The Most Important Plan You’ll Make

Whether or not we do it regularly, all of us know how to plan ahead: We plan for travel and vacation, we plan weddings, and we plan for natural disasters, for retirement, or what to make for dinner tomorrow night.  Why is it, then, that so few of us will create a plan to help our families and loved ones when we die?

Part of the reason may certainly be fear and discomfort.  Nobody likes to think about their own death, let alone talk about it with others; but neglecting to have this conversation now, while you are still alive, means that you are leaving the conversation for your loved ones to have later, when they are hurt and grieving.  It also means that you are unfairly asking them to guess at what your wishes may have been, and make difficult decisions that should have yours to make.

This article by Michael O’Mara lists 10 things to for your family before you die.  10 things may seem like a tall order, especially when the subject is “the great hereafter”; but it seems a whole lot easier when you consider that 7 of the things listed are generally addressed as part of your estate planning with our firm—and we can help you with the other 3 things if you so desire.

You wouldn’t leave it for your children to pack your suitcase after you’ve left on vacation—don’t leave it for them to make your difficult decisions after you’ve passed away.  Call our office to help you with your estate planning today.

It’s Never Too Early to Start Thinking About Retirement

Every parent wants to teach their children fiscal responsibility, but it’s not always easy to impress upon live-for-the-now youngsters the concept of saving for a rainy day. Certainly teaching by example is one tried and true method; another is practice. But can a 15 to 21 year old really practice saving for retirement? Of course they can!  And according to this article in the Washington Post, they can reap incredible benefits.

“Setting up a Roth individual retirement account for your teenager can be a smart and rewarding move to consider at tax time… It makes good sense to set aside money that can grow many times over by the time it is put to use. And establishing an IRA with a teenager’s own cash — perhaps supplemented by the parents or grandparents — can convey a powerful financial message that no pep talk could match.”

If you show your child or grandchild that setting up a Roth IRA is just another milestone—similar to graduation, getting a driver’s license, or getting a first part time job—the lesson comes through loud and clear that saving for the future is a natural and normal part of adulthood.  In fact, the attainment of a first job can be the perfect instigating factor for setting up an account because “A Roth IRA can be opened only if the child has income from a job – and allowances don’t count.”

A Roth IRA can be a nice thing for a child to have for another reason… parents or grandparents can support and supplement the child’s investment with their own contributions as well.  A retirement account may not be the most traditional of gifts, but it’s never too early to learn the value—and necessity—of saving for the future.

When and Why You Might Turn Down An Inheritance

Would you ever turn down an inheritance?

Your first reaction might be “Of course not!” But don’t speak too soon. Most estate plans are created at least in part to protect heirs (generally spouses and children) from the sometimes devastating blow of estate taxes; but with the estate tax in a confusing state of flux this year some of these plans won’t work as their creators intended—and heirs may end up looking for a way to protect themselves against the unintended consequences of well-intentioned estate plans.

This article in the New York Times explains what it means if you disclaim (or turn down) an inheritance, and when you may want to employ this tactic.

“Historically, lawyers have recommended disclaimers to repair estate planning oversights that bring negative tax consequences — as when parents left money to already affluent adult children. In such a case, the children could disclaim, so the inheritance would go their own children instead, rather than facing the possibility that this money might be taxed in their own estates.”

The article goes on to explain why some people might consider using this strategy this year, when—due to the expiration of the estate tax—“a formula clause could wind up allocating all the money to one [heir] or the other, rather than dividing it between the two.”

Although this is an interesting solution to be considered in some cases, there are no easy answers to the question of what to do when you are the beneficiary of an estate that has taken an unexpected turn. If you have any questions whatsoever about an inheritance—or about your own estate plan—call your estate planning attorney for help.

The Not Quite Empty Nest Syndrome

It’s that time of year when many high school seniors are starting to prepare for graduation and eventually to head off to college; these seniors are close to turning—or in some cases have already turned—eighteen.  It’s almost time to spread their wings, leave the nest, and be on their own…

… Except that most 18 year old college freshmen aren’t actually ready to be on their own.  They still rely on their parents for financial support, emotional support, credit card payments, physical transportation… even clean laundry! And just about all of them still rely on their parents’ medical insurance when they need health care. You would think, then, that you as parents would be able to make medical and financial decisions for these fresh 18 year olds when they need help… except you can’t.

Once your child is 18 you as a parent are no longer their legal guardian. No longer will you be able to easily call the shots in the hospital or doctor’s office.  You may pay the credit card bill, but you may not always get a representative to talk to you if there is a problem with that credit card.  Likewise you may not make decisions regarding their bank account, or have legal dealings on their behalf with their landlord. Not unless your child gives you permission, that is—written permission in the form of a durable power of attorney and/or a healthcare directive.

By naming you as his agent in a durable power of attorney and/or a healthcare directive, your brand new 18 year old is giving you the power to keep doing what you’ve been doing all along… be his loving parent and help with the tough decisions; or—heaven forbid—step in to take charge in case of an emergency.

Durable powers of attorney and health care directives are documents that can be easily executed by our office or your own trusted attorney.  Creating one of these documents for the first time is a good opportunity to discuss responsibility with your child, and encourage him or her to begin thinking of these decisions that you have helped them make all these years as their own.  We know, however, that this isn’t always an easy subject to discuss with your young adult.  If your child is resistant to discussing this with you, perhaps he or she will be willing to discuss it with your family estate planning attorney instead.  This is an important subject, not only for you as a parent, but also for your young adult’s safety and well being.

10 Tips for Potential (or Existing) Trustees

The creation of a trust and estate plan includes spending a certain amount of time choosing the people who will be your fiduciaries—the people who will carry out your wishes.  One of the most important fiduciaries is your trustee, who is involved in just about every aspect of the administration of your trust. Most people choose someone close to them to serve as trustee: a best friend, son or daughter, brother or sister. Choosing someone who knows you and your family to serve in this role can be beneficial in many ways, but if that person doesn’t have a financial or legal background the responsibilities can be overwhelming!

If you want to give your trustee a head start (or if you’ve been nominated as a trustee and need a little help yourself) this article from the Elder Law Answers website shares “9 Do’s and 1 Don’t” of being a trustee. These suggestions will help a potential or new trustee better understand their responsibilities and the scope of the job to come.  Advice such as #1, “Do read the trust document”; or #3, “Do keep the best interests of the beneficiaries in mind at all times” may seem obvious now, but it’s not always so clear when you’re beset by insistent and emotional relatives.  The more technical tips such as #2, “Do create a checking account for the trust”; and #9, “Do file income tax returns for the trust” are invaluable starter-steps for someone who has never done this before.

But the most important tip to remember is the one don’t: #10, “Don’t fly solo. Get professional advice to make sure you are correctly fulfilling your role.” If you or the people you’ve chosen as your trustee are ever in doubt, please don’t hesitate to call our office for help.

News and Updates About the Estate Tax

A month and a half into 2010 and Congress’ failure to stop the lapse in estate tax is still making waves. These two trusted news sources explain why having “no estate tax” this year should worry you.

One of the first reasons you should be worried, as revealed by this article in the Wall Street Journal, is that a larger base of estates will actually end up paying more this year rather than less; “Under last year’s law, estates up to $3.5 million, or $7 million for married couples, were exempt from federal tax. This year that law has been replaced by a fiendishly complex levy raising taxes on the assets of those with little as $1.3 million. It will affect the heirs of at least 50,000 U.S. taxpayers who die this year, whereas the old law affected only about 15,000 estates a year.”

Another main cause of worry, explains the New York Times, is the possible reinstatement of the estate tax by congress, effective retroactively; “The general view is that Congress wants to, and should, re-enact the estate tax retroactive to the beginning of this year,” [says tax specialist Ian Shane] “In January, February or March that’s easy, but as the year goes on it becomes more difficult.”

Of course the biggest worry estate planners have is the effect this year-long lapse will have on existing plans.  Couples who already have an existing estate plan are advised to get their documents reviewed—and possibly revised—to prevent “standard clauses” from having unanticipated effects.  As Joanne Johnson, head of the American wealth advisory service of J. P. Morgan explained to the NY Times, “It’s common to find language like ‘I hereby fund this trust to the maximum amount I can shelter from federal estate tax.’ The rest can then pass tax-free to the spouse. Such wording is risky as long as the estate tax is off the books… because there is no maximum.” What ends up happening is that everything goes into the trust for the kids, leaving the spouse with nothing.

What is the lesson here? The lapse in the estate tax may not be the boon it first appears to be.  Talk with your estate planning attorney to find out how the new laws may affect your family.

Make Your Memoirs a Part of Your Legacy

As members of a melting-pot nation, Americans place a high value on family stories and history.  We love to know when and why our ancestors came to this country from “the home land”; but we also enjoy the simple stories about how mom and dad met, or how grandpa served in the military.  These stories help us define who we are and where we came from—they give us a sense of belonging.

But the sad fact is that most of us don’t think about asking our parents or grandparents about their stories and histories until it’s too late. All too often it’s after grandma passes away and you’re going through her belongings that you find old books, photos or letters and wish you could ask about them.

This is part of the reason why writing memoirs, or a family history, has become so popular in recent years. Although the thought of “writing your memoirs” may seem daunting, it doesn’t have to be difficult.  In fact, it has become so popular that there are quite a few books and tools out there to help guide you through either writing your own history or interviewing older relatives to record theirs.

Nothing seems more natural than including your memoirs as part of your estate plan. When you create an Estate Plan you plan to pass on your estate (property, assets, and wealth) to your loved ones; but that is only part of what you’ll want to pass along.  An Estate Plan can also include your history and experience as part of that wonderful inheritance.  Our firm can help take care of your assets, but only you can preserve the wisdom and experience that makes your history so unique. Don’t wait until it’s too late.

Make your Estate Plan About Values

It’s easy to see, when creating an estate plan, how important it is to protect and pass on your assets, but a good estate planner knows that a will or a trust is not all about assets.  In fact, for all of the technical and financial language you may find in your will or trust, the most important part of the document is if—and how—it reflects your values.

You may think that values are something you’re more likely to discuss with your spiritual advisor than your estate planner, but we know you’ve worked hard to give your children and grandchildren a foundation of knowledge and belief to serve them when you’re not there.  We want to help you create a thoughtful and comprehensive Estate Plan can help you continue doing just that.

There are a few ways in which you can use your estate plan to pass on your values:

  • You can impress upon your grandchildren the importance of education by leaving an inheritance to them in an Educational trust.
  • Help your kids learn to follow their dreams by earmarking part of the trust principal to be distributed should they want to start their own business.
  • Pass on your belief in the value of family by creating a special trust to support stay-at-home parents.
  • Teach fiscal responsibility by choosing to have distributions made gradually, helping your beneficiaries learn how to handle their finances responsibly and with maturity.

With the help of a caring and attentive attorney, you can leave a deeper legacy than mere money; you can impart your closely held values for generations to come.

Handing Over the Keys to the Kingdom

It goes without saying that nobody wants to give up control of their finances and put themselves at the mercy of someone else’s decisions; which is why most people spend hours and hours considering who to name as their agent when they sign a power of attorney.  But what happens if you pick the wrong person? This article about an elderly mother and the daughter who stole from her is a sad example of just how important it is not only to choose your agents wisely, but also to relinquish control wisely as well.

It is commonly believed that simply adding your “agent” as a joint owner on your bank accounts is the easiest (or cheapest) way to gradually “hand over the reins”; but giving someone else unfettered access to your bank accounts is a dangerous risk in the best of circumstances—all too often it leads to the tragic exploitation and abuse mentioned in the article above.

he good news is that there are safer ways to give your agents the powers and access they need without completely handing over the keys to your kingdom:

  • A Durable Power of Attorney that goes into effect when two doctors have declared you incapacitated
  • Naming more than one person as your agent (This can lead to a slower decision-making process, but it does provide you with checks and balances and oversight.  If you’re worried about disagreements between agents, name a third party to serve as a mediator or tie-breaker.)
  • Naming a financial institution as your financial agent
  • Choose a professional advisor or overseer through whom all decisions must be approved. This has the added benefit of giving your agents someone to whom they can go for advice in a tough situation.

Any of these options may be safer than joint ownership of your bank accounts, but every family and financial situation is unique, so ask your trusted attorney about which options may be best for you.

The Family That Plans Together Saves Together

According to the New York Times, “an estimated 38 million Americans provide care to an aging relative.” With numbers like this you would think this would be a frequent topic of conversation within families, but this is rarely the case.  Unfortunately, because we tend to avoid the uncomfortable subject of our parents aging, most families are unprepared when mom or dad begins to need help (either physical or financial). But denial can’t stop the inevitable from happening; it only means that you and your siblings will be unprepared when the time does come to care for mom or dad.

What this article in the New York Times stresses is the importance of planning as a family. Parents may think that by keeping their troubles to themselves they’re saving their children stress and heartache, but evidence shows that sons and daughters do end up shouldering part of the burden—financially, physically and emotionally.  It stands to reason that if they’re going to share responsibility, these responsible children should have some part in the planning process as well.

The Times article offers some suggestions on how to discuss the issue of aging with your parents and your siblings, and how to prepare for the future together, including how to:

  • Open the conversation with your parents and siblings.
  • Assess financial conditions and options—including Medicare.
  • Learn about care options and their costs.

Don’t wait to have this conversation.  As financial gerontologist Rosanne Roge is quoted as saying, “The most important thing is to recognize that it’s likely that elders who live a long time are going to need some help… and you have to pay for it some of the time.”  The best time to prepare is now.