The numbers are staggering. At least one in two of us — that is you and me – are going to require long term care at some point in our lives. I would doubt that half of those reading this have a plan in place for their long term care.
Most of my clients are going to require long term care. And yet when I ask whether they have a plan in place, the vast majority indicate that they do not. Let me point out the flaw in the inactivity.
Here are a few numbers. For a couple turning 65, there is a 70% chance that at least one of them will need long term care. The percentages obviously increase as the couple ages to the point that for those people over age 85, 97% will require assistance in the last year of life.
Long term care is not cheap. Some are estimating that by 2018, a private room will cost $500 per day. Twenty-four hour care in the home will cost approximately the same.
Long Term Care is defined as when a chronic condition, trauma, or illness limits the ability to carry out activities of daily living (ADLs) which may include bathing, dressing or eating or instrumental activities of daily living (IADLs) which may include household chores, meal preparation, or managing money.
For those over age 50 (I realize most 50 year olds are thinking that they are too young to be thinking about long term care), ask yourself the following questions:
If you ever need long term care, where do you want to receive it?
Who will provide that care?
Are there potential care providers? Are there arrangements that can be successfully implemented? For how long?
How will you pay for it? (Do you have savings? insurance? government assistance?)
Is your home safe for you to stay in if you require long term care? If not, can it be made safe?
Will you have to move?
Have you looked at retirement communities, assisted living facilities and skilled nursing facilities in your community?
If you have not developed answers to the above questions by the time you require long term care, there is a large chance that others will make the decisions for you. Some people are fine with that, but others given the choice will want to decide for themselves.
Meeting with your estate planning attorney is an important first step in analyzing the issues as they relate to you. The estate planning attorney will make recommendations based upon your situation. He/she may then suggest speaking to a financial planner and/or insurance professional.
]]>I think that one of the reasons some estate planning attorneys kept the documents was because it insured that they would get future business from the client’s family when the trust will was executed. I recommend that my clients keep their living trust; wills and other estate planning documents in an easily accessible place. Moreover, I suggest that they inform their successor trustee/executor where they are kept.
What about safe deposit boxes? In the event that you wish to keep the originals there, the safe deposit box should be titled in the name of the living trust so that the successor trustee can have easy access. Otherwise, more than one person has said, it is like locking the keys in the safe. Moreover, the successor trustee should be informed as to where the safety deposit box is located. I am currently administering a large estate and my client (the successor trustee) went to more than 10 banks before finding the location where the decedent kept his safe deposit box.
Ultimately, I am a believer in keeping the documents at home in a safe, but accessible place. In any event, inform the successor trustee/executor where the documents are kept.
]]>As an estate planning attorney, I see the results of what happens when someone remarries without revising or amending their estate plan including their living trust and will. Here are some things – there are others – that one should do upon getting divorced and especially upon getting remarried:
2. In the event of remarriage, remember your children from your previous marriage and take steps to affirmatively protect them in the event that you predecease your new spouse. This is a serious concern. Frequently, clients assume that there new spouse will provide for your children. More often than not, your assets ultimately end up not with your children, but with your new spouse’s children. By working with a qualified estate planning attorney, or an attorney who prepares many living trusts, you can still provide for your new spouse for the remainder of his/her life so that your new spouse will be secure financially.
Many estate planning attorneys are very familiar with planning for blended families. Make sure you talk to one who has experience with handling the various issues that arise.
In the event that it has been a while since you have reviewed your estate plan, including your will and/or your living trust, it makes sense to review it to make sure it is current with your situation. If you have not done your estate plan yet, I would enjoy speaking to you about getting it started. I can be reached at 310-391-1311.
]]>In his will, he requests that his “children try to be as understanding and tolerant of each other as possible.” As I read that, I thought that is interesting for a United States Senator to write because a senator who wants his legislation to be continuously passed has to be mindful of following that thought.
The Post-Bulletin article which was written by McClatchy Newspaper writer Mark Johnson indicates that Senator Helms divided his estate “between his wife, and a trust to provide any needed support for his wife, children and grandchildren.”
Among specific items it provided that his wife receive his congressional papers; that his stamp and coin collections be sold; and that if no one wanted his Senate desk – I would think someone would want it – that it should be given to the Jesse Helms Center Foundation until a family member requests to use it.
Mr. Johnson indicates that the will repeatedly uses the term “death taxes”. Many estate planning and probate lawyers use the more benign sounding phrase “estate taxes”. Helms had been a proponent of eliminating those taxes.
While I am not certain of the probate law in North Carolina, I imagine it is similar to California probate in that wills lodged with the court are available for the public to see.
In 2004, Mr. Masry and his wife of 13 years, created the Edward and Joette Masry Family Trust as their living trust. They appear to have funded the trust with the property they acquired during their marriage. Each spouse was a trustee of the trust. The trust contained language providing that each spouse reserved “the right and power to revoke this trust, in whole or in part, from time to time during their joint lifetimes, by written direction delivered to the other Trustor and to the Trustee.” (“Trustors” are the creators of the trusts and in this case the owners of the assets in the trusts. Some attorneys use the word “Settlors” and others use “Grantors” instead of “Trustors”).
A couple of weeks before his death, Masry executed both a “Notice of Revocation of Interest in Trust and Resignation as Trustee” and a new trust, the Edward L. Masry Trust, with two of his children as successor co-trustees. He virtually simultaneously transferred his assets from the family trust to the new trust.
Needless to say, his widow was not happy and she sought to have the Revocation of the Family Trust to be declared invalid because she did not receive notice during her lifetime. She lost at the trial court level as the judge found that the method of revocation in the trust was not the exclusive method of revocation because the trust did not say it was the only method of revocation that could be used and that the California Probate Code provided an additional method of revocation.
Mrs. Masry appealed the trial judge’s finding to the California Court of Appeal and the Court of Appeal upheld the trial court. The Court of Appeal in its written opinion acknowledged on the one hand, that it might not be fair that one spouse can revoke a trust without the knowledge of the other, but noted that on the other hand, one spouse can dispose of his or her share of the community property without the other’s consent.
Frequently in estate planning and in drafting a living trust or family trust, it is the little things that can make all the difference. That is why we constantly urge our clients to stay on top of their affairs and to review their documents at least annually.
]]>Currently Internal Revenue Code Section 121 provides an exclusion from the sale of the taxpayer’s principal residence up to $250,000 of gain ($500,000 for a married couple filing a joint return) as long as the residence was the principal residence for 2 or more years out of the 5 year period ending on the date of sale. Moreover, the exclusion may be used once every 2 years.
Besides individuals, the exclusion may be used by: (1) the estate of a decedent; (2) any individual who acquired the home from the decedent within the meaning of IRC Section 1022 (which deals with the treatment of property acquired from a decedent dying after December 31, 2009); and (3) a trust which was a qualified revocable trust immediately before the death of the decedent.
This summer Congress passed the “Housing and Economic Recovery Act of 2008” which primarily is concerned with the increase in foreclosures and other concerns in the housing market. However, it also amends section 121. Beginning this coming January, “gains shall be allocated to periods of non-qualified use.” What this means is that the exclusion amount will now be adjusted to deal with periods where the property is used as a second home or rental property.
Here is how it will work beginning January 1: if a homeowner uses a home as a rental property for the first three years of the five year period and then uses the home as a primary residence for the next two years, the homeowner will only be able to exclude 40% (2/5) of the gain.
The IRS will only look at January 1, 2009 and thereafter. Any non-qualified uses prior to that time are exempt. Moreover, if the homeowner first uses the home as a primary residence and then converts it to a rental property in or after year three, there should not be proration.
Do not rely on the above. It is always wise to talk to your tax preparer or an estate planning attorney prior to engaging in any acts that might decrease the capital gain tax exclusion. In certain circumstances, the taxpayer may still be able to utilize Internal Revenue Code Section 1031 (Exchange of Property Held for Productive Use or Investment).
]]>Kevin Gorman and Mike Prisuta wrote an interesting article in the Pittsburgh Tribune-Review (July 11, 2008) titled “Estate tax threatens NFL’s old guard of owners”. While the focus on the article is on the longtime owners of the Pittsburgh Steelers, the Rooney family, it also details some of the other recent ownership changes in the NFL.
Let’s start with the Rooney family who have owned the Steelers since 1933. Five brothers ranging in age from their late 60s to mid-70s collectively own 80% of the team which is valued somewhere near a billion dollars. Some of the brothers are concerned with their own estate taxes and therefore are looking to sell their interests.
The estate tax rate is 45% — which is the lowest it has been in a long time – and depending on who the next president is, it could increase to 55% which is where it was until the early part of this decade.
The writers explain that Lamar Hunt gifted the Kansas City Chiefs to his children and paid the gift tax while he was alive. He regretted not doing it earlier, but he did it early enough that it was a lot cheaper because of the continued appreciation of the value of the team than had he waited until his death.
The Miami Dolphins were sold by the Robbie family to Wayne Huizenga in 1994 because the surviving family members could not pay the estate taxes to keep the team. Recently Mr. Huizenga sold one-half of the team and all of its stadium rites in February 2008 and stated that one of his reasons was estate planning.
This is not limited to football. In Southern California, we have seen the O’Malley family and the Autry family sell the Dodgers and Angels respectively because of estate taxes. On the other hand, the owner of the Los Angeles Lakers has indicated that ownership of the Lakers is going to stay in his family. One would think that the owner, Mr. Buss, has done some estate planning to ensure that result.
The message is that not all wealthy people do all of the estate planning that they should. In virtually every case, had the owners thought early enough about their estate planning they would have been able to keep the team within the family. However, as Lamar Hunt said in an interview in 2000 which was six years before his death: “ But for some people, it’s hard to think in terms of dying. They don’t want to admit it happen to them at any time.” In the same interview, he lamented not having done the estate planning even earlier than he did it as he said “[i]f I was real farsighted, I would have done it when the franchise was worth $10 million.
]]>Most of my clients appoint a family member; most frequently it is a child. I do counsel my clients to think about the position seriously and select the individual who will most successfully implement their wishes. Even for those clients that do not appoint a family member, it has always been fairly straightforward to select a family advisor such as a CPA or the trust department of a bank or an entity that specializes in managing trusts.
Like virtually everything in life, there are advantages and disadvantages to utilizing more than one trustee. The advantages can include segregation of duties and also asset protection. Segregation of duties may benefit the performance of the trust. At least that is the idea.
(On another posting to this blog, I will discuss “trust protectors” which are people who monitor the trustee.)
The asset protection idea is that if a beneficiary has the ability to distribute assets from his/her trust, it is more ripe for creditors. Thus, many parents are thinking twice about making their child(ren) the distribution trustee. On the other hand, they may allow their child to determine the investment strategy or to manage a family business.
The negatives include the possibility of higher fees associated with administering the trust. Moreover, if assets do not perform well, there could be issues as to has the fiduciary responsibility to the trust.
]]>Frequently clients have a haphazard list of beneficiaries. Even if they have been consistent, it may not be well thought out. I suggest that everyone, whether you have a living trust, a will, or not review your beneficiary designations. Here are some things that you should consider.
1. Understand the Fundamentals
Beneficiaries can be listed for many types of assets, including, but not limited to, life insurance policies, retirement plans and annuities. Furthermore, payable on death or transfer on death can be done on many accounts at the bank.
Virtually anyone and anything can be listed as a beneficiary. The obvious choices are spouses, children, trusts, and charities. When a beneficiary is named, the asset will be paid to the listed beneficiary. This may or may not be what you would have wanted. You may have gotten married (or divorced) since you named the beneficiary.
This leads us to point number two.
2. Maintain Current Designations
Undoubtedly if you visited with an estate planning attorney and you undertook an estate plan, whether it be living trust based or will based, the lawyer asked you to provide him or her a list of your assets. More than likely, he/she asked you for the beneficiary designation.
However, if you have not met with an attorney, or if it was several years ago, or if there have been significant changes in your life (e.g. divorce, marriage, birth or death), you may need to change beneficiaries.
3. Taxes are always Lurking
This is where an estate planning attorney can be especially helpful. Just because an asset has a beneficiary on it, does not mean that it is not part of your estate. Keep that in mind for potential estate taxes (this year one can have $2,000,000 without there being any federal estate tax and in 2009 the amount is $3,500,000). Also, when distributions are taken on retirement assets, taxes have to be paid.
]]>When I prepare an estate plan for either an individual or a couple, in I prepare a living trust, a will, a power of attorney, an advance health care directive, a HIPAA release, deeds for real property (real estate) and for married couples frequently a marital property agreement.
Some living trust attorneys include a paragraph in the Will that contains instructions, if any, concerning funeral, memorial service, burial or cremation. Other lawyers provide forms for the client to complete that allow the client to indicate the handling of their remains; the type of remembrance service; and to provide instructions.
Most of my clients have something they want to say concerning these issues; and some have very well thought out instructions that include what type of music should be played, food served, etc.
I always caution clients to let their family, successor trustee/executor know their thoughts or let them know where they have listed those thoughts so that they can be found immediately. Otherwise, there is a risk that something happens that the client would not have wanted. Obviously, my client will not be aware if his/her wishes were not complied with, but the family members will.
A conscientious estate planning attorney will ask the kind of questions to allow the client to consider issues that he or she may not have previously considered. This is simply one such issue. Read past and future blog posts to learn about other issues or call if you would like to make an appointment.
]]>