members.  A family member who can afford to purchase the piece can buy it from the estate.

4.  Make a specific gift of property with sentimental value in your will. That way, there will not be a question about who should receive that item.

For many relatives, sentimental items can be just as important, if not more so, than money in the bank.  This article is a helpful guide, and I encourage you to print it out and keep it in your file of helpful information for managing your affairs. 

If I can assist you in any way, please call me or contact me by email.  I’ve spent years developing my expertise in these areas of estate management, and I would enjoy applying my expertise to assisting you.

Contemplating your own mortality or incapacitation

Contemplating your own mortality or incapacitation, as estate planning requires you to do, is off-putting under the best of circumstances. And estate planning is often put off to avoid the reality that life is not endless.  This is compounded by the seemingly constant flux of the tax code which allows the “avoiders” to put estate planning even further on the back burner.

A recent article on Yahoo Finance highlights the minimum that you should do in spite of all the reasons to avoid the hard work of estate planning.   5 Estate-Planning Tasks That You Shouldn't Put Off by Christine Benz of Morningstar. 

It is a short read, and you are encouraged to take a few minutes to review the 5 tasks.  Commit yourself to a specific time to tackle these 5, and your estate will be much better for it.

Keeping tabs on the estate-planning rules during the past few years has been a little like watching Olympic-level table tennis: The action moves quickly, and it's difficult to keep up.

The amount of assets that could pass estate-tax-free drifted upward for most of the 2000s, and the estate tax went away altogether in a single year, 2010. Extremely generous exclusion amounts, which allow estates of more than $5 million to escape the estate tax, have prevailed for 2011 and 2012. But the tax is set to return with a vengeance in 2013. Barring Congressional action, estates of $1 million will be subject to the estate tax starting next year, and the top estate tax rate will be 55%.

But even if the amount of assets subject to the estate tax increases above the $1 million level that's planned for 2013, I'd still take the threat of higher estate taxes as a wake-up call. The exclusion limit has been extraordinarily benign for the past three years, affecting only very wealthy families, but it might not remain that way. When you consider that real estate holdings are included in one's total estate value, it's not hard to see how reducing the exclusion amount to $1 million or less could touch a lot more families. Even if the exclusion amount remains very high, the core estate-planning to-dos are actually pretty evergreen and don't have anything to do with the tax regime. They could, however, have an extraordinary impact on whether your wishes are carried out before and after you die.

Here are the key estate-planning to-dos.

Task 1: Update Your Beneficiary Designations

Even if you've never set foot in an attorney's office, you've laid the groundwork for an estate plan if you've filled out beneficiary designation forms for your financial accounts. Those designations, in fact, trump other estate-planning documents when it comes to distributing your assets, so it's worthwhile to periodically review them to make sure they're up-to-date with your current situation--if you've gotten married or divorced, or example. (How would your spouse feel if you inadvertently left your 401(k) account to your brother?) And if you have drafted estate-planning documents such as a will, your attorney should be able to help you review your beneficiary designations to ensure that they sync up with those documents. This article provides guidance on beneficiary designation dos and don'ts.

Task 2: Designate Legal Guardians

Here's another step that's important regardless of asset level: Parents of young children should designate legal guardians who will look after their children if the parents should die or otherwise be unable to care for their minor children. Spouses often put off this step because they disagree about guardianship, but it helps if you can focus the discussion on actual child-rearing abilities and willingness to do the job. Don't get hung up on hurting anyone's feelings or bypassing friends or family members who might expect to be your guardians but aren't the best choice. (Naming someone a guardian because you're a guardian for their children isn't a good reason.) Most important, your guardian should be willing and able to take care of your children if the need arises, so an essential step is to discuss the responsibilities with the potential guardian and make sure he or she is on board. You also want your children's guardian to share you and your spouse's values and views on parenting; financial wherewithal should be a consideration, as well. It's also worth noting that it's possible to name two guardians--one to take care of your child's needs on a day-to-day basis and another to supervise the child's financial assets. But that's usually not practical for obvious reasons.

Task 3: Create a Living Will and Last Will and Testament

A living will is another document that's important no matter what your asset level is; it tells your health-care providers and your loved ones how you would like to be cared for if you should become terminally ill and unable to express your wishes yourself.  Called a "medical directive" in some states, this document details your views toward life-support equipment. Not to be confused with a living will, a last will and testament details how you'd like your assets and possessions distributed after your death.

Task 4: Draft Powers of Attorney

Estate planning doesn't just relate to death and dying: A basic estate plan should also address what would happen to your affairs if you are still living but incapacitated. A power of attorney is a document that specifies who will handle your affairs if you are unable to do so. You'll need to draft two separate documents: one that names your power of attorney for health-care decisions and another for financial matters (often called a durable power of attorney). The person you entrust with your power of attorney for health care will, ideally, live in close geographic proximity to you and will also understand your general wishes about your own health care. The person who you name on your durable power of attorney form should be detail-oriented and comfortable with financial matters, and he or she should also have a general understanding about your attitudes toward and goals for your money.

Task 5: Name an Executor

Your executor will gather all of your assets after you're gone and make sure they are distributed in accordance with your will. Ideally, your executor will be someone who's comfortable with numbers and good with details, and will also be able to find the time to work on your estate. It's common to name family members as executors, but in more complicated situations it might be preferable to use a professional, such as a bank trust officer, to serve as your executor. It's a good idea to tell your executor that you've named him or her, and also provide details on how to obtain access to important documents, such as your will and a master directory detailing all of your accounts.

Hopefully you’ve been motivated by these 5 Tasks that should not be put off.  If I can be of assistance, please call me or comment on this posting. And remember, “Don’t put it off”, so contact me this very moment.  

The Dilemma of Disinheritance

The motives for cutting a relative out of an estate range from the most primal — hate, abandonment, regret — to the most rational.

Planning what to leave behind to loved ones can be a difficult matter since, even with taxes out of the picture, it means explaining your choices and your hopes. On the other hand, planning to specifically disinherit someone can be even more difficult.

Inheritance and disinheritance are emotionally charged concepts. The motivations that go into disinheritance are especially complex, as discussed in a recent article in The Trust Advisor titled Why Are Family Members Disinherited?.

Teaching point: If you are considering disinheritance, then it also is important to think about what that means, both for yourself and the excluded heir. There are many reasons to disinherit, some more reasonable than others and some worth abandoning upon meditative reflection.

Still, if you must disinherit, then consider explaining your basis for that decision. While it is your choice and right, your legal documents must be clear and withstand (oftentimes) inevitable legal challenge by the affected heir.

If you want to talk in more detail about a disinheritance issue, please contact me.  I’m available to answer questions and to meet with you.

Reference: The Trust Advisor (April 15, 2012) “Why Are Family Members Disinherited?”

 

Good Preparations create a Graceful Exit

The wealth of many boomers is tied up in businesses they own. And that can be a problem when it comes time to retire. The Wall Street Journal published a very good article on this topic, and my WealthCounsel colleague, Lizette Sundvick, added the below commentary.

If you’re a small business owner, then you probably speak of your business and your life in the same breath. There’s nothing wrong with that. In fact, you are in good company.

All told, your business is one of the biggest challenges and accomplishments in your life. That said, it’s rare that the business is the only fulfilling thing in your life. In addition, do you really want to continue working in and on your business until the day you die, with no retirement or with old-age eventually getting in the way?

With your life and your business so intertwined, it makes it all the more necessary to plan properly.

The Wall Street Journal took up this matter in a recent article titled Preparing to Leave. I recommend this article to your reading list because it both warns of mistakes and offers solutions.

To whet your appetite, here are the “mistakes” identified:

1. Creating a business that’s too dependent on the owner.
2. Ignoring the tax benefits of planning ahead.
3. Incorrectly valuing the business.
4. Rushing to accept a rich number.
5. Hiring your brother-in-law to do the deal.
6. Underestimating the emotional impact of selling a business.

Like those old movie matinees, I am going to leave you pondering the solutions to these “cliffhangers.”

In the end, only you know when to hold’em and ergo when to fold’em when it comes to the continuation of your business. However, don’t delay. You, your loved ones and others dependent on the business will be glad you didn’t.

Any one of these issues is well worth meeting and talking about, so I invite you to call me to set up a meeting.  Let’s make sure you’re prepared to “Exit Gracefully”.

Reference: The Wall Street Journal (April 29, 2012) “Preparing to Leave”

 

 

Tax Court Rules for Taxpayer in Transfer of Closely-Held Business Interests

The Tax Court has just passed a new technique that closely-held businesses owners —and wealthy families — can use to pass assets to heirs with a minimal amount of taxes and complications. The ruling in the case, Wandry v. Commissioner, is stirring up excitement among experts.  The below commentary was written by a WealthCounsel associate, Lizette Sundvick, who practices throughout southern Nevada.

Just between us, isn’t it nice when the IRS loses a case to a taxpayer? For example, the little-guy victory in the landmark case of Wandry v. Commissioner affirms and simplifies a very powerful tool for passing on wealth, especially for the business owner.

While the case and the estate planning tool in the crosshairs have been the subject of previous articles, The Wall Street Journal provided a new explanation of the two in an article appropriately titled “Shielding the Family Business.”

The basic plan for wealth transfer when there is a business involved is to give it in pieces, and that’s precisely the plan that benefits from Wandry v. Commissioner. Giving away the entire business outright is a good way to take a tax hit, since it will invoke a gift tax when you cross certain thresholds during the year and in your lifetime.

There’s currently a lifetime exemption of $5.12 million and an annual exclusion of $13,000. Nevertheless, it’s easy for a business to be worth more than $5.12 M, and using that exclusion in full will drain what you have available against the estate tax later at death. However, by their very nature and structure, business interests are especially amenable to piecemeal ownership transfer. This is because ownership of the business, and therefore the underlying assets owned by the business, is an abstraction, and you can simply gift your interests in the business without a tax hit. For example, you can chip away by giving a usefully small amount, say, $13,000 per year per individual (or whatever number Congress and the IRS set for that year), without gift taxes.

Of course, gifting business ownership is not entirely ideal. Fortunately, that’s what the Wandry v. Commissioner case tries to fix. Gifting exactly $13,000 is pretty easy by simply writing out the figures and name on a check. On the other hand, with an abstraction like business ownership, the gift depends on the value of the business and, more to the point, on the value that you and the IRS agree or disagree about.

If you give $13,000 of ownership on the basis of your valuation, but the IRS adds up $15,000 based on its own valuation, then the IRS might also think you owe a tax (or, alternatively, that your gift/estate tax exemption should erode by that much). As you might have guessed, that’s exactly what happened in the Wandry case. Unfortunately for the IRS, the court held that the Wandrys had clearly intended to give their annual exemption amount and, if there is a new appraisal and higher valuation of the gift, then the excess wasn’t intended to be gifted in the first place.

As is always the case with the law, there is much more to this case and more guidance to be gleaned for the business owner. I would recommend reading the original article if you are or will be transferring interests in your business. As always, make sure you engage qualified legal counsel before taking action.  I am available to talk on the phone or meet in person.

Reference: The Wall Street Journal (April 30, 2012) “Shielding the Family Business”

Separation of Church...and Estate

For many people, estate planning isn't just about financial assets and other practical concerns. It's also about honoring their religious beliefs and passing those values on to family members. That can be very tricky ground.  My legal colleague, Lizette Sundvick, has offered the below commentary in reference to a good Wall Street Journal article on this topic.

Planning your estate may seem like a simple matter of deciding who gets your stuff when you’re gone. What if you are a person of great faith and religious conviction? How does a person of faith plan for his or her estate when life (and especially life beyond) is so much more than mere “stuff”?

The problem of mixing religion and estate planning – that is, the problem of doing it well – is taken up by the Wall Street Journal in an article titled Joining Church and Estate.

If your decisions during life are guided by your faith, then likely your estate decisions will be too. For example, end-of-life, disposition of remains and even charitable giving decisions are oftentimes determined by one’s religious beliefs. These are personal decisions that directly impact you and collaterally impact others.

However, it is an entirely different matter to make religiously-motivated decisions for others. Given the numerous alternative planning strategies and tools available to plan your estate, it is possible to make (or attempt to make) religious decisions for your heirs. This is where problems can arise.

In the extreme, you can move beyond encouraging to requiring the observance of certain religious principles, rituals, or lifelong membership in the given religion to secure any inheritance. As the Wall Street Journal article illustrates, this is where problems can arise. In short, requiring heirs to uphold religious principles they do not share can work to undermine them.

The article discusses some particularly poignant examples and real life court battles. It’s worth a read and serious consideration when trying to strike that delicate balance of encouraging without alienating those whose beliefs may differ from your own.

I stand ready to assist you in striking the delicate balance between church and estate.  Please call me or email, and we’ll find a time to meet.

Reference: The Wall Street Journal (April 30, 2012) “Joining Church and Estate”

 

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

Question #7

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. 

Should you give away assets now to save taxes?

Now that the estate tax exclusion has gone to $5 million per person ($10 million per couple), this issue concerns fewer people. Keep in mind, too, that most methods of saving estate taxes require you to totally give up ownership and control over assets, whether you are giving them to people directly or putting them in a trust. A threshold question for anyone contemplating this strategy: Can I afford it? Be sure you are leaving yourself enough, and to be on the safe side, you should assume you will live to an advanced age.

You can give anyone $13,000 a year (a couple can give $26,000) without eating into your $5 million exclusion. If you want to give away more than that, you can either count your gift against the $5 million exclusion amount or, if you have used up the tax-free amount, pay gift tax of 35%. Remember that each dollar of the exclusion used during life shaves a dollar off what is available for your estate to use after your death.

So before you dip into the lifetime exemption, consider some simple, tax-free ways to prune your estate. They include paying tuition and medical expenses for another person (such as a grandchild) directly, funding 529 college savings accounts and converting a traditional IRA to a Roth.

This concludes the "Estate Planning for Women (and the Men Who Love Them) series. I hope you have found these posts thought provoking and valuable. Questions like these can often trigger even more questions in your mind.  Please accept my invitation to schedule a meeting where we can discuss these topics and others that might be relevant to your estate planning.  Give my office a call to set a meeting.

 

6 Things To Do Before Your Spouse Dies

While important to both sexes, estate planning often affects women more profoundly. Women live longer on average and tend to marry older spouses, making them three times as likely as men to be widowed at 65.  It’s a staggering reality, and here is some pertinent information for coping with this reality.

Barbara Stanny recently contributed this article to Forbes.  The article gets right to the point in a practical and personal way. 

It's time to have "The Talk"

I heard from a woman whose husband had just been diagnosed with terminal cancer. She wanted to know what she should do before he dies.

Reading her words, I felt a mixture of heartbreak and admiration. Death is not easy to talk about, let alone prepare for. Sadly, most women will face a similar dilemma at some point. Instead of going into denial, like many do, this woman went into action.

Her question sent me back to when my father became seriously ill. I’ll never forget the day I went to my mother and asked: “Do you know what Dad has planned for you when he dies?”

“Oh yes,” she replied quickly, but when I pressed her for details, she couldn’t deliver any.

She also made it abundantly clear: this was not a conversation she wanted to have. I made it even clearer: avoidance was not an option. Here’s what we did:

1. We had “The Talk.” I made my Mom sit down with my Dad and we looked at all the financial documents: bank statements, investments, estate planning, etc. This was not, by any means, an easy conversation. Dealing with death is emotionally excruciating, at least it was for us. Nerves were frayed. My Mom glazed over. My Dad lost patience. I kept scratching my wrist (a nervous habit) until it bled. But by the end, my Mom knew where every penny was and what arrangements he had ( and hadn’t) made made.

2. We assembled “ The Team.” My Dad was very much a do-it-yourselfer. Mom needed her own team of professionals to support and guide her (during and after). First on our list was to hire an estate lawyer. Mom, my sisters and I met with him first, brought in my father, and together my parents created a very good, tax efficient estate plan… which my Mom not only understood, but had a big role in creating. The whole family helped her find an investment advisor (we interviewed 3). She also hired a CPA . It soon became clear he wasn’t a good fit, so she recently hired someone else. She meets with her “team” on a regular basis to this day.

3. We updated documents. We made sure the Will, Power of Attorney, EVERYTHING reflected their latest info and current wishes.

4. We envisioned a future without Dad. My mom started thinking about living single: how much money she’d need to live on (a lot… she wasn’t going to work nor did she have to, but she did like to spend); how she wanted her money invested (very conservatively);and who would assist her with this (her team).

5. We had regular family meetings. These meetings, though often emotional, were absolutely wonderful in getting everyone on the same page while Dad was still alive. Meetings included my sisters, spouses, and all the grandchildren (we eventually had great grandkids crawling around too). My Dad let everyone know what his wishes were, especially for philanthropy, and enrolled the whole family to the board of his foundation. These meetings drew us closer in many ways.

6. Mom talked to friends. She’d had several friends who lost their husbands, so she talked to them at length. They gave her great advice which really helped her see life goes on, happily so.

Having done these things, by the time my father died, all my mother had to do was grieve. Every detail was in order. There were no surprises. All papers signed. All major decisions made. Her team was in place. Practically speaking, his passing was seamless. Emotionally, it wasn’t easy. But being prepared, financially, made it a little easier.

If you would like to insure the stability in your financial life, please give me a call.  I work every day helping my clients “Be Prepared”.  I welcome your questions.  Let’s start early when the stress level is the lowest to work our way through this check list of 6 things to do before your spouse dies.   You are always invited to contact me by phone or leave a comment on this blog