Estate Planning For Women (And the Men Who Love Them)

A fellow attorney (and award-winning journalist) Deborah Jacobs authored the book, “Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide”.  In her recent Forbes article titled “Estate Planning for Women (And the Men who Love Them)” she indicated the below question is a question every financially savvy woman should be able to answer. 

Question #4

Who would raise your children?

Few prospects are more wrenching than the possibility that young children will be orphaned. Often, parents put off writing a will because this particular thought is unbearable or couples cannot agree on a potential guardian. Some assume--incorrectly--that it is enough just to ask a relative or trusted friend to step in if the need arises.

But not formalizing the arrangements and doing some estate planning along the way could leave your children in a vacuum. For example, let's say you are a single or surviving parent--in this group too, women predominate. If you do not have a written document outlining your wishes, a court usually decides who will fill your shoes. A custody battle might erupt or, awful as it sounds, no one may want your children. And without financial planning, there may not be enough money for your child's support.

When choosing a guardian, people typically look first to relatives, starting with their own siblings--the child's aunts and uncles. A second choice for some people is their own parents, if they are young enough. Even if certain family members seem like obvious candidates, take into account all the factors involved. Key questions to ask: Am I comfortable with the individual's lifestyle and values? Would my child have to relocate? Can the prospective guardian incorporate my children into his or her household? If I have more than one child, would the guardian be able to keep them together? Does my child already have a relationship and a good rapport with the person?

Here too, you can build in checks and balances--by putting a different person in charge of the money you leave for your child's support. You can name a guardian for the funds, or put them into a trust and designate a trustee to spend the money on your child's behalf. While financial guardianships are a matter of state law and require court supervision in some states, trusts are a private matter. A trust also gives you much more say over how the money is spent.

Questions like this one can often trigger even more questions in your mind.  Please accept my invitation to schedule a meeting where we can discuss this topic and others that might be relevant to your estate planning.  Give my office a call to set a meeting.

 

Government Cuts Affect Nursing Homes

One of my WealthCounsel colleagues posted a comment on the potential for concern about nursing home care levels.  Lizette Sundvick targets this concern that appeared in this article: “Medicare Cuts Could Up Nursing Home Costs” SmartMoney.

Nursing home residents may soon face higher costs and reduced services, as planned Medicare spending cuts take effect this fall. 

The last few months have been a wild ride on multiple levels, to include concerns over Medicare and the “debt crisis.” While many more challenges lie ahead in terms of budget cuts, some cuts already have been made under the radar screen. Several you should know about actually go into effect this fall, as reported in a recent SmartMoney article.

According to SmartMoney, nursing home residents could face higher costs or reduced care once these cuts kick in.

Background

On July 29, The Centers for Medicare and Medicaid Services (CMS) decided and announced that they would be compensating for last year’s $4 billion shortfall by cutting reimbursement rates to nursing homes by 11.1%. In real terms, the shortfall is going to reduce government reimbursements to nursing homes. In 2010, nursing homes increased charges on residents by an average of 5%. Bad news: These reduced government reimbursements likely will trigger even higher nursing home costs for residents beginning this fall. Alternatively, it might trigger a reduction in services to nursing home residents. Either way, the forecast is not pleasant.

Perhaps I am wrong. Perhaps nursing home residents won’t see increases in costs or decreases in services. After all, the CMS actually justifies the 11.1% cut by pointing out that it is simply a more accurate reimbursement amount based on a government report indicating that Medicare has been overpaying. In fact, a spokesperson for the CMS maintains, “We do not believe that nursing homes will respond to the payment changes by decreasing the quality of care furnished to patients. However, we intend to carefully monitor changes in utilization and staffing patterns to ensure that patients continue to receive high quality care.”

Still, the nursing home industry appears to be monitoring the situation with caution. Bottom line: If you have a loved one in a nursing home, then you, too, should take notice.  Keeping abreast of current economic changes keeps you prepared for changes you may need to make on behalf of your loved one.  

The potential for drastic changes in long term care environment serve as reminders that our power of attorney and healthcare directives need to be up-to-date and relevant.  If you want assurance that your plans are up-to-date, then let’s get a meeting scheduled to review your plans.

 

Estate Planning For Women (And the Men Who Love Them)

A fellow attorney (and award-winning journalist) Deborah Jacobs authored the book, “Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide”.  In her recent Forbes article titled “Estate Planning for Women (And the Men who Love Them)” she indicated the below question is a question every financially savvy woman should be able to answer. 

Question #3

Whom can you trust?

Advancements in medical science and care may enable us to live fuller, longer lives. But that also means more women are likely to suffer from a diminished mental state--a harsh reality that's difficult to accept. In case that happens, you should have a durable power of attorney, appointing a family member, friend or adviser as an agent to act on your behalf in financial and legal matters. Also make sure you have a health-care proxy, a separate document that authorizes an agent to make medical decisions on your behalf.

Choose carefully: A power of attorney, though necessary for all of us, is unfortunately also a license to steal. The best person to put in charge is a close family member--preferably one who lives nearby. Most financial advisers do not want this responsibility, nor is it cost effective to pay their hourly fee to handle routine tasks like paying bills. Naming joint agents, which is allowed only in some states, is one way to provide checks and balances. Or you can appoint another person, like an attorney, an accountant or a family friend, to supervise the arrangement. Before selecting an agent, it is important to determine whether that person is willing to take on the duties.

If you're nervous about giving the signed document to your designated agent right away, you could leave it with your lawyer with instructions on when to turn it over. In that case, remember to tell your agent whom to contact.

Or, instead of making the power of attorney effective from the moment you sign it, you can specify that it be activated by a specific event, for instance, if you become incompetent. The problem with this approach, known as a springing power, is that someone must decide when you have reached that state. Traditionally, this has required a medical opinion.

Questions like this one can often trigger even more questions in your mind.  Please accept my invitation to schedule a meeting where we can discuss this topic and others that might be relevant to your estate planning.  Give my office a call to set a meeting.

 

Don't fall prey to the 2011 "Dirty Dozen" tax scams

The IRS has identified the "Dirty Dozen" tax scams of 2011.  Participating in or falling victim to them can result in real harm to your pocketbook and your freedom.  My WealthCounsel colleague, Scott Makuakane, practices in Hawaii and he recently posted five of the Dirty Dozen.  He noted that he did not list them in any particular ranking of "dirtiness":

Hiding income offshore

People used to be able to get away with this because of the IRS' former inability to track offshore accounts.  Things have changed, and penalties have been increased.  Any tax strategy that requires secrecy as an element for success is highly suspect and probably should be avoided. 

Identity theft and "phishing"

It is absolutely critical to protect  your personal information.  All an identity thief needs are your name, birthdate, and social security number to make your life a living hell.  Watch out whenever anyone asks for those bits of information, and protect yourself by shredding documents that may contain sensitive information about you before you discard them.  Also beware that identity thieves are out there trying to gather your personal information any way they can--through email, by posing as government personnel, by spyware programs that can steal passwords from your computer, and a variety of other nefarious means.

Return preparer fraud

Be careful who you trust with preparing your returns.  If you have a fairly complicated return, it would behoove you to work with a CPA.  In any event, be sure to work with trustworthy professionals in whatever you do.

False or misleading forms

Some folks claim refunds to which they know they are not entitled.  Obvious no-no.  Don't file a return that does not pass the smell test.

Frivolous arguments

People sometimes make the darndest arguments.  Here is one that will land you in the pokey.  Premise 1:  there are ample declarations by the IRS in a variety of publications that our income tax system is "voluntary."  Premise 2:  I have the right to opt out of any "voluntary" income tax system.  Conclusion:  by golly, I will opt out of the U.S. income tax system and there is nothing anybody can do to me if I do. 

Please don't get caught up in any "strategy" that would seem to enable you to evade taxes.  Tax avoidance or minimization through recognized legitimate means (such as deductions for charitable contributions and mortgage interest) is good stewardship.  Tax evasion is a crime, and it will eventually catch up with you.

You can check out the rest of the "Dirty Dozen" on the IRS website.  For some information on legitimate approaches to estate planning, please contact me and we discuss the legal path offering confidence in your estate planning.

Estate Planning For Women (And the Men Who Love Them) Question #2

A fellow attorney (and award-winning journalist) Deborah Jacobs authored the book, “Estate Planning Smarts: A Practical, User-Friendly, Action-Oriented Guide”.  In her recent Forbes article titled “Estate Planning for Women (And the Men who Love Them)” she indicated the below question is a question every financially savvy woman should be able to answer. 

 

Question #2

Is there money in the bank?

In the process of dividing assets into "yours," "mine" and "ours," couples should make sure there is enough money to cover immediate expenses if one of them suddenly passes away. These reserve funds can be held in each of your separate accounts or in a joint one. Just be aware that when you die, your spouse or partner will probably not have access to your individual account right away, and you will each need the discipline to keep the fund flush. A better approach is to maintain a joint account designated for emergencies that can also be available for this purpose.

With bank and brokerage accounts, the most frequent form of joint ownership is joint tenancy with rights of survivorship. It is available to any two people who want to own assets together. Both owners have access to the assets during life, and when one joint tenant dies, the survivor immediately becomes the sole owner of the whole property, regardless of what the will says, or whether there is a will. These features make this type of ownership appealing both to spouses and other couples.

Despite these advantages, joint tenancy has a serious drawback: it exposes each owner to the other's potential liabilities. Unmarried couples also need to be aware that state laws on joint tenancy for non-spouses may vary. Consult a lawyer who is familiar with the rules of the state where you live.

Questions like this one can often trigger even more questions in your mind.  Please accept my invitation to schedule a meeting where we can discuss this topic and others that might be relevant to your estate planning.  Give my office a call to set a meeting.

Potential Portability Problems

Portability has become a popular topic among the estate planning set, and I found this recent post to be valuable.  The author of the commentary is Lizette Sundvick, who practices in the sate of Nevada.  And her comments are based on the article  “Wealthy Take Estate-Tax Exemptions Beyond Grave Until 2013”  Bloomberg (8-6-11)

The Bloomberg article notes that:  Wealthy individuals in the U.S. will find it easier to cut their estate-tax bill as a result of a provision for using their deceased spouses’ exemption credit.

Much ado has been made about this new power in estate planning known as “portability,” and for good reason. Nevertheless, it’s also prudent never to put all your eggs in one basket. So it is with the matter of estate tax exemption portability.

As you may know, “portability” is the new ability for a deceased spouse to transfer their unused gift and estate tax exemption amount to their surviving spouse. Provided all the required paperwork is timely filed with the IRS, that effectively allows a married couple to exempt an astounding $10 million from federal taxes for their loved ones without the use of trusts or legal devices.

Bloomberg suggests that it is better to think of portability as a “safety valve” for married couples, especially those whose assets would be entirely covered by the doubled exemption, but not something to be relied upon. The biggest limitation, for one, is that portability exists at the whim of lawmakers. After the budget showdown last December, existence of portability is only guaranteed until the end of 2012 (if that, Congress being the politically fickle animal that it is).

But there is another important caveat Bloomberg touches upon that is worth mentioning. Portability is a power that exists between spouses, but in a world of shifting marriages, divorces, and remarriages that also creates strange limitations. Portability only applies to the last deceased spouse. Accordingly, if a widow remarries, then they could potentially lose that massive exemption (even after their own estate has doubled, creating an estate tax liability). Indeed, if portability isn’t lost and if the widow’s new spouse predeceases after using their own exemption by gifting, then the widow’s estate is in the same tricky situation.

We all know (or should know) that relying on fickle politics is addressing the temporary.  On the other hand, we encourage you to investigate every opportunity that arises for your use here and now.

Portability can be a worthwhile tool to consider.  On the other hand it can be a daunting issue to incorporate into your long-term estate tax plans.  As these new planning tools surface, it is advisable to make sure your estate plan is up-to-date and fully addresses your desires regardless of what "portability "may or may not offer.  Please call to schedule a meeting. 

 

Estate Planning For Women (And the Men Who Love Them)

While important to both sexes, estate planning often affects women more profoundly. Women live longer on average and tend to marry older spouses, making them three times as likely as men to be widowed at 65. So for women, estate planning is a crucial part of retirement planning. And since they usually survive their spouses, women more often have the last word about how much wealth goes to family, charity or the taxman.

A fellow attorney (and award winning journalist) Deborah Jacobs recently authored an article in Forbes titled “Estate Planning for Women (And the Men who Love Them)” she indicated the below question is one every financially savvy woman should be able to answer. 

Question #1  

What key deadlines apply when a spouse dies?

Starting in 2011, a surviving spouse can add any unused estate tax exclusion of the just deceased spouse to her own $5 million exclusion--this is called portability. So a widow can pass on as much as $10 million, untaxed, through either lifetime gifts or her will. But portability is not automatic. To get it, the executor of the estate of the first spouse to die must file an estate tax return, even if no tax is due. Surviving spouses should see to it that the form is filed even if they have nowhere near $5 million of their own, because who knows what the future holds?

Nine months is also the deadline if you plan to disclaim (turn down) any portion of what you inherited from a spouse so that it can go directly to your children or other family members or into a trust for their benefit. The new tax law makes it more likely that spouses will leave everything to each other outright. Other couples may want to give the survivor the right to disclaim at least some money and have it go into a family trust or bypass trust, as it is also called.  This allows the survivor to make an informed decision based on her own financial resources and federal and state estate laws at that time. If you want to use this postmortem tax planning strategy, you need to keep an eye on the calendar.

Questions like this one can often trigger even more questions in your mind.  Please accept my invitation to schedule a meeting where we can discuss this topic and others that might be relevant to your estate planning.  Give my office a call to set a meeting.