How Do I Include My Pet in My Estate Plan?

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How Do I Include My Pet in My Estate Plan?
pets included in estate plan

A recent survey of pet owners showed that nearly half (44%) of pet owners have prepared for the future care of their animals, in the event their pets outlive them. With traditional financial planning instruments like living trusts, life insurance, and annuities, pet owners can have peace of mind knowing their pets’ needs will be met.

Forbes’s article, “3 Financial Planning Tips For Pets Owners,” says that typically, “pet estate plans” should cover more than simply who will care for the pet, when you are no longer around. Expenses such as food, doggie day care, veterinarian bills and medication should also be considered.

20% of all respondents in the survey said they have financially planned for their pets’ future care. About 38% said they added the pet’s future caregiver as a beneficiary to a life insurance policy and 35% added more coverage to their life policies. 13% also recently purchased annuities naming the pet’s caregiver as the beneficiary.

However, many pet owners forget about end-of-life planning. Consider an individual trust for your pet or donating funds to your local humane society or pet shelter.

One question many have before adding a new animal to the family, is whether they can afford it. The cost of an animal from a breeder can be high, so a more affordable option is to check out your local humane society or animal rescue group. Remember that the costs of food, vet bills, and other supplies are just as important to think about, before making a pet a part of your family. Pets are too often returned to animal shelters, because pet parents were unable to afford to properly care for the pet.

Last, ask about pet insurance at your veterinarian. Many clinics offer plans and staff members will be able to talk to you about the right option based on the type of animal, breed, age and other criteria of your pet.

Simple steps like these will make certain your pets are cared for properly and without burden to the person who accepts your animals.

Reference: Forbes (January 27, 2019) “3 Financial Planning Tips For Pets Owners”

How Can I Make a Trip to the ER Easier for an Alzheimer’s Patient?

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How Can I Make a Trip to the ER Easier for an Alzheimer’s Patient?
Emergency room

Trying to make someone with Alzheimer’s comfortable in an ER is not an easy thing. However, there are some things you can do to make the stimulation-saturated environment a little less overwhelming, says The Advocate in the article “Alzheimer’s Q&A: What should I know before taking someone with Alzheimer’s to the emergency room.”

Start long before you must go to the ER, by creating a list of your medications and have a few copies with you.

Bring the medication list and any assistive devices, including hearing aids, dentures, an extra pair of glasses and any walking aids, like a walker or a cane.

Also, have a list of contact information for all healthcare providers and family members. If you have a power of attorney for healthcare (also referred to a California Advance Healthcare Directive), bring that as well. If the individual has a POLST or any other documents, like a do not resuscitate (DNR), bring those just in case. Make sure to have all health insurance information.

Expect a wait, so bring snacks. A portable music player with the person’s favorite soothing music and headphones may provide some comfort. Magazines or books that are used during quiet times at home may be useful. Don’t bring anything of value, like jewelry or a wallet. And don’t bring a crowd. Small children, unless there is no one who can care for them or other family members, are best left at home.

Unless the individual is having a life-threatening emergency, you will likely have to wait, and you may be waiting a while. Provide simple step-by-step explanations of what is taking place and be honest with them about why they are in the hospital and what is happening.

Focus on keeping them calm and comfortable. Offer a snack and if possible, find a quiet space in the waiting room.

Make sure that the hospital staff is aware you are there with a person who has Alzheimer’s or dementia. They may not have training in caring for dementia patients, so be prepared to advocate for your parent or loved one. Offer suggestions in communicating with the person and ask doctors and medical personnel to limit their questions, which may increase stress and anxiety. Speak with the doctor privately, if possible.

Request that the staff avoid using any physical restraints or medications to control the person’s behavior, unless absolutely necessary. Let the staff know about any fever, medication side effects or changes in mental status. Never leave the person alone in the ER or the evaluation room.

Reference: The Advocate (Jan. 20, 2019) “Alzheimer’s Q&A: What should I know before taking someone with Alzheimer’s to the emergency room”

Is Your Junk Drawer Better Organized than Your Digital Assets?

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If your digital estate is not properly cared for, it can lead to problems for your heirs, including an opportunity for hackers to try to get at whatever assets they can, reports the White Mountain Independent in the article titled “Is your ‘digital estate’ in order?”

Think about how many of your personal accounts are online:

  • Financial accounts: banking, brokerage, bill-paying utilities;
  • Virtual property: credit card points, frequent flyer miles, cryptocurrency;
  • Business accounts: eBay, Amazon, Etsy; stock photo accounts;
  • Email accounts: Gmail, Outlook, Yahoo;
  • Social network: Facebook, Twitter, LinkedIn, Instagram; and
  • Online digital storage: Dropbox, Google Drive, iCloud.

Those are many assets to protect. Where do you start?

First, create an inventory. Use the categories above or create your own. However, you should make it organized.

Document your wishes for how you want your digital assets to be managed. If you don’t specify this, you may be leaving a wide-open arena for long legal battles. Your heirs and beneficiaries may never gain access to them. Hackers might go after them and use your identity. Your heirs may also have to engage in an expensive and protracted battle with a social media giant with costs eating into their inheritance.

Name a digital executor in your will. This is a relatively new area, but you can name a person to be your digital executor. Not all states recognize this position, so you’ll want to speak with a local estate planning attorney to find out what the laws are in your state.

Ensure your estate planning documents include the authorization to access your accounts. Depending on the state you are in, the access to your digital assets on your death will be determined by the terms of the account, as well as your estate planning documents. It is important that your documents allow for the access and management of your digital assets on your death.

Review your plans, especially as you add new digital assets.

Managing digital assets can be as difficult as managing tangible assets. The laws are still evolving, so speak with your estate planning attorney to make sure that your estate is prepared, and your heirs will not face a digital nightmare after you have passed away.

Reference: White Mountain Independent (Oct. 26, 2018) “Is your ‘digital estate’ in order?”

 

How Can I Use Special Needs Planning with the New Tax Laws?

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Of course, the precise expenses for an individual with special needs will vary, based upon the type of condition and level of care. A condition, such as autism, can require lifetime support costing upwards of $2.3 million, according to the advocacy and support organization Autism Speaks.

If you have a family member affected by a disability, what is your plan to pay for this care? This was the issue explored in a recent Financial Planning article, “A new special needs planning approach under the tax overhaul.”

Families usually want to plan for disabled relatives, but can be wary of losing access to savings, fearing that they may need the money themselves. A caretaker must also weigh the individual’s needs against the family’s other financial goals and obligations.

Planning for people with special needs, often involved irrevocable trust strategies in the past. Trusts can benefit the person with special needs, but other family members had limited access to the investments. The lifetime estate tax exemption is now doubled under the tax overhaul, so most Americans do not face a federal estate tax. The change in the tax law and higher exemptions have made it possible for people to plan for the loved one’s care, while ensuring protection for the family.

  • Estimate the cost of caring for a family member with special needs. A good plan should preserve eligibility for government benefits, such as Medi-cal and SSI. However, it is important to note that many expenses are not covered. This plan must also state who will care for the disabled person, if the primary caregiver dies or is incapacitated.
  • Decide how to fund the plan. Families frequently use a permanent life insurance policy to help cover any gaps left by limited government aid. The death benefit, which is generally income tax-free, provides money to help replace caregiver services, add to benefits provided under government programs and provide a liquidity source to help equalize the inheritance for other family members.

When the federal estate tax exemption was lower, a parent or caregiver usually would create an irrevocable third-party special needs trust during their lifetime. The trust assets would be used to purchase a life insurance policy, with the trust made owner and beneficiary. At the insured’s death, the death benefit received by the trust would be excluded from the grantor’s estate for estate taxes. The policy distributions would provide ongoing care for the relative, while allowing for access to government benefits.

However, the new higher exemptions have made it possible to plan for a loved one with special needs and also protect the entire family. This can be done by a caretaker personally owning a life insurance policy on his/her life, that names a special needs trust as the beneficiary.

  • Work with an estate planning attorney. Use an attorney who has experience with special needs planning, to determine the appropriate ownership structure, based on your personal situation.

Reference: Financial Planning (January 15, 2019) “A new special needs planning approach under the tax overhaul”

How Can a Trust Keep My Family From An Undesirable Lifestyle?

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How Can a Trust Keep My Family From An Undesirable Lifestyle?
incentive trust beneficiaries

Some people are hesitant to use trusts in their estate planning. Some have the notion that if you leave money in trust, it will make “trust fund babies” of your children or grandchildren.

You may be afraid that they’ll become spoiled brats, who do nothing but spend money they haven’t earned or invest foolishly.

FEDWeek’s recent story, “Using a Trust as an Incentive for Your Heirs” explains that trust distributions can be limited to modest amounts or left to the discretion of the trustee, who’ll manage the trust assets.

This article suggests that if you do leave money in trust, you should avoid the common practice of providing for distributions at the ages 25 and 30.

That’s because, at those ages, most people are better off finishing their education and establishing their careers. Giving them a bagful of money at that age might decrease their drive to pursue a meaningful career.

One way to do this is what’s called an “incentive” trust. This type of trust offers rewards to trust beneficiaries who accomplish specific goals.

With an incentive trust, the beneficiaries might get a particular amount of money for getting higher education degrees, attaining certain levels of earned income or volunteering at a church or in the community. For instance, your trust could be drafted by your estate planning attorney to state that the trustee will distribute to each of your grandchildren a certain percentage (such as 25%) of earnings each year, up to a certain amount. This could be tied to a requirement that you make.

Another way to go about this trust is to leave the distributions to the discretion of the trustee. The trust might detail the types of activities that will be rewarded, then permit the trustee to make appropriate distributions.

When you’re going to depend so much on the judgment of the trustee, for this type of arrangement to work, it’s critical to choose a highly-qualified trustee.

The trustee could be a relative, friend, professional advisor, or licensed private fiduciary. They must be able to empathize with your beneficiaries but still make prudent decisions about distributions. It is best to nominate someone who is independent and will not benefit from the distributions themselves. In addition, add a plan for trustee succession, in case your first choice becomes unable or cannot serve.

Reference: FEDWeek (January 17, 2019) “Using a Trust as an Incentive for Your Heirs”

What Does a Fiduciary Do?

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What Does a Fiduciary Do?
Lunch Meeting

It sounds a little like something financial, like maybe something you do at a bank. But a fiduciary relationship is a legal relationship that includes responsibilities that can be enforced, reports the Denton Record-Chronicle in a detailed article with the edgy headline “What is the “F” word?” The article addresses this serious topic that is often glossed over.

In a fiduciary relationship, whether between a lawyer and a client, a CPA and a client or two non-professionals, one person has a duty to act only in ways that will benefit the other person or group of people. The fiduciary is required to be loyal, act in good faith, be completely honest and refrain from doing anything that would benefit the fiduciary, instead of the person they are responsible for. This is required, even if the people are not aware of being in a fiduciary relationship.

The fiduciary may not use their position, as trustee or financial advisor or executor, to “self-deal,” or take actions that benefit the fiduciary and not the other person or people. The fiduciary must also share all relevant information with the beneficiary.

So, who are these fiduciaries? They could be business partners, someone who has power of attorney for another person, trustees or estate representatives, attorneys, licensed private fiduciaries, or employees. These formal relationships are created by a relationship; in these instances, they are usually around legal agreements in the shape of partnership agreements, estate planning documents, retainers (for attorneys) and employment contracts for employees.

Some fiduciary relationships come with more responsibilities than others. Trustees and personal estate representatives, like executors, are charged with tasks in addition to general fiduciary duties. They are usually given the responsibilities of handling money, property, and investments. They have a duty to properly manage those assets and report on those assets to the beneficiaries and heirs.

For attorneys, client-attorney privilege, that is, not sharing information that the client tells the attorney in confidence, is a fiduciary duty. It is also an ethical duty for the attorney.

For employees, the duty to act in an employer’s best interest may not be as limiting. Unless there is a non-compete contract, the employee may seek employment from a competitor or create a competing business, while working for the employer. However, the employee may not steal customers or other employees, before resigning from a position.

If a fiduciary does not follow through on their duties, it is called a breach of fiduciary duties. In estate planning, the executor is expected not to self-deal, and to put the interest of the estate and its beneficiaries first. The executor may charge a fee. However, the amount is determined by the laws of the state.

It should be noted that estate planning attorneys are guided by fiduciary duties and ethical responsibilities that are part of their training as attorneys. An attorney must always put their client’s interests first and keep the client fully informed, even when it’s not good news.

Reference: Denton Record-Chronicle (Jan. 16, 2019) “What is the “F” word?”

How Would Cinderella’s Story Be Different, if Dad Did Estate Planning?

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The story never really focuses on why Cinderella is placed in such a dire position in the first place. However, The National Law Review article titled “A Cautionary Fairy-Tale–If Only Cinderella’s Father Had An Estate Plan” does. It starts with a light-hearted tone, but the details quickly move to how many different ways that this family situation could have been prevented with proper estate planning.

To refresh your memory: Cinderella’s mother died, her father remarried and then he died. She is basically a slave to her evil stepmother and stepsisters, in her own home.

Let’s start with what would happen, if there had been no estate plan. If the family lived in California, half of her father’s estate would go to her stepmother, and half of the estate would be given to Cinderella. As a minor, her half of the estate would be placed in an UTMA account–Uniform Transfers to Minors Act or held in a guardianship estate account. There would be a court-appointed custodian, who would be required to use these funds for her health, education, maintenance and support. The court would have likely appointed the Evil Stepmother, who would not likely have complied with the guidelines. A second option would have been for the money to be placed in a trust for Cinderella’s benefit, but the Evil Stepmother would likely have been named a trustee, and that would not have worked out well either.

What Cinderella’s father should have done, was to create a Revocable Living Trust Agreement, stating that certain assets are the separate property of the father (Schedule A), that certain assets are the property of the Evil Stepmother (Schedule B) and that certain assets are community property of the father and the Evil Stepmother (Schedule C).

A neutral successor trustee would have been named—a friend, fiduciary, corporate trustee or perhaps the Fairy Godmother—to oversee the trust. At the death of the father, the trust should have directed that the trust be divided into two subtrusts, known as an A/B split trust.

The Survivor’s Trust (Trust A) would have gathered all the Evil Stepmother’s separate property and one half of the value of the community property assets. Trust B (The Decedent’s Trust) would have all of the father’s separate property, as well as half the value of the community property assets. The trust could have been structured so that the Evil Stepmother could use the Survivor’s Trust assets as she wanted and could only receive income, if the assets to the Survivor’s Trusts were depleted.

The neutral successor trustee would either work with the Evil Stepmother or make sure that Cinderella’s share of the Decedent’s Trust was not being improperly depleted. At the death of the Evil Stepmother, the assets in the Decedent’s Trust would go to Cinderella.

Cinderella’s father could have also taken out a large life insurance policy to ensure that she was cared for, with the proceeds to be distributed to an UTMA account, with a neutral custodian or to a support trust with a neutral trustee.

The only way Cinderella could have recovered any assets would have been through litigation, which is the likely way this story would have turned out, if it happened today. It’s not ideal, but if a child has been left with nothing but an Evil Stepmother and two nasty stepsisters, a lawsuit may be a worthwhile effort to recover some assets. Assuming that the Evil Stepmother either adopted Cinderella or was appointed her guardian by the court, there would be a fiduciary obligation to protect her, and an accounting of assets at the time of her father’s death would have been prepared.

Estate planning would have preempted the story of Cinderella. It does serve as a clear example of what can happen with no estate plan in place. Whether your blended family enjoys a great relationship or not, have your estate plan created, so that if things turn wicked, your beloved children will be protected.

Reference: The National Law Review (Jan. 16, 2019) “A Cautionary Fairy-Tale–If Only Cinderella’s Father Had An Estate Plan”

Are You Ready to Retire? These Professionals Can Help

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Are you thinking about retiring in 2019 or 2020? Do you know if you are ready to retire? It seems like a simple concept: Just pick a month, run some numbers and turn off your weekly early morning wake-up alarm. However, it’s not that simple. According to an article titled “Professionals can ease a person into retirement” from the Cleveland Jewish News, most people need some help for both financial and non-financial planning.

A good place to start is with the financial side. Take inventory of all your assets to identify where you have assets and where you have liabilities. You’ll need to be brutally honest with yourself and your spouse. Are there gaps? Is your credit card debt bigger than you thought? Use this exercise to get a real sense of whether you can retire this year.

Next, take care of the legal aspects of retirement. You’ll need a will (and possibly a trust), durable power of attorney, and an advance healthcare directive. The financial and medical POAs will give someone the legal authority to make financial and medical decisions for you, if you become incapacitated. If you already have a will but have not reviewed it in three or four years, it’s time for a review. Laws change, lives change, and what may have worked well for you and your family when the will was first created, may not work now. You’ll want to work with an estate planning attorney to create a plan, making sure assets are properly aligned with your estate plan and minimizing any tax liability for your heirs.

This is also the time to consider how you’ll pay for long-term care. Do you have a long-term care insurance policy in place? Speak with a reputable insurance agent, or if you don’t know one, ask your trusted advisors to make a recommendation. People don’t like to think about going into a nursing home for an extended period of time, but it happens often enough that it makes sense to have this type of insurance. It’s not cheap—but neither is paying out-of-pocket for care at a nursing facility.

When you’ll retire, and what you’ll do with your retirement years, which could last two or even three decades, is a big question. The answer may be based on your finances—can you realistically stop working full time, or do you need to continue to work for a few more years? Would part-time work fill any savings gaps? These are questions that can’t be answered, without a thorough financial analysis of your retirement income.

If you stop working, what will you do? Some experts advise asking a bigger question: Who are you, now that your work identity is gone? If you’ve planned well, or if you’re lucky, your retirement can be a time of great fulfillment, spending time with family, volunteering in the community and devoting time to taking better care of yourself. For some people, retirement from one career is an opportunity to spring into a new career, one that they’ve always put to the side, in order to earn a paycheck.

How much you can achieve of your dreams, depends on putting down a solid foundation of legal and financial resources. An estate planning attorney and a financial advisor are important members of your retirement success team.

Reference: Cleveland Jewish News (Jan. 9, 2019) “Professionals can ease a person into retirement”

Are You Ready for an Emergency or Natural Disaster?

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Are You Ready for an Emergency or Natural Disaster?
Wild fire and natural disasters

Fires, floods, earthquakes: the natural disasters and emergencies that have turned people’s homes and lives upside down have made us aware of how vulnerable we are, and how little time there is when disaster strikes. A “go-bag” to protect your family that contains credit cards, cash, flashlights, flares, batteries, warm clothes, prescriptions, and other necessities is just one part of being prepared, says the article “The most important ‘go bag’ item for emergencies is only 2 inches long” from The Union.

That’s your “financial go bag.” It won’t feed you or keep you warm, but it will save you countless hours and headaches when life returns to normal. Here’s what you need to know:

  1. Gather all your important documents. That means your driver’s license, passport, birth certificate, social security card and Medicare card. If you own your home, you should include deeds to property and titles to cars, as well as insurance policy summaries for home, auto, medical, long term care, life, or umbrella policies. Include statements for checking, savings, investments, debt accounts with account numbers and federal and state tax returns from the last three years. Add estate planning documents. If you have a pet, include their license information, chip ID and vaccine records. If there is an 800 number for a service that can track your pet. Make sure to include that.
  2. Create a physical list of important phone numbers and addresses for family members, professionals, including your estate planning attorney, CPA, financial advisor, dentist, doctors, and emergency contacts. Print it out and put it in your go bag. If you don’t have any power, your list on the phone will not be accessible.
  3. Create a video inventory of your home, including the contents of dressers, drawers, cupboards, collections. Don’t forget the garage and outdoor landscaping.
  4. Scan all this information and store it on two thumb drives (also known as memory sticks). Protect the information, by using an encryption method to secure it, in case it gets lost.
  5. Put one of these thumb drives into your safe deposit box and another in your go bag. Even a fireproof safe won’t survive a massive wildfire, so don’t put it in a safe in or under your house. Put the go bag somewhere near an exit point, where it blends in and is secure.
  6. Tell your family and closest friends that you have a financial go bag and where it can be found.

This does take a little time, but if disaster strikes, and you can move quickly with your documents and your “regular” go bag, you and your family will be in a better position to rebuild your lives.

Reference: The Union (Dec. 23, 2018) “The most important ‘go bag’ item for emergencies is only 2 inches long”