Four Steps to Take Right After an Alzheimer’s Diagnosis

If you or a loved one has been diagnosed with Alzheimer’s disease, it is important to start planning immediately. There are several essential documents to help you once you become incapacitated, but if you don’t already have them in place, you need to act quickly after a diagnosis.

Having dementia does not mean an individual is not mentally competent to make planning decisions. The person signing documents must have “testamentary capacity,” which means he or she must understand the implications of what is being signed. Simply having a form of mental illness or disease does not mean that you automatically lack the required mental capacity. As long as you have periods of lucidity, you may still be competent to sign planning documents.

The following are some essential documents for someone diagnosed with dementia:

  • Power of Attorney. A power of attorney is the most important estate planning document for someone who has been diagnosed with Alzheimer’s disease or some other form of dementia. A power of attorney allows you to appoint someone to make decisions on your behalf once you become incapacitated. Without a power of attorney, your family would be unable to pay your bills or manage your household without going to court and getting a guardianship, which can be a time-consuming and expensive process.
  • Health Care Proxy. A health care proxy, like a power of attorney, allows you to appoint someone else to act as your agent for medical decisions. It will ensure that your medical treatment instructions are carried out. In general, a health care proxy takes effect only when you require medical treatment and a physician determines that you are unable to communicate your wishes concerning treatment.
  • Advanced Directive for Health Care or Living Will. Advanced directives and living wills explain what type of care you would like if you are unable to direct your own care. An advance directive can include a health care proxy or it can be a separate document. It may contain directions to refuse or remove life support in the event you are in a coma or a vegetative state or it may provide instructions to use all efforts to keep you alive, no matter what the circumstances.
  • Will and Other Estate Planning Documents. In addition to making sure you have people to act for you and your wishes are clear, you should make sure your estate plan is up to date, or if you don’t have an estate plan, you should draw one up.  Your estate plan directs who will receive your property when you die. Once you are deemed incapacitated, you will no longer be able to create an estate plan. An estate plan usually consists of a will, and often a trust as well. Your will is your legally binding statement on who will receive your property when you die, while a trust is a mechanism for passing on your property outside of probate.

In addition to executing these documents, it is also important to create a plan for long-term care. Long-term care is expensive and draining for family members. Developing a plan now for what type of care you would like and how to pay for it will help your family later on. Your attorney can assist you in developing that plan and drafting any necessary documents.

If you would like more information feel free to contact our office today.

How to Handle Sibling Disputes Over a Power of Attorney

A power of attorney is one of the most important estate planning documents, but when one sibling is named in a power of attorney, there is the potential for disputes with other siblings. No matter which side you are on, it is important to know your rights and limitations.

A power of attorney allows someone to appoint another person — an “attorney-in-fact” or “agent” — to act in place of him or her – the “principal” — if the principal ever becomes incapacitated. There are two types of powers of attorney: financial and medical. Financial powers of attorney usually include the right to open bank accounts, withdraw funds from bank accounts, trade stock, pay bills, and cash checks. They could also include the right to give gifts. Medical powers of attorney allow the agent to make health care decisions. In all of these tasks, the agent is required to act in the best interests of the principal. The power of attorney document explains the specific duties of the agent.

When a parent names only one child to be the agent under a power of attorney, it can cause bad feelings and distrust. If you are dealing with a sibling who has been named agent under a power of attorney or if you have been named agent under a power of attorney over your siblings, the following are some things to keep in mind:

  • Right to information. Your parent doesn’t have to tell you whom he or she chose as the agent. In addition, the agent under the power of attorney isn’t required to provide information about the parent to other family members.
  • Access to the parent. An agent under a financial power of attorney should not have the right to bar a sibling from seeing their parent. A medical power of attorney may give the agent the right to prevent access to a parent if the agent believes the visit would be detrimental to the parent’s health.
  • Revoking a power of attorney. As long as the parent is competent, he or she can revoke a power of attorney at any time for any reason. The parent should put the revocation in writing and inform the old agent.
  • Removing an agent under power of attorney. Once a parent is no longer competent, he or she cannot revoke the power of attorney. If the agent is acting improperly, family members can file a petition in court challenging the agent. If the court finds the agent is not acting in the principal’s best interest, the court can revoke the power of attorney and appoint a guardian.
  • The power of attorney ends at death.If the principal under the power of attorney dies, the agent no longer has any power over the principal’s estate. The court will need to appoint an executor or personal representative to manage the decedent’s property.

If you are drafting a power of attorney document and want to avoid the potential for conflicts, there are some options. You can name co-agents in the document. You need to be careful how this is worded or it could cause more problems. The best way to name two co-agents is to let the agents act separately. Another option is to steer clear of family members and name a professional fiduciary.

Sibling disputes over how to provide care or where a parent will live can escalate into a guardianship battle that can cost the family thousands of dollars. Drafting a formal sibling agreement (also called a family care agreement) is a way to give guidance to the agent under the power of attorney and provide for consequences if the agreement isn’t followed. Even if you don’t draft a formal agreement, openly talking about the areas of potential disagreement can help. If necessary, a mediator can help families come to an agreement on care.

If you would like to learn more about powers of attorney and how you can benefit from having one, please give us a call today!

Estate Planning in the New Year

The New Year is all about a fresh start. Along with losing a few pounds and joining the gym, why not consider starting 2018 off with an estate plan that works for you and your family? This does not simply mean assessing whether or not you have estate planning in place. It also means ensuring the planning you do have is up to date and actually accomplishes your estate planning goals. Only about half of all Americans have planned for their disability and death. Of the fifty percent of people who have created estate plans most estate plans are only updated every 20 or so years. We believe your best practice is to review your estate planning every year and update your estate plan every 2-3 years so it remains consistent with changes in your life (personal and financial), changes in the law, changes in your attorney’s experience, and changes in your legacy. Make 2018 the year you adopt this philosophy as well!

In addition to reviewing your physical estate planning documents, the New Year is also a good time to assess what you own and determine if assets have been bought or sold which might impact your planning. Proper asset ownership is a critical piece to ensuring your estate planning works. Consider this relatively common scenario: you have a checking account, a savings account a retirement account and a house. All of the accounts and the house are owned jointly with your oldest child and your oldest child is the beneficiary of your retirement account. You also have a Last Will and Testament that says when you die everything you own is to be split equally between your three children. In this situation, when you do die, what do you think is going to happen? If you believe your oldest child gets everything and you have disinherited your other two children, you would be correct. Because your oldest child is the joint owner and beneficiary of all of your assets, she gets everything! This is true even though you have a Will that say something else and your intent is for all of your children to be equal beneficiaries of your estate. This is a perfect example of why reviewing what you own and how you own it is essential to the success of your estate planning.

Contact us today for more information on how you can start off the new year with a comprehensible estate plan.

Estate Planning Tips for Natural Disasters

Natural disasters can be extremely scary for all involved. Many people lose their lives and leave their families behind because they’re unable to get help during an emergency. It can also be scary for outsiders to watch as so many helpless people are injured or killed during a natural disaster. It’s important to have a plan in place, so that you and your family are protected, no matter what happens. Below are 10 estate planning tips to keep in mind in order for you and your family to be better prepared for a natural disaster.

  1. Keep a copy of your critical documents in a fireproof safe, safety deposit box, or in the cloud in a password-protected folder that can be accessed outside of the disaster zone.
  2. Create a password file so your representatives can access your 401k, IRA and investment accounts. It is almost impossible to get information on your investments and life insurance policies without the requisite paperwork and account information.
  3. Make sure your personal representatives and trustees have copies of your current wills, trusts, advance directives and powers of attorneys. We provide copies to give to clients so that they can email them to the right person.
  4. Keep your CPA or financial adviser up to date on your estate plan and who prepared it. Your representatives will need to contact the attorney who hopefully has copies of your executed documents in a safe and accessible place.
  5. Know where you homeowners insurance policy is and communicate with your agent on where back-up copies might be placed.
  6. Find your life insurance policies, scan them and get rid of the expired ones. Know how much insurance you have through your employer and who the beneficiaries are.
  7. Create an inventory of your assets and liabilities and update it once a year. Lost accounts and utility deposits happen frequently and ended up being turned over to the state when the owner cannot be found.
  8. Create an emergency number for family members to call that is a landline. Cell phones may not be operative. Keep hard copy list of the phone numbers of extended family members–not just in your cell phone.
  9. Don’t assume the courthouses will be in operation anytime soon. Many of the buildings are seismic-deficient and paper records may be destroyed.
  10. If you have sufficient assets, consider preparing a trust to avoid probate and name an out-of -state back-up trustee to administer your estate.

For more information on how you can better prepare yourself for a natural disaster contact us today.

Estate Planning Considerations When Sending Your Kid to College

Each year, hundreds of thousands of incoming freshman leave their parents’ nest and get their first taste of independent life as an adult. For most students, the experience is nothing short of a dream come true while for others weekend trips home may be the only way to keep their sanity. Regardless of how long it takes a new college student to get comfortable in his or her new way of life, one thing is certain- and it is something that many parents do not fully grasp: When a child moves away from home to begin this exciting chapter of life, he or she is not only leaving the comforts of home but also the protections that parents offer until the age of 18. By “comforts” and “protections” I mean much more than having someone who does your cooking or laundry. Under the law, when your child turns 18 he or she is an adult under the law,  which means that a parent’s right’s in controlling some affairs of that child become significantly diminished. Among these diminished rights are the (1) the right to make healthcare decisions on behalf of the child, and (2) the right to act on the child’s behalf in financial transactions.

In the event the child is hospitalized, medical personnel have no obligation to follow anyone’s wishes regarding treatment or consent except for the patient’s, and medical records are going to remain sealed from view absent a court order directing otherwise. In the event of a serious accident or illness that leaves the child unable to determine his or her own course of treatment or who can make those decisions on his or her behalf, a doctor’s hands are going to be tied, which will lead to a court’s intervention in order to make important decisions.

Further, institutions such as banks, utility providers or even landlords typically will not permit an individual that is not named on an account to access its funds or information. This means that if a child is in the hospital for an extended period of time unable to act on his own behalf, the financial repercussions of failing to do things such as pay bills in a timely fashion can be long-lasting in the form of bad credit and collections.

So how do parents prepare and plan for these unthinkable situations in which decisions regarding the child’s healthcare and financial transactions must be handled? The answer is PROPER ESTATE PLANNING. Below are a few documents that your college-bound child should not leave the nest without.

Advanced Directive for Health Care

 A living will is a directive that instructs family members and medical professionals on which end-of-life procedures you want done (for example,  instructions on when you want to be kept on or removed from life support). A medical power of attorney (also known as a health care power of attorney) is a legal document in which you are able to appoint someone to make decisions regarding your health care in the event that you become incapacitated. Advanced directives for healthcare are often useful to designate a medical power of attorney in conjunction with a living will to form this document in order to ensure that you will have someone advocating for the directives you have spelled out in writing. In addition to those directives spelled out in writing, an advanced directive for health care can also allow you to appoint someone to make decisions regarding your health care that isn’t spelled out in writing.

HIPPA Release Form

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is a federal law that sets rules for health care providers and health plans about who can look at and receive your health information, including family members and friends. You know those forms every health care provider makes us sign when we receive any type of medical care? The one that typically allows the doctor to release information to our health insurer? That is a HIPAA form.

A signed HIPAA authorization is like a permission slip. It permits healthcare providers to disclose your health information to anyone you specify. A stand-alone HIPAA authorization (not incorporated into a broader legal document) does not have to be notarized or witnessed. Young people who want parents to be involved in a medical emergency, but fear disclosure of sensitive information, need not worry; HIPAA authorization does not have to be all-encompassing. The young adults can stipulate not to disclose information about sex, drugs, mental health, or other details they might want to keep private.

A Durable Power of Attorney for Finances and Property

The durable power of attorney for finances and property functions the same as the durable power of attorney for healthcare; but it addresses powers related to non-medical actions such as those related to finances and property management and transactions. With a valid durable power of attorney for finances and property an agent should be able to access the principal’s bank accounts and financial records, pay rent, utilities and credit card bills, manage investments and loans and so on.

Important to note as well is the ability to structure the powers of attorney to limit the agent’s ability to take action until the principal is deemed incapacitated so the principal is the only party able to act on his behalf unless or until something happens.

To learn more about these estate planning tools please contact us today!

 

ESTATE PLANNING FOR YOUR SECOND MARRIAGE

While falling in love for a second time is a beautiful thing, it’s important to be aware that second marriages typically create the need for some fairly in-depth estate planning.

To ensure the bliss of this new union extends far beyond the wedding day, it’s critical to proactively and effectively address how your nuptials will affect your financial liabilities, existing benefits, and distribution of your assets to loved ones.

  1. Communication Is Key

The first and most important step to ensure estate planning success in subsequent marriages is to have open and comprehensive conversations with your spouse and your family. You must clearly articulate your wishes and your concerns, and you must also provide a forum in which family members can share their thoughts and concerns.

Because these conversations can quickly become tactically or emotionally overwhelming, it’s a good idea to engage a trusted estate planning attorney or a professional family counselor. This impartial, professional third-party will ensure that your family conversations are collaborative and productive.

  1. Don’t be Afraid to Ask the Hard Questions

Address estate planning details that are important to not only your long-term wedded bliss, but also the well-being of your entire family. Here are just a few of the key questions that come up in the event of a second marriage:

Do you or your spouse owe any debts to any ex-spouses?

Do either of you have other liabilities that might negatively impact each other’s financial standing?

Is either of you collecting benefits such as Social Security from a deceased spouse, and — if so — do you know how remarriage will affect those benefits?

If either you or your spouse-to-be are on Medicare or Medicaid, do you know if getting married will put the other party’s assets at risk?

If either of you have children from a previous marriage, do you know how you want to handle leaving assets to them and any other heirs?

If there are young children in your family, do you know how you plan to handle any guardianship issues and provide financially for those children?

Have you discussed whether you will keep your assets separate, commingle them, or create a hybrid solution that involves keeping some assets separated and commingling others?

Though this is just a sampling of the kinds of questions that can arise, it’s easy to see how one question can lead to another and another and so on. The complete scope of the situation can quickly become quite broad.

This is why it’s so important to create clarity around your wishes and then put those wishes in writing.

  1. Document Your Plan

Once you’ve come to terms with all the possible issues and done the up-front work of having those important conversations with your family, the last step to put all this to bed is to get the appropriate estate planning documents drafted – Wills, trusts, powers of attorney, healthcare directives, etc. Click here to learn more about these.

Estate planning decisions for second marriages and blended families can be complicated. Give us a call and we’ll help you get this done. Once your plan is in place, you can rest assured that your intentions will be carried out.

Standalone Retirement Trusts

Nowadays, most Americans hold their wealth in retirement accounts. When it comes to
inheritance and estate planning, special considerations are necessary to ensure that these assets are protected and distributed according to the account holder’s wishes. 

Retirement assets, such as IRAs, are typically passed via beneficiary designation. For example, for a married couple with children, it would be common to designate the spouse as primary beneficiary and children as secondary. However, in almost all occasions it is advantageous to name a trust—rather than a particular individual—as the designated beneficiary. Once the retirement account becomes inherited by a non-spouse beneficiary (i.e. children), it is important to understand that IRS regulations
treat this inherited retirement account differently. Specifically, once inherited, the beneficiary is obligated to begin taking required minimum distributions from such funds within a more immediate time horizon of either five years or over the beneficiary’s life expectancy.  An IRA administrator will also offer the option of receiving the proceeds as a lump sum payment, which is very often discouraged, especially in the case of minor or financially irresponsible children. The preferred goal in planning for inheriting retirement assets is to maximize this window of time so that the tax-sheltered, long-term growth benefits of retirement accounts are maximized.

IRAs and other retirement instruments were designed precisely for a specific purpose: retirement. They were not intended as a savings mechanism for future generations. Tax laws work according to this assumption, and so foresight and planning are necessary when including such holdings in an estate to be passed on to beneficiaries. Trusts can serve as an appropriate conduit to protect and preserve these assets.

Some will consider a standard revocable living trust by default when structuring a retirement trust.  This could cause unfavorable consequences, however, including a more fixed distribution schedule and the lack of creditor protection. Further, the IRS may a not consider the revocable living trust as a designated third party beneficiary, resulting in the assets becoming immediately, taxable income.

A Standalone Retirement Trust is a trust that is created for the sole purpose of serving as the beneficiary of the remainder of your IRA funds (and other qualified funds, e.g. 401(k)). Thus, the trust will be funded after you pass with whatever is left of your retirement assets. Then, the trustee of the Standalone Retirement Trust will oversee the distribution of the funds to your heir(s) in a manner you see fit.

A Standalone Retirement Trust will provide you with significantly greater control over the manner in which your remaining retirement funds are distributed to your loved ones, rather than just control who will receive the funds after you die—as is the case with leaving your IRA through a simple beneficiary designation.

Other potential benefits of Standalone Retirement Trusts include 

  • Asset protection in the event of a divorce;
  • Creditor protection;
  • Generation-skipping tax benefits;
  • Special Needs/Supplemental Trust benefits;
  • Alerts the beneficiary of any tax consequences of an immediate payout;
  • Allows beneficiary’s to thinly stretch tax obligations over time;
  • Alleviates the need for a court appointed guardian for minor beneficiaries
  • Provides a beneficiary with asset protection in the event the beneficiary becomes disabled; and 
  • Allows for successor beneficiaries. 

For more information on Standalone Retirement Trusts contact our office today. 

Avoiding Family Disputes In Estate Planning

Family discord is not uncommon. In fact, avoiding family disputes is one reason to plan an estate carefully. Unfortunately, merely planning an estate alone is not sufficient to avoid a family dispute. It must be planned in the right way to avoid disputes.

There are many elements which enter into a family dispute about estate planning. Here are a few:

  • Bad Dynamics

Often, there is little that can be done about bad family dynamics due to extenuating circumstances such as a long history of bad blood between two brothers. When there are deep rifts in a family, many times there is little that can be done, except to plan for the possibility of a dispute. For example, a no contest or “in terrorem” clause should be considered. Such a clause disinherits anyone who contests the estate plan. This works especially well when coupled with a substantial bequest.

  • Unfair Disposition

When there is a disposition which is likely to be viewed as unfair, it increases the likelihood of a contest. But, fair is not always equal. For example, if one child has special needs, it may be fair for that child to receive a greater portion of the estate. Also, if one child has been the parents’ caretaker, it may be fair for the caretaker child to receive a greater portion of the estate.

  • Lack of Communication

Often the biggest factors in a family dispute is lack of communication. There may be bad dynamics and what is perceived as an unfair disposition. But, when that disposition is a surprise, then the dispute escalates. The client should be encouraged to communicate their wishes to their family. This will increase the likelihood of their wishes actually being carried out and decrease the likelihood of a contest.

For more information on avoiding and handling family disputes surrounding your estate plan, contact us today.

Preparing Heirs for Successful Wealth Stewardship

There are numerous research tools that are available detailing the difficulty of maintaining wealth through multiple generations. This simple fact highlights the importance of teaching children to be competent financial stewards. Claudia Sangster, Northern Trust’s director of Family Education and Governance, encourages families to introduce children to monetary concepts at an early age. Sangster promotes using day-to-day activities, like grocery shopping, to teach the value of money to children. Parents explaining their reasoning behind certain product choices may help children in understanding the differences between price and quality and how these characteristics affect decisions. As children get older, implementing an allowance opens up an avenue for independent spending. Sangster suggests structuring the allowance by placing it in three jars: one for spending, another for saving, and the final for giving. Whatever your personal or family philosophy regarding money, bring your children into that discussion so they are aware of the expectations and can plan more strategically for their own future.

See the article, Preparing Heirs for Successful Wealth Stewardship

Charitable Gifting Strategies for Your Estate Plan

Charitable giving is a great option to consider for your estate plan. Charitable estate planning helps you combine your desire to give to charity with your overall financial, tax, and estate planning goals. Many of you are likely familiar with a bequest, the most common form of charitable giving (where you indicate a specific amount or a percentage of your estate/trust to go to charity). However, there are many different options to consider based on your personal and financial goals.

Charitable Remainder Trust

A Charitable Remainder Unitrust (CRUT) is a gift where property is transferred into a trust and pays annual distributions from its principal until the trust terminates, at which point the remainder amount transfers to the charity. The property transferred into the trust is invested during the life of the trust.

This option provides an immediate tax deduction to the donor for the charitable gift, as well as annual distributions from the trust. A CRUT is a great option to consider for those who have highly appreciated assets that might be subject to capital gains tax (stocks, real estate, etc.), as a CRUT will help you avoid these taxes.

Benefits of a CRUT:

  • Receive income for life or a term of years in return for your gift
  • Receive an immediate income tax deduction for a portion of your contribution
  • Pay no upfront capital gains tax on appreciated assets you donate
  • You can make additional gifts to the trust as your circumstances allow, for additional income and tax benefits

Things to consider:

  • A CRUT is an irrevocable gift to the charity
  • The level of investment for a CRUT.

Charitable Gift Annuity

Another gift option is a Charitable Gift Annuity (CGA), where you transfer cash or securities to the charity, which in return pays a fixed income to you or a selected beneficiary for life. The remaining balance passes to the charity when the contract ends at the death of the last beneficiary. This option is good for those who might be interested in supplemental income at a higher return than a low-earning security or CD. CGAs can also be done at a lower investment, with many charities requiring a minimum of $5,000 to $10,000 (ex. American Cancer Society has a $5,000 minimum). Many charities have a CGA program, and you can connect with them to learn more about their program and request a rate illustration.

Benefits of a CGA:

  • Receive dependable, fixed income for life in return for your gift
  • In many cases, increase the yield you are currently receiving from stocks or CDs
  • Receive an immediate income tax deduction for a portion of your gift
  • A portion of your annuity payment will be tax-free

Things to consider:

  • Beneficiaries must be at least 60 years of age at the time of the gift
  • Gift annuity rates are partly determined by the age of the beneficiary
  • Charities often have minimum donation requirements for a CGA
  • Younger donors may find planning benefits in a deferred gift annuity

Other Creative Gifting Options

There are many other creative ways to do charitable giving with your assets, including gifts of appreciated securities, a retained life estate, a donor advised fund, or gifts of personal property. I will quickly outline each of these gifts below.

Gifts of Appreciated Securities

You transfer appreciated stocks, bonds or mutual fund shares you have owned for one year or more to the charity and receive an immediate income-tax deduction.

Retained Life Estate

This is a popular type of gift; you transfer your property to charity and continue to live in the property for life or a specified term of years, and continue to be responsible for all taxes and upkeep. The property then passes to the charity when your life estate ends. You get immediate income tax deduction for a portion of the appraised property value and get to use the property for the rest of your life.

Donor Advised Fund

An increasingly popular option in recent years, a donor advised fund (DAF) is an irrevocable gift to a public charity sponsoring your account of cash, securities, or other property. You invest your fund and distributions to charities of your choice are made at your recommendation. This option allows donors to make a charitable contribution, receive an immediate tax benefit and then recommend specific charitable donations to be made from the DAF.

Gifts of personal property

You transfer valuable paintings, antiques, or other personal property to the charity for the charity to use or sell and in return receive an income tax deduction on the appraised value and pay no capital gains tax.

There are numerous creative ways to incorporate charitable giving as part of your estate plans. Some of these options have benefits to you or your beneficiaries during your lifetime, and ultimately can help you with your financial goals. Its recommended taking time to consider your ultimate goals for your estate plan, as well as the goals for your legacy. It is also recommended that if you have a charity in mind to include in your estate plans, reach out to them to find out the options they have available to you.

Your legacy is important and can have meaningful and lasting impact in your community, so take the time to understand all of the charitable giving possibilities available to you.

For more information, contact us today.