Family Meetings and Trustworthy Siblings Needed to Help Aging Parents

It gets tricky when aging parents start having problems managing their own financial and legal affairs. Siblings can be a challenge, if they lack the ability to understand the changing roles from adult child to caregiver, or if they don’t know how to manage the “business side” of life. That, says the Monterey Herald in the article “Financial planning: Family communication helps aging parents,” can lead to challenging circumstances for aging parents and siblings.

For one thing, parents are often reluctant to seek help, even if they are aware that things are not right. Notices of missed payments may be stuffed in a drawer or left to pile up in stacks on a desk that was once orderly and tidy. Depending on where adult children live, this state of affairs could go on for a very long time, until someone realizes that it’s not for lack of money, but their capacity is starting to diminish. If you are nearby and visit often, you may not notice until things are in a bad state. If you live far away, you may not know until an annual visit brings you to a home that’s in a state of disarray.

Some siblings are easy to work with and understand the challenges that aging parents face. However, others don’t have the temperament or the knowledge to help out. If they are estranged from the parents, they obviously won’t be much help and could get in the way. Trying to reach out and keeping them informed may be difficult. However, it may also be necessary.

If there is a good relationship with siblings and they all live relatively close to each other, the family should begin with a series of regular family meetings. Ideally, the parents call the first meeting to take place, and they are able to take the lead in explaining why everyone is gathering and what needs to be accomplished. If they are not capable of doing that, or don’t want to do that, because they don’t want to be seen as needy or pushy, then an older sibling usually steps up.

A family with a history of good communication can usually deal with the legal and financial matters in several meetings. A family that rarely talks or only speaks during the holidays will need to get accustomed to working with each other in a productive manner. Some families meet at their estate planning attorney’s office. The attorney can serve as a facilitator, while an estate plan is put into place. Often, a neutral, third-party meeting place can diffuse some of the old family dynamics, which often emerge when a family meets at the family home.

Start by putting together a summary of the parent’s situation. What are their expenses, and what are their sources of income? How are their investment accounts titled? Do they have an estate plan? Have they named beneficiaries for their retirement accounts and life insurance policies? Is there a long-term care policy in place? How is their home titled, and where is the deed located?

Having the answers to these questions will also help you protect parents from financial elder abuse.

Evaluate their health with a realistic view. Do they have the health coverage they need? Are they independent now, and what is the prospect for their future independence? If they should become less able to live on their own, what will that look like? How will that be paid for?

Next, review their legal status. Do they have a will, power of attorney, health care power of attorney and HIPAA release form? If their estate plan has not been reviewed for more than three years, it needs to be updated. Many financial institutions and some health care facilities will not accept documents that are more than three to five years old. If any documents were created before HIPAA went into effect (2001), then they definitely need an updated estate plan.

The goal is to prepare as much as possible in advance, rather than reacting to a crisis. Increasing family communication around caring for aging parents can also bring siblings closer together, with a shared cause. Getting parents the care they need before an emergency, will also leave everyone in the family knowing they’ve done the right thing.

Reference: Monterey Herald (Feb. 20, 2019) “Financial planning: Family communication helps aging parents”

Can a Professional Fiduciary Help Me with Estate Planning?

When it’s time to do your estate planning, you should get assistance from professionals. When you draft your estate plan, you’ll need to work with an estate planning attorney. You also may want to speak with a trust company or licensed private fiduciary, which can help facilitate your estate plans and coordinate the activities of your legal and financial professionals, says The Pasadena Journal’s recent article, “Who Can You Trust to Reduce Stress of Estate Planning?”

If you have a reasonable amount of financial assets, you may benefit from the various services provided by a professional fiduciary. Those services can range from administration of a variety of trusts (such as living trusts and charitable trusts) to asset-management services (bill-paying), and safekeeping services (like providing secure vaults for jewelry and collectibles).

Employing a professional fiduciary can make things much easier, when it’s time to plan and execute your estate. A professional fiduciary can help you in these ways:

  • Lessening family fighting. Dividing estate assets can result in ill will and stress in a family. However, a professional fiduciary can act as a neutral third party to reduce feelings of unfairness.
  • Providing greater control. With a living trust that’s administered by the professional fiduciary, you can allow yourself great control over how you want your assets distributed.
  • Saving time and energy. With a professional fiduciary, you can let them do all the “legwork” of coordinating your plans with your financial professional, tax advisor and attorney. These professionals are also used to dealing with trust companies.
  • Adding protection. A professional fiduciary assume fiduciary responsibility for your financial well-being. This means that your best interests are always considered in each service and transaction they perform.

You can select from among many different trust companies and professional fiduciaries, but before choosing one, examine the services and fees of the various options.

As you journey toward that time of your life, when estate planning becomes more essential, discuss your plans with an estate planning attorney, a tax advisor, and a financial professional about whether using the services of a professional fiduciary might be right for you.

Reference: The Pasadena Journal (February 20, 2019) “Who Can You Trust to Reduce Stress of Estate Planning?” 

Iconic Designer Leaves a Fortune for Beloved Cat

The Burmese cat owned by Lagerfeld stands to inherit a sizable amount of the designer’s fortune, estimated at some $300 million, according to a report from CBS News titled “Karl Lagerfeld’s cat to inherit a fortune, but may not be richest pet.” The beloved cat, named Choupette, was written into his will in 2015, according to the French newspaper Le Figaro.

Before Lagerfeld died on Feb. 19, the cat already had an income of her own, appearing in ads for cars and beauty products. She has nearly 250,000 followers on Instagram and is an ambassador for Opel, the French car maker. She is also the subject of two books. Choupette has had her own line of makeup for the beauty brand Shu Uemura.

Lagerfeld was a German citizen, but he and Choupette were residents of France, where the law prohibits pets from inheriting their human owner’s wealth. German law does permit a person’s wealth to be transferred to an animal.

There are three approaches that Lagerfeld might have taken to ensure that his beloved cat would be assured of her lifestyle, after his passing. One would have been to create a foundation, whose sole mission is to care for the cat, with a director who would receive funds for Choupette’s care.

A second way would be to donate money to an existing nonprofit and stipulate that funds be used for the cat’s care. A third would be to leave the cat to a trusted individual, with a gift of cash that was earmarked for her care.

It is not uncommon today for people to have pet trusts created to ensure that their furry friends enjoy a comfortable lifestyle after their humans have passed. Estate laws in the U.S. vary by state, but they always require that a human have oversight over any funds or assets entrusted to a pet. Courts also have a say in this. There are reasonable limits on what a person can leave to a pet. A court may not honor a will that seeks to leave millions for the care of a pet. However, it has happened before.

Real estate tycoon Leona Hemsley left many people stunned when she left $12 million for her Maltese dog. In 1991, German Countess Carlotta Liebenstein left her dog Gunther IV a princely sum of $80 million. To date, Gunther remains number one on the “Top Richest Pets” list.

For pets who are beloved parts of regular families and not millionaires in their own right, an estate planning attorney will be able to help you plan for your pet’s well-being if it should outlive you. Some states permit the use of a pet trust, and California is one of those states. Regardless of what option you choose, I highly recommend that you make a plan for a secure place for your pet and provide necessary funds for food, shelter, and medical care.

Reference: CBS News (Feb. 21, 2019) “Karl Lagerfeld’s cat to inherit a fortune, but may not be richest pet”

What are the Top Four Estate Planning Mistakes Made by Celebrities?

The Reno Gazette Journal gives us the top four estate planning mistakes by celebrities you need to avoid in the article, “Yes, even celebrities make estate planning mistakes.”

You don’t have a will. Your affairs should be properly handled, and your family should be protected, when you pass away. However, neither singers Aretha Franklin nor Amy Winehouse had a will. Franklin left behind four sons with some financial issues. Amy didn’t take the time to plan either. She didn’t say how she wanted her $6.7 million estate to be distributed. Without any written instructions, her estate went through probate and was distributed to her parents. The primary purposes of a will are to designate the guardians of minor children, an executor of your estate and which beneficiaries are to get what assets.

Not considering a trust. Who wants to be a celebrity when it comes to private matters? Remember that a will is a public document, and anyone can go to the courthouse and look it up. However, with a living trust, your wishes remain private. Learn from the saga of the late Whitney Houston, who died at age 48. First, her will named her daughter Bobbi Kristina Brown as sole beneficiary. However, her daughter then died three years later at age 22. Houston’s estate was then involved in a battle with the IRS over the valuation of recording royalties and was assessed a tax bill of $2.2 million. To top it all off, her ex-husband Bobby Brown, ironically may be the heir of the Houston estate.

A living trust can help your estate plan remain private and away from others. It names who is entitled to your assets and how they are to get them. A trust names trustees. It also may provide estate tax benefits. If you look at Whitney Houston’s situation, a living trust may have helped by providing guidance to daughter Bobbi, after her mother’s death.

Failing to update your estate plan. We all experience changes throughout our lives. This includes finances, health, family dynamics and relationships—any one of these can mean it’s time for an estate plan review with your attorney. Look at the late Michael Crichton, the author of Jurassic Park, who was diagnosed with throat cancer, when his sixth wife was pregnant. Crichton failed to update his estate plan to include his soon-to-arrive son. His wife sued to include the baby as an heir, and Crichton’s daughter from a prior marriage opposed. The judge ruled the baby could inherit. Crichton could have saved everyone a lot of stress, anguish, and money, by simply updating his estate planning documents.

Failing to plan for disability before death. You should also think about planning for the possibility of being disabled and needing assistance in managing your affairs. Ask your estate planning attorney about powers of attorney and living wills to help protect you and your loved ones, in case of incapacity. For example, the final years of blues singer Etta James, known for “At Last” and “Tell Mama,” were full of court hearings. The legal battle was between her husband of 42 years and her son from a prior marriage. Etta signed power of attorney over to the son in 2008, but her husband claimed that she suffered from dementia and was incompetent. Her son wanted to restrict the amount of money Etta’s husband spent on her medical care. They settled, and the husband was named as conservator. However, he was limited to $350,000 for medical care for his wife. Etta James passed a short while later.

These celebrity misfortunes with their estate planning don’t need to be a roadmap for you and your family. Talk with your estate planning attorney now.

Reference: Reno Gazette Journal (November 14, 2018) “Yes, even celebrities make estate planning mistakes”

What Do I Do First After the Death of My Spouse?

There is no doubt that the stress can be all-consuming when a spouse passes away. It’s not a good time to make financial decisions. You should also avoid making any major changes for at least a year if you’re able. Allow your emotions to settle, prior to doing anything that could drastically impact your taxes and finances.

U.S. News & World Report recently published an article, “Don’t Make These Mistakes When Your Spouse Passes Away,” that warns us to take care to avoid these mistakes after the death of a spouse:

Taxes. Your tax-filing status will change after a spouse passes away. That could move you into a higher tax bracket or cause you to lose tax breaks. You can’t file married filing jointly and no longer have two exemptions. Check with your tax preparer before December if you need to make any adjustments prior to the close of the tax year.

Social Security and Annuity Income. You may also lose your deceased partner’s Social Security income. Widows and widowers can claim a Social Security survivor’s payment that’s equal to the amount the higher earning spouse received. However, there will now be just one Social Security check coming in, not two. In some instances, pension or annuity payments might also cease. You may see significant changes in your income.

Unplanned Withdrawals from Tax-Deferred Accounts. Many people seek to make up lost income, by taking retirement account withdrawals. However, a mistake can trigger both taxes and penalties. Income tax is due on each traditional 401(k) or IRA withdrawal because when you withdraw tax-deferred money, there are tax consequences. When you make a withdrawal from a spouse’s IRA, taxes are due. If you’re not 59½ or older, you could also pay a 10% early withdrawal penalty. Surviving spouses should try to minimize taxes on retirement account withdrawals to help the money last as long as possible.

Paying Taxes on Retirement Account Withdrawals Too Early. A surviving spouse can transfer tax-deferred retirement account assets into his or her name. That frequently lets a person further delay taxation. If you are under 70½, you can defer taxes into the future.

Paying a 10% Early Withdrawal Penalty. If the surviving spouse isn’t yet 59½ and needs some of the money in a retirement account, you can transfer the money into an inherited spousal IRA. If you need money, the IRS will let you take distributions. You’ll have to pay taxes, but you avoid the 10% penalty.

Required Minimum Distributions (RMDs). Distributions from retirement accounts are required after age 70½—even in the year when the spouse passes away. If the decedent was in payout mode and past 70½, make certain that between the decedent and beneficiary, you still take the required minimum distribution. If you forget, there’s a possible penalty of up to 50% of what you should have taken.

Advice. It’s not easy or practical to delve into your finances, right after losing a loved one. Don’t make any big money moves without advice. Remember to also incorporate tax planning with your estate planning, and work with an experienced estate planning attorney.

Reference: U.S. News & World Report (February 15, 2019) “Don’t Make These Mistakes When Your Spouse Passes Away”

How Do I Incorporate Charitable Giving into My Estate Plan?

One approach frequently employed to give to charity, is to donate at the time of your death. Including charitable giving into an estate plan, is a great way to support a favorite charity.

Baltimore Voice’s recent article, “Estate planning and charitable giving,” notes that there are several ways to incorporate charitable giving into an estate plan.

Dictate giving in your will. When looking into charitable giving and estate planning, many people may start to feel intimidated by estate taxes, thinking that their family members won’t get as much of their money as they hoped. However, including a charitable contribution in your estate plan will decrease estate tax liabilities, which will help to maximize the final value of the estate for your family. Talk to an experienced estate attorney to be certain that your donations are set out correctly in your will.

Donate your retirement account. Another way to leverage your estate plan, is to designate the charity of your choice as the beneficiary of your retirement account. Note that charities are exempt from both income and estate taxes. In choosing this option, you guarantee that your favorite charity will receive 100% of the account’s value, when it’s liquidated.

A charitable trust. Charitable trusts are another way to give back through estate planning. There is what is known as a split-interest trust that lets you donate assets to a charity but retain some of the benefits of holding the assets. A split-interest trust funds a trust in the charity’s name. The person who opens one receives an immediate tax deduction when money is transferred into the trust. However, the donors still control the assets in the trust, and it’s passed onto the charity at the time of their death. There are several options for charitable trusts, so speak to a qualified estate planning attorney to help you choose the best one for you.

Charitable giving is a component of many estate plans. Talk to your attorney about your options and select the one that’s most beneficial to you, your family and the charities you want to support.

Reference: Baltimore Voice (January 27, 2019) “Estate planning and charitable giving”

Kids Grown Up? Protect Them with These Three Documents

Without the right documents in place, you do not have the legal right to protect your own children, once they turn 18, says The National Law Review in an unsettling but must-read article titled “Three Critical Legal Documents Every Parent Should Get in Place Now to Safeguard Their Adult Children.”

There are only three documents and they are fairly straightforward. There is no reason not to have them in place. If your adult child was incapacitated by an accident or an illness, you would want to speak with the medical staff to find out how they are and what decisions need to be made. Whether you were making a phone call or arriving at the hospital, a nurse or doctor would not be permitted to speak with you about your own adult child’s condition or be involved with making any medical decisions.

It sounds unreasonable, and perhaps it is, but that is the law. There are steps you can take to ensure that you are not in this situation.

HIPAA Authorization Form gives you the authority to speak with healthcare providers. This is a federal law (Health Insurance Portability and Accountability Act of 1996) that safeguards who can access an adult’s private health data. HIPAA prevents healthcare providers from revealing any information to you or anyone else about a patient’s status. The practitioners could face severe penalties for violating HIPAA.

This is why you want to have a HIPAA authorization signed by your adult child and naming you as an authorized recipient.  This will give you the ability to ask for and receive information about your child’s health status, progress and treatment. This is especially important, if your child is unconscious or in an unresponsive state. The alternative? Going to court. That’s not what you want to be doing during a health emergency.

A Healthcare Power of Attorney needs to be in place, so you can be named their “medical agent” and have the ability to view their medical records and make informed decisions on their behalf. Without this (or a court-appointed guardianship), healthcare decisions will be in the hands of healthcare providers only. That’s not a bad thing, if you implicitly trust your child’s doctor. However, if your child is incapacitated in an out-of-town hospital with healthcare providers you don’t know, you will want to be able to make decisions on his or her behalf.

Note that physicians prefer a single medical agent, not a handful. The concern is that if time is a critical factor and a group of family members do not agree on care, it may compromise the healthcare services that can be provided. You can name multiple agents in priority order. A mother might be listed as the medical agent, and if she is unable or unwilling to serve, the second person would be the father.

The third document is a General Power of Attorney. This would give you the right to make financial decisions on your child’s behalf, if they were to become incapacitated. You would have the legal right to manage bank accounts, pay bills, sign tax returns, apply for government benefits, break or apply a lease and conduct activities on behalf of your child. Without this document, you won’t be able to help your child without a court-appointed conservatorship.

Keep in mind that these documents need to be updated every few years. If you try to use an older document, the bank or hospital may not accept them. Your adult child also has the ability to revoke these documents at any time, just by saying they revoke them or by putting it in writing. If you have an adult child living out of state, you want to have these documents prepared for your home state and their state of residence.

Finally, this is not a time to download forms and hope for the best. An estate planning attorney will know more specifically what forms are used in your state and help you make sure that they are prepared correctly.

Reference: The National Law Review (Feb. 11, 2019) “Three Critical Legal Documents Every Parent Should Get in Place Now to Safeguard Their Adult Children”

Retiring Business Owners, What’s Going to Happen to Your Business?

When the business owner retires, what happens to employees, clients and family members all depends on what the business owner has planned, asks an article from Florida Today titled “Estate planning for business owners: What happens to your business when you leave?” One task that no business owner should neglect, is planning for what will happen when they are no longer able to run their business, for a variety of reasons.

The challenge is, with no succession plan, the laws of the state will determine what happens next. If you started your own business to have more control over your destiny, then you don’t want to let the laws of your state determine what happens, once you are incapacitated, retired or dead.

Think of your business succession plan as an estate plan for your business. It will determine what happens to your property, who will be in charge of the transition and who will make decisions about whether to keep the business going or to sell it.

Your estate planning attorney will need to review these issues with you:

Control and decision-making. If you are the sole owner, who will make critical decisions in your absence? If there are multiple owners, how will decisions be made? Discuss in advance your vision for the company’s future, and make sure that it’s in writing, executed properly with an attorney’s help.

What about your family and employees? If members of your family are involved in the business, work out who you want to take the leadership reins. Be as objective as possible about your family members. If the business is to be sold, will key employees be given an option of buying out the family interest? You’ll also need a plan to ensure that the business continues in the period between your ownership and the new owner, in order to retain its value.

Plan for changing dynamics. Maybe family members and employees tolerated each other while you are in charge, but if that relationship is not great, make sure plans are enacted so the business will continue to operate, even if years of resentment come spilling out after you die. Your employees may be counting on you to protect them from family members, or your family may be depending upon you to protect them from disgruntled employees or managers. Either way, do what you can in advance to keep everyone moving forward. If the business falls apart the minute you are gone, there won’t be anything to sell or for the next generation to carry on.

How your business is structured, will have an impact on your succession plan. If there are significant liability elements to your business, risk management should also be built into your future plans.

To make your succession plan work, you will need to integrate it with your personal estate plan. If you have a Last Will and Testament in a California-based business, the probate judge will appoint someone to run the business (based on the priority of your family members), and then the probate court will have administrative control over the business, until it’s sold. That probably isn’t what you had in mind, after your years of working to build a business. Speak with an estate planning attorney to find out what structures will work best, so your business succession plan and your estate plan will work seamlessly without you.

Reference: Florida Today (Feb. 12, 2019) “Estate planning for business owners: What happens to your business when you leave?”

 

Do I Have All the Beneficiaries Set Up Correctly on My Assets?

Pretty much everything you own, transfers in one of three ways:  1) by title; 2) by will/trust; or 3) by contract.

When’s the last time you’ve reviewed your beneficiaries? This question was explored in a recent InsideNoVa article, “Naming Beneficiaries: A Quick Tip to Reduce the Surprise Factor.”

For example, if your checking account is titled in your spouse’s and your name “with rights of survivorship” (WROS), you effectively co-own the account. That one should be all set, at least until the surviving spouse dies.

Your will or trust instructs your executor on the transfer of any assets that aren’t transferred by title or contract. That’s probably at least some of your estate. Therefore, if you don’t have a will and/or a trust, make an appointment with an estate planning attorney to make sure you have this important document.

Next, the beneficiary designation contacts for assets like your retirement accounts, pension plans, and insurance policies should be reviewed when there’s a life event, like birth or adoption of a child, a divorce, or a marriage.

Start the process by identifying all the accounts you own, including life insurance policies, annuities, and the like that will pass by beneficiary designation. You should then see who the primary and contingent (secondary) beneficiaries are for each. You can usually assign percentages to your beneficiaries. Therefore, you could name your spouse as primary beneficiary, 100%. Your siblings could then be secondary beneficiaries in equal shares.

Some contracts allow you to have your funds be distributed “per stirpes.” In that case, if you name your three children as primary beneficiaries, they each would receive a third. However, if your eldest son dies with you, with per stirpes, his share will go to his children.

In addition, there may be situations when you might designate a trust as a beneficiary. This can get complicated, so work with an experienced trust and estate attorney.

In any situation, if it’s been a long time (or never) since you reviewed your beneficiary designations, do it right away.

Reference: InsideNoVa (October 26, 2018) “Naming Beneficiaries: A Quick Tip to Reduce the Surprise Factor”