Estate Planning is a Priority

Estate Planning is a Priority

By: Katye Delashaw 

As you accumulate wealth in pursuit of financial goals such as retirement or a child’s college education, have you given any thought to estate planning?

Estate planning encompasses more than just the distribution of your estate to your heirs; it is a process designed to identify the best way to accumulate, preserve, and protect your wealth. A carefully prepared estate plan can help you address lifetime management issues, as well as death transfer issues.

Before you can develop strategies for your estate plan, you’ll need to identify your planning objectives. Ask yourself the following questions:

• Whom do you want to benefit from your wealth?

• Do you want to donate some or all of your wealth to charity?

• Do you want to transfer some of your wealth to your beneficiaries during your lifetime or only upon your death?

• Do you have any situations that require specialized planning, such as a previous marriage or a special needs child?

With these questions answered, you can begin looking into the various estate planning tools available to you. In particular, wills and trusts are two essential components of an estate plan.

A will is simply a legal document that provides instructions outlining how you would like your assets administered and distributed at your death. In your will, you can name an executor or personal representative who will be responsible for carrying out your wishes after the probate process confirms the validity of your will. You can also nominate a guardian for minor children and plan for specific bequests to certain individuals or charitable organizations.

While a properly drafted will can detail your wishes and allow you to control the distribution of your estate, it is important to remember that a will is only operative at your death. For this reason, a will does not address lifetime concerns, such as the management of your assets in the event of incapacity.

A trust, on the other hand, is a legal document that names an individual or entity (the “trustee”) who takes legal title to, and manages, the assets you transfer to the trust for the benefit of the persons (the “beneficiaries”) you specify in the trust document. The trustee is responsible for managing and administering the assets according to the instructions in the trust document. Trusts are created in two different ways. A trust may be created and implemented while you are alive (an intervivos or living trust), or it may be created through your will at your death (a testamentary trust).

Because a testamentary trust is created through your will, it is effective only upon your death. As with all estates passing by will, the estate is subject to probate. At the conclusion of the probate process, the assets are distributed to the trustee. In addition, because it is created at death, the testamentary trust cannot provide for the management of your assets during your lifetime and, therefore, cannot plan for incapacity.

While wills and trusts are important to your estate plan, there are many other tools and strategies available to you as well. To develop a comprehensive estate plan to cover all of your needs, enlist the help of an estate planning attorney, tax professional and financial advisor.

Source: http://www.montgomeryadvertiser.com/story/money/business/2014/08/27/estate-planning-priority/14714941/

 

 

Estate Planning: A Ranking of Good Assets and Bad Assets

By: William Baldwin

Some assets are terrific holdings in estates. Go to your grave clutching them.

Some are bad for heirs. Play hot potato with them during your senior years.

What follows is a tax ranking for retirement assets. At the top: the holdings you should hang onto as long as you can. At the bottom: the holdings that you should be most inclined to cash in when you need to pay the rent.

Key assumption: You have more than enough savings to live on, so it’s likely you will be leaving something to children and grandchildren. Your objective is to keep your family’s tax burden as light as possible.

The important element of the tax code that drives our ranking is called “step-up.” Appreciated assets left in your estate get stepped up in tax basis when you die, with the appreciation never taxed. If you buy a Google share for $100, hold on for more than a year and die when it’s worth $1,000, then neither you nor your heirs will owe income tax on the $900 capital gain. If they sell two months later for $1,015, their gain is $15.

The main focus here will be on income taxes owed by either you or your descendants. Inheritance taxes, for most families, are far less important. The federal estate tax applies only to larger estates ($10.6 million, if held by a married couple), and a lot of states don’t tax estates.

Most of the choices described below won’t affect estate taxes. In the Google example, the share goes on an estate tax return at its $1,000 market value. Roth and other IRAs are subject to the estate tax.

My ranking is based, in large part, on a white paper put out a year ago by AllianceBernstein. The experts at this firm are wealth managers, not tax attorneys, but their investment advice is very tax-wise. They won’t be doing your tax return but they might be telling you why, for tax reasons, you should hold onto that master limited partnership they put in your portfolio.

Here’s the ranking, beginning with a buy-and-hold item and ending something that you should get rid of tomorrow.

1. Depleted partnerships. Let’s say you buy Enterprise Products Partners (EPD) at $39 for the dividend. Over the next decade it pays out $15, but depreciation charges on the company’s pipelines shelter much of the distributions. And so (we will suppose for illustration) only $3 of your payout is taxable. The other $12 represents a nontaxable “return of capital.” That reduces your basis, or tax cost, from $39 to $27.

Now let’s say you sell, in 2024, at $44. You think you have a gain of only $5, but the IRS will have a harsher view. Your gain is $17. Of this, $5 will be taxed at the favorable rates for long-term capital gain. The other $12 is going to show up as a “recapture” of depreciation and get taxed at stiff ordinary-income rates.

So don’t sell your partnership shares. Hang on.

n 2024 you get run over by a cab on the Upper West Side. Your children inherit the EDP at its stepped- up value. If they sell, both the $10 of capital gain and the $25 of recapturable income are forgiven. If they keep the shares, their basis, which is a starting point for depreciation calculations, is $88. As a result, more of their dividends are sheltered than yours would have been if you had lived.

The taxation of partnerships is complex and sometimes counterintuitive. The important thing to know is that you should buy publicly traded partnerships only when you are in or near retirement, and you should cling to the shares. There is more on the tax theoryhere.

2. Collectibles. This category includes artwork, gold, and gold bullion funds (but not shares of gold mining companies). Long-term gains get taxed at a 28% rate, not the 15% or 20% rate that usually applies to stocks and bonds. So, other things (like the percentage gain in the asset) being equal, collectibles are things to keep and assets like stocks are things to sell.

3. Highly appreciated stock. If you are sitting on a ten-bagger, keep sitting on it if you can.

4. Roth money. Once you have paid the income tax on your IRA or 401(k), turning it into a Roth account, you and your heirs are home free for income taxes. Money compounds inside the account tax-free. Withdrawals are tax-free. You are under no obligation to withdraw from the account, and your heirs are entitled to the leisurely withdrawal schedule set out here.

All this makes a Roth a desirable asset. How desirable? That depends on your age, your heirs’ ages, your tax bracket and your tastes in investing. But in many cases you’d be better off dipping into a Roth for spending money than selling anything in categories 1 through 3 above.

Suppose you need to get your hands on $80,000 and your choice is between (a) selling Google shares that you bought long ago at ten cents on the dollar and (b) making an $80,000 withdrawal from the Roth account. If you are in a high tax bracket, option (a) might well compel you to sell $100,000 of shares in order to have $80,000 left after state and federal income taxes.

And let’s say you die not long after. Which would be more valuable to your heirs—$80,000 left in a Roth that would be sheltered from portfolio taxes, but not forever? Or a $100,000 stock position that could be reinvested in a diversified, tax-wise portfolio? For a lot of families, especially the ones that know how to minimize portfolio taxes, the $100,000 deal is the better one. Use option (b) to raise the $80,000.

5. Somewhat appreciated stock. Suppose you own Google shares that have merely doubled since you acquired them. They would be nice to have in an estate, but not as nice as a Roth account. Sell them before messing with that Roth.

6. Taxable IRAs. These are retirement accounts funded with previously untaxed contributions. The money might have come from deductible IRA contributions you made or from rollovers of pretax 401(k)s.

We’ll assume that you have already made any withdrawals from IRAs that you are compelled to make by dint of being 70-1/2 or older. The question is whether you pull out additional sums to cover bills. Sure, if you have exhausted assets in categories #8 and #9 below.

If you cash in a taxable IRA, you pay income tax on the money. If heirs cash it in, they pay. If you’re all in the same tax bracket, that’s a pretty much a tossup.

Except for one thing. Leaving the money in allows it to enjoy more years of tax-deferred compounding.

7. Bonds. If they have gone up at all since you bought them, it was probably only a little. These should be fairly close to the top of your sell list.

8. Cash.

9. Depreciated securities. If you bought a security for $30,000 that is now worth $18,000, sell it and claim a $12,000 capital loss deduction. Do this tomorrow. Do it even if you don’t need the cash.

You can get back into the same stock if you wait 31 days. If you are afraid the market will rebound while you are on the sidelines, use the loss-harvesting strategy described here.

Die with an underwater asset and the unrealized capital loss evaporates. This is the mirror image of the step-up rule. If assets are to get a step-up at death, then it’s fair they get a step-down, too.

You can use capital loss deductions to offset capital gains plus up to $3,000 a year of ordinary income. Unabsorbed losses are carried forward to future years. Absent gains, it will take you four years to put that $12,000 mistake to good use.

Alas, unused capital loss carryforwards suffer the same fate as unrealized capital losses when you die. They evaporate.

What if you bought the stock for $30,000, it’s now worth $18,000, and you are quite sure a $12,000 loss deduction will never do you a lick of good? (Example: You already have a giant loss carryforward and you are 90 years old.) Give the underwater stock to your granddaughter. She can’t claim your $12,000 loss, but in her hands the first $12,000 of price recovery is scot-free. She’ll have a taxable gain only to the extent she pockets more than $30,000.

Source: http://www.forbes.com/sites/baldwin/2014/08/25/estate-planning-a-ranking-of-good-assets-and-bad-assets/

 

 

 

 

Estate Planning Assures End-of-Life Wishes

Estate Planning Assures End-of-Life Wishes

By Charlotte Tallman

When it comes to planning for the unexpected, having a certified estate planner create a practical plan for an estate is imperative.

An estate consists of all property owned, and estate planning is the systematic development and updating of goals, policies and procedures for all of that property. By utilizing the expertise of an estate planner, there is an assurance that what is desired at the end of life will be done; as well as the fact that the estate will be preserved for spouses and heirs, including when and how much beneficiaries will receive.

When speaking to an estate planner, various opportunities will be shared, including the following areas of planned gifts as outlined by the Community Foundation of Southern New Mexico. (TheCFSNM, www.cfsnm.org, can recommend professional estate planners throughout southern New Mexico and provide estate planning resources.)

Bequest by will: A bequest by will is written in a will and designates a gift amount by percentage of estate or contingent on specific future events ensuring charitable wishes will be fulfilled. In many cases, donors can receive a substantial reduction in federal estate taxes.

Charitable remainder trust: This type of planned gift allows donors to place cash or property into a tax-exempt trust that pays the beneficiary an annual income. The donor receives an immediate tax deduction for the present value of the gift in the year the gift is made. After death, or at the end of the specified term, the remainder of the trust transfers to the charitable entity named.

Charitable lead trust: In a charitable lead trust a donor contributes cash or property to a trust that pays either a fixed amount in dollars or a fixed percentage of the trust’s assets to the charitable entity named for the number of years specified. Once this period ends, the assets held by the trust revert to the donor or the donor’s estate, or are transferred to beneficiaries named by the donor. A charitable lead trust is not exempt from tax.

Life estates: A gift of a home or farm can be gifted outright leading to a tax deduction for the property’s market value. If a donor wants to donate property but wants to retain use of the property for the rest of the lifetime, they can gift it through a life estate.

Retirement assets: A donor can complete a change of beneficiary form provided by the plan administrator to apply retirement benefits to a charity. Simply renaming the beneficiary of a retirement plan in one’s will without changing the beneficiary designation will usually be ineffective.

Insurance policies: Gifts of life insurance provide a simple way to give a significant gift to charity, with tax benefits that can be enjoyed during life. The donor makes the charity the owner and irrevocable beneficiary of a life insurance policy. The donor receives a tax deduction for the approximate cost or fair market value, whichever is less. If the policy is paid up, the donor receives an immediate tax deduction. If it is not, the donor can claim continuing tax deductions on premium payments the donor makes directly to the charity.

Charitable gift annuity: This form of a gift is a contract between a donor and the charity. The donor makes the gift and receives an immediate tax deduction. In exchange for the gift, the charity agrees to pay the donor a fixed income for life, or the life of another specified recipient. The income the donor receives during life is guaranteed by the charity.

The Community Foundation of Southern New Mexico is dedicated to helping the Southern New Mexico community now, and in the future. For more information see our website atwww.cfsnm.org or call Luan Wagner Burn, Ph.D., at 575.521.4794. To donate, mail your check to CFSNM, 301 South Church St., Suite H, Las Cruces, NM 88001.

Source: http://www.lcsun-news.com/las_cruces-news/ci_26354341/estate-planning-assures-end-life-wishes

 

 

 

 

 

 

Avoid These Estate Planning Nightmares

By: Michele Lerner

A serious illness, family crisis or death in the family can bring out the best behavior among relatives — or the worst. According to the 2014 Intra-Family Generational Finance Study by Fidelity Investments, 64 percent of parents older than 55 who have at least $100,000 in investable assets and their adult children over 30 aren’t on the same page about when the right time is to have conversations about estate planning. Even among those families that do talk about these topics, few get into the level of detail that’s recommended. The study found that 31 percent of parents say they haven’t talked in detail about estate planning; an additional 10 percent haven’t discussed the subject with their offspring at all.

One reason that estate planning is so complicated and emotionally fraught is that adult offspring often confuse love and money. “What many parents don’t understand is that their children do not see an inheritance as dollars, they see it as ‘love units,’ ” says Ken Moraif, a certified financial planner or at Money Matters, a wealth management and investment firm in Dallas-Fort Worth.

Problems can arise when parents decide to leave a bigger inheritance to one child because, for example, that child isn’t doing as well financially as another. “The child that received the smaller inheritance interprets that as ‘Mom and Dad loved my sibling more than me,’ ” says Moraif. “This creates resentment and ill will that the parents had no intention of creating.” He says parents should individually explain a disproportionate inheritance to each adult child and allow them to vent their frustrations, so that they don’t feel punished for their success or less loved.

Hurt feelings and misunderstandings aren’t the only inheritance troubles that can plague families. Consider the following real-world stories of times when estate plans (or lack thereof) went awry.

1. Failure to Plan

“We recently faced an unfortunate situation with a grandson who had lived with his grandfather for 30 years because his mother wasn’t in his life and his father had died,” says Pat Simasko, founder of Simasko Law in Mount Clemens, Michigan. The grandson put his life on hold to take care of his grandfather as he got older, but when the grandfather passed away, the grandson wasn’t entitled to any inheritance.

“The grandfather never put his $750,000 estate in proper order,” says Simasko. “There wasn’t anything that could be done. It truly amazes me that if a person would take one to two hours to properly plan, future disappointments could be avoided.”

2. Derailed by Simple Administrative Details

Craig Myers, a financial adviser and president of CR Myers & Associates in Southfield, Michigan, says he met with a woman whose mother left a trust that stated that her children were to inherit 100 percent of the estate. There was even a prenuptial agreement with her new husband stating that all of her assets prior to the marriage were to go to her daughter.

Unfortunately, the beneficiary designations on the accounts were never changed to name the trust, and as a result of this oversight, her new husband received 100 percent of her estate. “Someone may have a trust that explains their wishes upon death,” Myers says, “but if their beneficiary designations are not properly titled, they could disinherit their family without meaning to do so.”

Dan White, a financial adviser and founder of Dan White and Associates in Philadelphia, had a similar problem with a client whose husband passed away from a heart attack during their vacation in Spain.

“Her husband was a self-employed lawyer,” says White. “He put together all the paperwork, but forgot to take care of the biggest item. … He never named a beneficiary. Everything had to go to probate, and it took her months to sort out this mess.” White stresses to his clients the importance of having a professional review all paperwork. “One proofread through the document, and all of the delays would’ve been avoided.”

3. Cross-Country Squabbling Siblings

A client of John O. McManus, an estate attorney and founding principal of McManus & Associates in New York City, had a client whose daughter lived on the West Coast and son and daughter-in-law lived close to her on the East Coast. The children had joint power of attorney, and the daughter would sign blank checks so that her brother and his wife could pay for things their mother needed without constantly needing her signature.

“The son wrote his wife checks from his mom’s account as a salary to pay her for taking care of his mother, which caused some tension between the siblings,” says McManus. “Due to the son’s history of run-ins with the law, the daughter was wary of letting him have too much power over his mom’s estate.”

Ultimately, the mother named the daughter as sole executor. But after the mother passed away, the daughter-in-law took things out of the house that she claimed were hers or were “intended for her” by the deceased mom. “The daughter called the cops to have the daughter-in-law arrested when she would not leave the home of the decedent,” says McManus.

McManus was able to get both parties to agree that the daughter-in-law could go through the house with the estate sales team to select items that she claimed were left to her, and the company would value these items to be deducted from her share of the deceased’s estate.

To avoid situations in which relatives fight over individual property, it’s best to include a written list of items of value with designated recipients in your will.

4. Blended Family Brouhaha

Lauren Brouhard, vice president of retirement at Fidelity Investments, says that census data shows that blended families now outnumber traditional families in the United States. And stepparents, stepsiblings, and half-siblings can make estate planning much more complicated.

For example, a mother may want to leave different inheritances to her biological children than she does to her stepchildren, or want to protect her biological family’s inheritance in the event anything happens. “Without a meaningful discussion with the family about her intentions — and some follow-up steps to ensure these intentions are carried out — things can end up quite different than expected,” says Brouhard.

McManus recalls a client who died, leaving an administrative mess that led to an extended and complicated estate settlement process involving the man’s ex-wife, kids and current girlfriend.

For more than a year, there was a fight over who could open one of the client’s storage units. “Finally, we were able to find a day that lawyers from all the represented parties could go together to open the unit,” McManus says. “We had to count every item down to the socks to create an itemized list of contents to be divided among the heirs.”

The haggling over every detail of the deceased’s estate continues, McManus says: “His ex-wife, kids and current girlfriend are still fighting over anything and everything, including airline frequent flyer miles. We had to value the miles, investigate the transfer of ownership to an estate name and then equitably divide them.”

Don’t Leave Your Heirs a Mess

A detailed will, properly identified beneficiaries, and designated recipients of effects from an estate can reduce the chances of a free-for-all after a death, although when multiple parties are involved who were already arguing before the parent’s death, the chances are high that lawyers will be brought into the fray.

“The point is, if parents don’t make it clear what they want when it comes to things like estate planning, there’s a strong likelihood things won’t end up that way,” says Brouhard. “Adult children have an important role to play in helping to clarify and carry out their parents’ wishes, but this can only happen by talking things through as a family.”

Michele Lerner is a Motley Fool contributing writer.

Source: http://www.dailyfinance.com/2014/08/20/avoid-estate-planning-nightmares/

How Writing a Will Is Like Backing Up Your Hard Drive

By: Lazetta Rainey Braxton

In life as in computing, a little planning now prevents a lot of pain down the road.

Goodbyes are never easy, particularly if the relationship was a cherished one. Such was the case for me and my beloved hard drive. Its capacity for capturing great conversations, thoughts, and images felt irreplaceable. My heart sank as the computer technician conducted its last rites.

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But thanks to technological advances, a mirror image of my hard drive’s legacy resided only a download away. The online backup reduced my anxiety and helped me resume my daily activities. Preparing for the inevitable allowed me and my hard drive to appreciate our time together and live life with no residual regrets.

How would life be different if we applied such a healthy, forward-looking mindset to our human relationships through estate planning? After all, as with hard drives, our limited shelf life requires that we make the most of each day while also planning for a peaceful transition. Having loved ones struggle with managing unorganized financial affairs with no assistance only prolongs grief and blemishes fond memories.

Unfortunately, a lack of an estate plan is common for many households. According to a 2012 survey by Rocket Lawyer, 41% of Baby Boomers and 71% of people age 34 and younger don’t have wills. Giving legal direction regarding your finances, property, and children upon your death takes the guessing game out such important matters. Who knows your desires better than you? Otherwise, you leave the courts to untangle your affairs at the expense of your loved ones.

Preparing a will requires that you name individuals who are responsible for settling your estate (executors), taking care of your minor children (guardians) and managing the trusts you establish for the benefit of others (trustees). Having an up-to-date list of your financial assets and liabilities, including digital accounts and passwords, helps smooth the settlement of your estate. (Some people prefer a living trust to direct their estate rather than a will, in order to avoid probate — a legal process that validates the will.)

Other important estate planning documents include a durable power of attorney, durable power of attorney for health care, and a living will.

Durable powers of attorneys (POAs) give another person the authority to manage your financial, personal or health care affairs on your behalf in the event of mental incapacity (brought on by such conditions as dementia or a terminal illness). Health care POAs should also include Health Insurance Portability and Accountability Act (HIPAA) provisions governing an individual’s privacy and access to medical records. A living will gives special consideration to your preference regarding medical treatments that may prolong your life.

Some financial assets and property transfer outside of the will. Financial assets such as life insurance and retirement assets transfer by beneficiary designation. Bank accounts and some investment accounts can transfer by establishing these accounts as a payable on death (POD). How property is titled determines whether the property is considered a probate asset or a non-probate asset. It is important to review these documents regularly to keep up with life changes such as marriage, children, and divorce, and to ensure that assets transfer according to your wishes.

Source: http://time.com/money/3114144/estate-planning-documents-will/

Robin Williams Got it Right on Kids’ Trust

By: Annika Ferris Cushnie

Robin Williams was many things — a genius comedian, an Academy Award winning actor and generous philanthropist. He was also a father.

Early reports suggest that he also tried to protect his children from the hazards of “affluenza” often seen when children receive a massive inheritance at one time, when they are potentially too young to manage it.

I have not advised Robin Williams, so I can only go by the early reporting from TMZ, which reported it obtained a copy of Robin’s Williams’s trust , said to have been created in 2009:

“Under the trust, his kids, 22-year-old Cody, 25-year-old Zelda and 31-year-old Zachary received money … but in steps. … When each turned 21 they got one-third of the share. When they turned 25 they got half of what remained. When they turned 30 they each got their full share.”

It appears that Williams put a good amount of thought into his estate planning and tried to answer the questions of “How much is enough?” and “When is the right time?” for his children’s inheritance.

According to the report, the trusts for the actor’s children weren’t dependent upon his death, so he had taken steps to set up and fund the trusts before his death. This is a common move for wealthy individuals who may have children from prior marriages or an estate-tax issue.

Every family’s situation and goals for bequeathing assets to their adult children are different. Here are my thoughts on questions you can ask yourself to plan how to leave money to your children:

Do you leave it to your children while you are still alive?

Some people decide, as Robin Williams apparently did, that it’s better to hand down wealth to adult children while you, the parent, are still alive. (Of course, you have to have more than enough assets for yourself to be able to do that.) One benefit is that you will have some ability to help guide your children’s decisions, and it can be hugely rewarding to watch them build their lives responsibly with the help of the gifts you have given them.

If you have an estate-tax issue, making substantial gifts while you are alive can help to get the future appreciation of the assets out of your taxable estate — which saves tax dollars down the road.

Finally, being able to see a trial run of how your children handle money can also help you to make decisions about what happens at your death. With children from prior marriages (especially if one spouse is younger), making transfers while you are alive can help to avoid complications or relationalissues at your death.

If you leave assets for your children upon your death, do you give the funds to them outright? Or do you plan to have the funds held in trust?

If you leave assets to your children outright upon your death, you may be risking leaving a large amount of wealth in a lump sum to someone who may not be fully ready to manage the funds responsibly. Many wealthy individuals choose to have assets for their children held in trust, where they can create criteria for when and why the funds will be distributed.

Trusts can also offer some asset protection from creditors and divorce.

Do you hold the assets in trust for their lifetime? Or do you distribute principal at points in time?

Robin Williams’s decision to have the money distributed in three segments at different ages is a common solution. In 2009, when he created the trust, his children were either in or close to adulthood. His decision to distribute assets at three different ages allows for them to have a second and third chance. If they make a mistake with how they spend the first distribution, they have five years to learn and mature before receiving the next. Williams’s plans actually demonstrate a level of trust in his adult children as many high-net-worth families choose to have funds held in trust for their children’s lifetimes.

It surprises me a bit that he would have the assets distributed to them at such young ages, even though his trust spreads out the disbursements over several five-year periods. The age of 21 just seems young for receiving assets. Perhaps this particular trust wasn’t that large from an asset standpoint.

Trust terms, which dictate how accessible funds are to heirs while the assets are in trust, can vary quite a bit. In some cases income is paid out each year and principal is only available for specific circumstances like health, education, weddings or starting a business. In other cases these decisions are made by the trustee — which can be anyone from the beneficiary to a family member to a corporate trustee.

Who should draft a trust for your heirs?

In my experience, I have seen many mistakes from people trying to “do it themselves” with a trust that they have downloaded from the Internet or tried to draft themselves. To me, when it comes to money, it is extremely important to seek competent advice from the right professionals. That’s why my firm always recommends that a reputable estate-planning attorney handles our clients’ legal documents, whether a trust or a will or power of attorney.

Source: http://www.marketwatch.com/story/robin-williams-got-it-right-on-kids-trust-2014-08-14?siteid=rss

Start End-of-Life Planning Conversation Now

Start End-of-Life Planning Conversation Now

By: Dylan Babb

Remember those old west movies when the country doctor sits beside the gunslinger’s bed, and the old doc looks at him and says, “There’s nothing more I can do.” In contrast, today there is usually something that modern medicine can do next.

Rarely do we get the opportunity to sit down and talk to our families and our doctors about what we might be giving up when we agree to all heroic measures. These are difficult conversations to have with the people we love. It’s difficult for providers to have the conversation with patients and their families who are facing life-altering illness.

An AARP study on end-of-life care found that 80 percent of people surveyed wished to die at home, but in follow up studies only about 25 percent did.

When we approach death, we want to say, “I love you.” We want to say, “I am so proud of you.” We want to say, “I’m sorry” or “It’s OK.” But most of us haven’t made plans. A California survey found that 90 percent of people think it’s important to talk about end-of-life wishes with their loved ones, but fewer than 30 percent have discussed what they or their family would want.

We need to be talking. We need to talk to our spouses and children. We have to sit down with our primary care givers. We need to talk to our friends. We need to talk to our extended family. It’s not one conversation, one time. It’s an ongoing conversation. It’s a conversation that changes over time.

It’s also not just a conversation for older adults, it’s a conversation for everyone to have as both young and old need to make their end-of-life wishes known.

We have to prepare for what we know is coming. And we need time to put plans in place and get everyone on the same page. The conversation needs to begin before an illness or catastrophic event. The conversation needs to be at the kitchen table, not the hospital bed.

How do you get started? Talk to someone who is versed in end-of-life planning, who can help answer questions and direct you or your loved ones on how to fill out the appropriate forms to make your final wishes known.

Source: http://www.citizen-times.com/story/life/2014/08/11/column-start-end-life-planning-conversation-now/13930711/

Estate Planning: Caring for Dependent Adult Children

Estate Planning: Caring for Dependent Adult Children

By: Dennis Fordham 

Parents with dependent adult children with disabilities or mental illnesses are naturally concerned about who will care for their children when they can no longer do so themselves.

Dependent children, after all, often live at their parents’ home, receive substantial personal care and financial assistance from their parents and rely on their parents to manage their income and expenses.

Often a dependent adult child receives money from the Department of Social Security, like Social Security Disability or SSI that the parent manages as the child’s representative payee.

Hopefully, the parent, where possible, is also the child’s agent for financial, legal and property management, under a power of attorney, and also for health care decisions, under an advance health care directive.

These documents provide the parent with much broader authority. Otherwise, in the case of an incompetent and/or uncooperative adult child, the parent may become the child’s conservator.

Who will assist the child when the parent is incapacitated or eventually dies? If the adult child is competent and has a power of attorney and advance health care directive then alternatives agents, such as a trusted family member or friend, can be nominated.

But what if the child is not competent, is uncooperative, or there is no available friend or family to act as an alternative agent?

If the child is competent but there is no alternative family or friends who are qualified and willing to assist then a possible solution may be a relevant not for profit organization that assists such persons or a professional private fiduciary.

If the child is incompetent or uncooperative, however, then perhaps establishing a conservatorship while the parent is alive may provide a solution. A successor conservator can be appointed with less trouble once a conservatorship is already in place.

How will the parent’s own resources remain available to assist a dependent adult child when the parent is incapacitated or after the parent dies?

In case of the parent’s own incapacity, the parent’s own power of attorney and living trust, if relevant, should expressly provide that the parent’s resources are to be used to assist the adult child.

For example, the parent may wish to allow the child may continue to reside at home, even if the parent is in hospital or a nursing home, and that the child’s food and utilities are to be paid.

Further elaboration as to particulars can be provided in a letter of instructions by the parent to the alternative agent.

What happens when the parents eventually die and the estate is divided? Simply giving assets directly to the dependent child is a bad approach. Instead such assets should be held in a discretionary trust, and typically a special needs trust.

Why? Simply giving the child the assets outright will not only disqualify the child from any needs based government assistance but may likely result in the assets being squandered and the necessary care not being provided.

The right pooled special needs trust can receive and use the inheritance to hire a personal care advisor to visit the dependent adult, see that the child is taking care of him or herself, has food, transportation, and ensure proper living conditions.

One such pooled trust that specializes in caring for persons with mental illnesses and other brain disorders and operates here in California is proxy parent.

A pooled trust alone may not be the entire solution because pooled special needs trusts will not want to own and manage real estate.

Real property may need to be held in a separate special needs trust for the dependent child’s benefit managed by a relative, friend or private fiduciary acting as trustee. That way, the child can continue to reside in the residence.

Source: http://www.lakeconews.com/index.php?option=com_content&view=article&id=37851:estate-planning-caring-for-dependent-adult-children&catid=1:latest&Itemid=197

The Donald Sterling Trust: Working as Intended

The Donald Sterling Trust: Working as Intended

By: David H. Lenok

On Monday July 28, Judge Michael Levanas of the Los Angeles County Superior Court ruled in favor of Shelly Sterling, the estranged wife of Los Angeles Clippers owner Donald Sterling, and prevented Donald from blocking the $2 billion sale of the team to former Microsoft executive Steve Ballmer.

The central issue before the court was whether Shelly acted appropriately in removing her husband as co-trustee of the trust that owned the team for reasons of mental incapacity. Two doctors independently diagnosed Donald as being in the early stages of Alzheimer’s disease, triggering a clause in the trust that allowed for Donald’s removal.

In the wake of this decision, there’s been a great deal of rumbling in the advisory community about how to draft documents to better protect our clients from being removed in similar fashion. Putting aside Donald’s (not inconsiderable) personal indiscretions, it’s easy to see why some advisors would be disturbed to see a man forcibly removed from a position of great power by his own estranged wife on the basis of a fuzzy definition of incapacity. And, any arguments for paying more attention to one’s estate planning documents, drafting durable powers of attorney or even engaging in more sophisticated techniques, like employing a trust protector, are ones I can certainly get behind.  However, one question lost in the hubbub is: Did the incapacity clause work as intended? And I believe the answer here is “yes.”

Planning for a client’s incapacity falls at an awkward nexus of duties for advisors. Our overarching responsibility is to protect and serve our clients’ wishes, but there inevitably comes a point when clients may have to be protected from themselves. The incapacity clause in the Sterling trust could certainly have been drafted with more specificity as to what exactly “incapacity” entailed, but how much of our concern in this area is the result of 20/20 hindsight?

No document, no matter how often and carefully it’s updated, can perfectly handle every potential situation, particularly when you’re dealing with an issue as volatile as incapacity. The purpose of such clauses is to remove a client from a decision-making position when his ability to make those decisions has been compromised. There’s always going to be a fight when it’s time to actually do the deed. In this case, arguing the relative differences between the early and late stages of Alzheimer’s doesn’t see the forest for the trees. Donald’s capacity was compromised (regardless of the progression of the disease), and the clause kicked in and removed him. At a certain point, one has to take a step back from the minutiae and take comfort in intention. In the case of the Sterling trust, my opinion is that removing a client with Alzheimer’s from control of a multi-billion dollar asset is the very definition of “working as intended.”

Source: http://wealthmanagement.com/estate-planning/donald-sterling-trust-working-intended