RJP Estate Planning

Now That's Awkward!

An awkward part of estate planning is telling your kids how much — or how little — they'll get. Here's how a financial planner can help. For clients, one of the most stressful aspects of estate planning — already an emotionally difficult process — is the prospect of telling heirs what they plan to do with their assets. Because conversations about legacy plans can be terribly difficult, clients may avoid them at all costs — and the costs can indeed be substantial.

A recent Time article, titled "The Hardest Part of Making a Will: Telling Your Kids What’s in It" lists a few ideas to help you overcome the challenges of having these important conversations.

Here are the suggestions Time offers, as taken from the original article:

Communication. Think about your financial values in a larger context. Sometimes, estate plans will reflect lifelong values like charitable giving or the desire to provide for family first. If your children know your values, there is a good chance they will have an idea of what to expect from your estate.

Evaluate your children’s money skills. Children do not all have the same skills, knowledge, and attitudes about money. Children who will inherit large amounts of money need discussions about how to manage money and to be responsible.

Like one kid better? If you are not planning to treat all of your children “equally”—regardless of the reasons—you should share that information well in advance. Tell it privately to each child. You can have a lot of reasons to treat children differently in an estate plan; however, it is not a great idea to figure out the details when the will is probated. If you and your children can talk about the will's provisions and your reasoning for them ahead of time, there is less chance of conflict between siblings after the parents have passed. Do not allow your children to assume they are getting more than is really the case. If you do not tell them, you may avoid issues now, but there could be bigger troubles and resentment after your death.

Prepare your children for large or unexpected inheritances. Some individuals are shocked to get legacies much larger than expected from the lifestyles their parents led. An estate planning attorney may propose strategies that will help heirs learn more about both the financial and the emotional aspects of managing inherited wealth. An estate planning attorney may also suggest that parents look at options, such as giving more to the children during their lifetime, which would decrease the effect of a sudden inheritance.

Acknowledge those fears. Although they are not typically expressed, the biggest reason for not discussing estate plans with family members may be fear. Parents may think that their children will be angry or disappointed, or expect too much and be resentful of other heirs.

Communication is so important. It can ease some of the pain and anxiety in the decisions that parents make now and the aftermath when the will is probated. Working with an experienced estate planning attorney can also be a worthwhile investment toward achieving this goal.

Reference: Time (October 7, 2014) "The Hardest Part of Making a Will: Telling Your Kids What’s in It"

To get additional information on how to properly set up an estate plan for you and your family,
please visit our website at www.rjpestateplanning.com.

How to Care for Aging Parents

Dealing with aging parents is not only tough emotionally, but financially. A Caring.com report found that nearly half of family caregivers spend more than $5,000 a year on caregiving, and 30 percent spend more than $10,000. Your parents may need help. Are you ready?

A recent Newsday article, titled"Money Fix: The cost of caregiving," tackled this tough issue and offered some financial and non-financial advice to help with providing care for aging parents.

Here are the pointers Newsday recommends implementing:

Communicate. Speak with your parents. You may need to ask some hard questions: Do they have a strategy in place to pay for long-term care expenses? The answer could be as easy as purchasing long-term care insurance or devising a Medicaid plan.

Create a strategy. A PNC Financial Services Group survey found that 30% of pre-retirees who plan to care for a parent or another loved one will work longer to afford such care.

Build a cash reserve. The original article says that experts really do not recommend using your retirement funds to pay for this care. However, if needed, Roth IRA contributions can be withdrawn tax and penalty free.

"Unearth all possibilities." That is the descriptive phrase the original article uses for the type of creativity and imagination one should have when thinking about the budgeting and affording the added expense of a loved one's care. For example, if your father passed away and was in the military—even if it was a long time ago—your mom might have a claim to some veteran's benefits.

Another key point is that if your parent or loved one needs to be placed in a nursing home, Medicaid will "look back" five years for any gift made in an attempt to reduce assets to become Medicaid eligible. Gifts of that sort, the original article cautions, can trigger a waiting period before Medicaid would pay for nursing home care.

We are talking about a lot of money—$5K to over $10K a year to provide care for your parent or parents. Start to think about this sooner rather than later. Talk to your siblings and work with an experienced elder law attorney to make the right moves and to develop a strategy for this possibility.

Reference: Newsday (October 5, 2014) "Money Fix: The cost of caregiving"

World War II Veteran Victim of Elder Abuse

Elder abuse is a term that means someone is knowingly, intentionally or negligently causing harm or a serious risk to a senior. When Michael Casler contacted “8 on Your Side,” he was confident his 91-year-old brother-in law Benny Goo was a victim.

 
Benny Goo is a World War II veteran who fought in the Battle of Normandy. At one time, he was very affluent with a gorgeous home in Hawaii. But not anymore. Mr. Goo says that a woman named “Barbara” stole $2 million from him, which forced him to sell his home.

According to a KLAS TV(Las Vegas) news report posted on the station’s website, titled "Veteran claims elderly abuse by ex-wife," Benny believes that “Barbara”—the woman who took advantage of him—was his second wife. Mr. Goo said that when he had a stroke, Barbara placed him in a nursing home. He never saw her again. However, Barbara was busy cleaning out his bank account and switching his Social Security and pension checks to be deposited directly into her accounts.

After five years in a nursing home, Benny started to request contact with his family. His care providers found Benny's sister and brother-in-law. Once the two discovered what had happened, they asked KLAS TV's "8 on Your Side" for help, but there was little that the investigative team of reporters, law enforcement, or anyone else could do to help him.

You see when a spouse spends communal money or opens additional bank accounts, it is not deemed "elder abuse" under the law. It is what is called spousal privilege. Benny's wife did not break any laws and was within her rights as his spouse to spend and transfer the money. Unfortunately, the only recourse Benny had was to divorce his wife and get his Social Security and pension checks redirected to his accounts. Unless, Barbara has a change of heart and returns the money to Benny, it is gone.

This short but dramatic tale shows how our elderly can so easily be abused and used. If you have an elderly relative, be sure to keep an eye on new friends that suddenly enter their lives. As you can see, the only protection in some instances from unscrupulous individuals is diligence.

Talk with an experienced elder law attorney before this happens to your family member or loved one. He or she will have a wealth of information and some effective strategies to guard against this type of treatment. 

Reference:  KLAS TV (Oct 06, 2014) "Veteran claims elderly abuse by ex-wife"

The Basics of Estate Planning

Too often, the need for the most basic estate-planning documents is overlooked or misunderstood. While many people would admit they should have a will, 50 percent of Americans with children and 41 percent of baby boomers age 55 to 64 don't have one, according to a survey from online legal services company RocketLawyer.com. If you want to stay in control of your money and medical decisions until the end, here are the five most important estate-planning documents you need to have.

A recentCNBC article, titled "Stay in control with 5 estate-planning documents," talks about basic estate planning documents that everyone should have.

A will. It does not get any more basic in estate planning than drafting a will. A will states who will receive your estate assets and care for your minor children upon your death. As you may recall from previous posts, without a will, the state where you live gets to decide who gets your assets. The court will typically disburse shares based on their degree of family relationship to the decedent (you). Commonly, this degree moves from your spouse, then to children, then to your parents, and next to your brothers and sisters. If you do not have anyone in this line-up, other relatives you may never have known will make their claims. If there is still no one to claim the money as a relative, then the state will just keep it!

Why give gifts to people you hardly know or forfeit your estate to the state when you can avoid it simply by creating a will to tell everyone in writing who gets what?

Beneficiary designations. This seems like a pretty insignificant little form, but it can be huge when it comes time to disbursing your life insurance policy or any retirement account. Chances are you probably completed and sent in a beneficiary designation form when you took out the policy or opened the account. That form identifies who gets this money when you die. This form—not your will—says who gets the money. The original article suggests that you check your list of beneficiaries when there were any life changes, like getting married or divorced, having a child, or having more children.

Financial power of attorney. A financial power of attorney (financial POA) is another very critical piece of paper. It gives a trusted individual the authority to resolve your financial issues on your behalf if you become incapacitated or unable to make those decisions for yourself. A financial POA provides you with more control over your financial affairs and a better chance that your wishes will be followed. If you do not have a financial POA, the court selects someone to take care of these decisions—this can be a very lengthy and expensive process. The court usually appoints a close family member, but that person might not be the one you would have chosen. The original article also stresses that a financial POA is critical if you have a non-spouse partner: if you designate your financial POA, you have control over the scope of powers to grant your "agent," which can encompass accessing your financial accounts and managing all your financial affairs.

Medical power of attorney. A Medical power of attorney allows you to select who will make medical decisions on your behalf if you are unable to do so for yourself. Your chosen designee will be able to access to your medical records, speak with your medical caregivers, and deal with other important issues. Your designee will also make sure that your "advanced medical directive" is carried out.

Advanced medical directive. Deciding if you want tube feeding or to be put on a ventilator can be a really hard decision for loved ones to make if you have not put your wishes in writing. An advanced medical directive should clearly define what you want and what you do not want. This takes the decisions out of the hands of your family and improves the odds that your final instructions are followed.

Once you get these documents set up, the original suggests that you review and update them from time to time, especially if you have had any changes in your life. These are just the basics. You should talk to an experienced estate planning attorney and get sound advice for all of your estate planning issues.

Reference: CNBC (October 6, 2014) "Stay in control with 5 estate-planning documents"

To get additional information on how to properly set up an estate plan for you and your family,
please visit our website at www.rjpestateplanning.com.

A Quick Review of the Living Trust in Arizona

A living trust has advantages that a will can’t offer, so you may want to keep both. A revocable living trust is similar to a will in that it indicates how you would like your assets to be distributed after your death and can be amended anytime. While you should always have a will, a living trust—which is simply a trust set up during your lifetime as opposed to one created after your death—can be a valuable addition to your estate plan.

A recent article in Time, titled "Why This Estate Planning Tool Beats Just Having a Will," gives several reasons to consider living trusts.

The estate can be settled more quickly. The assets in a trust are not required to go through the probate process, which can be lengthy and expensive. Your heirs will be able to zip past any inconvenience of a court-supervised distribution of your estate—and there is no wait for creditors to file claims, which you have to do with a will even when there are no debts. Now some states have some form of expedited probate for estates less than a certain dollar value. This is different in every state, so ask your estate planning attorney about how the law works where you live. New York, for instance, has this type of process if the estate property, not including real estate, is worth less than $20,000. Also, the original article reminds us that when most of the estate is in IRAs or life insurance, you may bypass probate if you have named beneficiaries.

You get "back-up investment help". If you create a trust, you will need to name a trustee. The trustee is tasked with managing the assets, paying any taxes, keeping financial records, and disbursing payments to the beneficiaries. There might also be a successor trustee named in cases where you are managing the trust yourself. If so, you have someone to take over the trust duties in the event you become disabled or incapacitated and cannot manage your money for yourself.

You get to set things up for your children. You should also consider a trust if you have minor children or heirs with special needs. A nice feature of a trust is that you have the option to add terms that detail how and when a child is entitled to receive the assets. And, since a living trust is not a matter of public record (i.e., filed with the probate court), the distributions for your children are protected from prying eyes of outsiders.

Finally, the original article  reminds us that you should not transfer (retitle) an IRA to a living trust because it is counted as a withdrawal. This could mean a substantial financial penalty in terms of both income taxes and excise taxes, depending on your age.

After you have read the original article, contact an experienced estate planning attorney. Together, you will want to go over all of the details of your situation and see if a trust will help you and your family.

Reference: Time (October 6, 2014) "Why This Estate Planning Tool Beats Just Having a Will"

To get additional information on how to properly set up an estate plan for you and
your family, please visit our website at www.rjpestateplanning.com.