Posts By: Gene Osofsky

Throughout history, the multi-generational household has always had its place in our society. At times the multi-generational family has been common and plentiful, at other times rare and seen only on the fringes of society.  In the past few years, for reasons of both economy and practicality, the percentage of Americans living in multi-generational households has been steadily rising. In fact, a recent article in the Wall Street Journal states that “In 2008, a record 49 million Americans, or 16.1% of the population, lived in households with at least two adult generations or a grandparent plus one other generation, according to the nonprofit Pew Research Center in Washington. That is up 17% from 2000.”

Although multi-generational living had fallen out of fashion in the decades prior to this, there are a number of reasons why inviting elderly parents to live with you can benefit the entire family. “By living together, families say they are better able to meet one another’s needs for child and elder care. Moreover, money saved on rent can help finance a graduate degree, a job search or a down payment on a house, or offset the costs of long-term care.”

But setting up housekeeping with your parents (or your kids) isn’t as simple as merely moving furniture, often there are financial—or even legal—details to be worked out.  Here are some of the things you should discuss before you build the “in-law extension” in your home:

Will the situation be permanent or temporary? Whether your kids are moving back in until they find that dream job, or your parents are coming to live with you until they find the right retirement community, it’s important to discuss these goals and practical steps that will be taken to reach them. “Those who prefer a temporary arrangement should work out an exit strategy—for example, by estimating how long it will take a person experiencing financial problems to regain his or her footing.”

Will the “new tenants” pay rent, or make any other contribution to household expenses? If so, it is absolutely imperative to work out a rental agreement before hand.  Also, the “landlord” will need to ascertain whether the rent they collect should be reported to the IRS as income. “Some landlords simply aim to cover the extra expenses they incur. In that case, they owe no taxes on the payments they receive, ” according to the source quoted in the article.

If two generations are looking to purchase a new property together, there are completely different details to be considered. “When generations join forces to purchase or modify a property, each should retain an advisor to review the tax and estate-planning consequences and protect their investment in the event the union dissolves.” Additionally, “joint ownership can pose problems for those who may need to rely on Medicaid to cover future nursing-home costs.” It is a good idea to consult with an elder law attorney before signing any contracts.

There are many benefits to living in a multi-generational household, but even with all these benefits it is hardly an agreement to be entered into lightly.  Families considering taking this step should discuss it not only with the entire family, but with their financial and legal advisors.

Posts By: Gene Osofsky

The recent passing of Elizabeth Taylor has many wondering what will now happen with her sizeable fortune?  According to this article in Forbes Ms. Taylor’s fortune includes not only the millions she made in the Hollywood movie industry, but the even greater amount made she made with her fragrance line.

“In her most savvy business move, Taylor licensed her name to Elizabeth Arden and came out with several perfumes, including Passion, White Diamonds, and Black Pearls. Her fragrances have reaped a reported $200 million in sales over the years. Perfumes are one of the highest margin products out there, which is why celebrities love them. Taylor was doing it before anyone.”

Furthermore, a recent article in ABC News reports that Elizabeth Arden has no plans to discontinue the Taylor brand anytime soon. “White Diamonds remains a best seller almost 20 years after its 1991 introduction, a testimony to her transcendent and enduring appeal… Our best tribute to Elizabeth Taylor will be to continue the legacy of the brands she created and loved so much.”

The question now is, what will happen to this sizeable (and growing) fortune now that Ms. Taylor has passed away?  ABC News has some guesses: “On the question of what could happen to her estate now that she has passed away, many speculate it will be distributed to her four children and 10 grandchildren [with whom she is reported to have been on good terms]… And Taylor most likely bequeathed a substantial amount of money to her charitable work. Taylor was a devoted AIDS activist, helping form the American Foundation for AIDS Research in 1985 and the Elizabeth Taylor AIDS Foundation in 1991.”

Thus far no last will and testament has been released, which suggests that Ms. Taylor may have had a trust, an document which typically ensures privacy.  While it is only our speculation at the moment,  given what we do know about Ms. Taylor, it is not unreasonable to believe that her estate will be split between her family and her charitable endeavors, especially the AIDS Foundations to which she gave so much in life.

Posts By: Gene Osofsky

A recent article in the Wall Street Journal shines the light on a new program being instituted by a growing number of states called “Physician-Orders for Life Sustaining Treatment,” or POLST. “A POLST, which is signed by both the patient and the doctor, spells out such choices as whether a patient wants to be on a mechanical breathing machine or feeding tube and receive antibiotics.”  In current medical practice, it is usually discussed and signed in a hospital or long term care setting, when a patient’s health is fragile but the patient is still able to  give meaningful direction  to his or her physician. However, we see no reason that it cannot be discussed and signed at an earlier time, say, when you and your attorney are discussing your estate plan and your end-of-life wishes.

It is different from an Advance Health Care Directive, in that the POLST is an actual medical order from your physician.

Creating a POLST is an important step toward getting the care and medical treatment you want at a time when you may no longer be able to communicate those wishes to your family or medical staff.

Keep in mind that although the POLST is an important step in making your wishes known, the POLST is not intended to replace an Advance Directive. The POLST programs “are meant to complement advance directives, sometimes known as living wills, in which people state in broad terms how much medical intervention they will want when their condition no longer allows them to communicate.”

The WSJ article states that “A study supported by the National Institutes of Health last year found that patients with POLST forms were more likely to have treatment preferences documented than patients who used traditional documents such as living wills and do-not-resuscitate orders.“  This comes as no surprise, considering that executing a POLST includes getting the document signed by your doctor, thus ensuring that you doctor is not only aware that you’ve expressed your wishes for end-of-life care, but has also likely had a part in helping you understand exactly what your options are.   A short audio recording is available in the WSJ site. 

Our office recommends that our clients go one step further—in addition to having your doctor sign your POLST, give your doctor a copy of your Advance Directive as well. Once you have things squared away with your doctor we also recommend giving a copy of your POLST and your Advance Directive to the person you’ve named as your healthcare agent.

For more information, including the April, 2011, update to the POLST form used in California, visit the site of the Coalition for Compassionate Care at http://www.capolst.org/

The more informed you doctors and family are about your wishes for end-of-life care, the more likely it is that you will receive the treatment you prefer.

Posts By: Gene Osofsky

Only a few days ago the world was shocked by the terrible earthquake and tsunami in Japan. Our hearts and prayers go out the people affected by the tragedy, and many people are asking what they can do to help.

The sudden violence of nature has many of us looking at our own situations as well, wondering if we are prepared—as a country and as individuals—should an equally devastating natural disaster strike our own shores. Of course the first thought most of us have in this regard is whether or not we have a well-stocked supply of emergency rations, but as this article from CBS MoneyWatch.com points out, there is much more to surviving a natural disaster than the first 24 hours. “Most people never think about the items to take that help protect your financial assets.”

Author Steve Vernon includes in his article a list of things you can do to prepare for what comes after the first 24 hours of a natural disaster, including:

  • A stash of cash in case ATMs are shut down for a long period of time.
  • Contact information for family members, close friends, and work contacts.
  • A cell phone and charger, plus batteries and chargers for other necessary electronic equipment.
  • A list of account numbers and contact information for all your regular bills and payment obligations.
  • Your insurance company contact information.

These are only a few of the things you’ll want to have ready (or at least have thought about) if disaster strikes here at home.

Some natural disasters are so big in scope they are almost impossible to comprehend, let alone try to prepare for; but preparation is the best way to keep fear and panic at bay. It doesn’t help anybody to dwell too much on what “might happen,” but having a basic emergency plan in place gives you the freedom to go on with your everyday life, knowing that you’ve done what you can to be ready if disaster does strike.

For more information about disaster preparedness please visit the FEMA website here: FEMA Emergency Planning Checklists.

For more information about how you can help the disaster victims in Japan please check the Crisis Response Page on Google.

Posts By: Gene Osofsky

Last month the Obama administration released their budget for the 2012 fiscal year, and included in that budget were a few things that retirees (or those close to retiring) will want to be aware of.  If you own a business you may want to keep reading as well, as some of the proposals within the budget would affect not only retirees, but also small business owners.  This article in the US News and World Report describes some of the proposals included in the budget, including:

Automatic workplace pensions. This would require employers (with the exception of very small businesses) that do not currently offer a retirement plan to enroll their employees in a direct-deposit IRA account. Employees would have the ability to opt-out if desired.

Tax incentives to create retirement plans. This proposal would increase the value of the tax credit to small businesses that start new retirement plans.  The current maximum credit is $500/year for up to 3 years, the new proposal would increase that to $1000/year.

More Social-Security funding. Obama’s budget would allocate $12.5 billion to the Social Security Administration, up $1 billion since 2010. The primary aim of this increase would be to “reduce the backlog of disability claims and decrease Social Security fraud.”

But not all of the proposals included in the budget are beneficial to retirees.  Here are a few things you may want to watch out for:

Pension insurance premium increases. “The budget proposes giving the Pension Benefit Guaranty Corporation… the authority to adjust premiums and take into account a company’s financial condition when setting premiums.” Although this is certain to result in premium increases, the increases would be gradually phased in.

Senior Community Service Employment Program funding cut. The proposed budget would reduce funding for the Senior Community Service Employment Program by 45 percent, and would transfer the program from the Department of Labor to the Department of Health and Human Services. Seniors who hope to retrain for new jobs in their retirement years may find this more difficult to do than they expected.

Posts By: Gene Osofsky

For wealthy seniors, state death taxes may now be a big issue, especially if the seniors have the ability to relocate to a “death tax” friendly state.

The federal estate tax is set (for at least another two years) but we still expect some states to continue making changes to their own estate tax.  The fact is that state governments are caught between a rock and a hard place.  According to an article in Forbes Magazine,  “The changing state landscape… reflects a lot of ambivalence by state officials themselves. They want the estate tax revenue, but worry about chasing wealthy seniors across state borders.”

If you’re looking for an estate-tax-friendly state to which to retire you can check out the link to the map in the Forbes article; but before you move be sure to do your research.  Just because a state has no estate tax (or a high exemption amount) one year doesn’t mean it won’t change the next.  The best strategy is to be familiar with the state’s history.  How long has their estate tax been in place? Has there been any legislation proposed recently regarding the tax? How likely is it that their tax policies will remain the same as they are when you move?

Illinois recently made changes to the state laws regarding estate tax, and other states that are most likely to make changes in the future include Hawaii, Ohio, Connecticut and Vermont. “But don’t count on these efforts… even if you get relief one year, the levy can go up again the next.”

As always, the best strategy is to plan ahead, review your plan often, and have a knowledgeable estate planning attorney on your side.

Posts By: Gene Osofsky

You know how important it is to protect your family with an estate plan, but if you have a child with special needs then taking steps to protect them if something should happen to you is essential.  Unfortunately, for families which include special needs children, knowing exactly the best way to protect your child(ren) isn’t always so clear. As Joe Perez, the widowed father of 14 year old Danny, and the subject of this article on the ABC News website found out, it’s not as simple as leaving your child with a good guardian and decent inheritance—special needs children need a little more planning than that.

You know what you want for your child, you want him to live as contentedly as possible, with loving guardians and engaged in activities which will bring pleasure and peace. But how can this dream be achieved on the limited assets that Medicaid recipients are allowed to have without losing their government benefits? How can responsible parents safely leave an inheritance to their special needs child? For many parents, part of the answer to that question is having a special needs trust.

Unfortunately, not all parents are aware of the benefits of a special needs trust, or how easy it can be to create one—with the right help. A special needs trust is the vessel that will hold your child’s inheritance (from you or from another source) without disrupting that child’s government benefits. It gives your child the funds they need beyond the basic living expenses provided by SSI or Medicaid.

If your family could benefit from a special needs trust, please contact our office for more information. A special needs trust is not the kind of document that can be found in a software package or created from a standard trust template. The needs of your child are unique, and should be addressed as such.  For more information, click on  “Special Needs Planning”.

Posts By: Gene Osofsky

It’s that time of year again; the time of year when everyone starts gathering receipts, assessing income and expenses, and making appointments with tax advisors.  Tax time can be a very stressful time for many families, but—with the help of this article from MSN Money—perhaps tax season can be made a little bit easier. The article lists 13 tax breaks from 2010 that can help save you money, including:

  • The tax credit for first time homebuyers (if you’re not a first time homebuyer don’t give up, there’s a credit for existing homeowners too.)
  • The parking and transit credit
  • The college tuition tax credit
  • The credit for energy-saving home improvements

And then of course there are the two we’ve been mentioning here on our blog for the past few months:

  • The estate tax exemption, and
  • The annual gift tax exemption

Of course, not every item on the list is going to apply to every reader, but if even one or two credits apply to you or your family it can be a huge help.

Don’t rely only on this article to ease your 2010 tax burden, your own advisors and tax planners—who know more about your family’s personal and business finances—will be able to give you much more in-depth advice on how best to address your own tax situation.  In addition, talking to a professional advisor right now provides the perfect opportunity to tackle any issues in 2011, hopefully making this time next year a much happier and less stressful time for everybody.

Posts By: Gene Osofsky

We tell our readers quite often that a will can be one of the most important documents in your estate plan, but sometimes we like to remind our readers that wills are interesting family and historical documents as well.

In an earlier era where “Living Trusts” were seldom used, genealogists will often use an ancestor’s last will and testament to determine important details about family members: names and birthdates of siblings or children, extent of property, last known address, etc. Additionally, these are often the documents in which we make our final wishes known.  This is often where our true selves come out; who we liked best and what we valued most.

A last will and testament can be very revealing indeed.  In honor of President’s Day we offer these interesting tidbits relating to the wills of the leaders of our nation:

  • George Washington was concerned with the future of our young nation to the very end, and gave some of his estate toward establishing the first American Institutions of higher education, an attempt to prevent young Americans from being “sent to foreign Countries for the purpose of Education, often before their minds were formed, or they had imbibed any adequate ideas of the happiness of their own; contracting, too frequently, not only habits of dissipation and extravagance, but principles unfriendly to Republican Government & to the true and genuine liberties of mankind.”
  • Interestingly, President Abraham Lincoln left no will—and he was a prominent lawyer who should have known better!
  • President Harry S. Truman included careful tax planning in his last will and testament.
  • President Warren G. Harding must have had some kind of premonition when he conveniently decided to write his will 6 weeks before his sudden death.
  • The will of President Calvin Coolidge was just 23 words long: “Not unmindful of my son John, I give all my estate, both real and personal, to my wife, Grace Coolidge, in fee simple.”
  • President John F. Kennedy was a bit poetical in his will, and included this haunting phrase, “being of sound and disposing mind and memory, and mindful of the uncertainty of life…”

Posts By: Gene Osofsky

We’ve written before about the importance of reviewing and updating your estate plan, but it’s a topic worth mentioning again—especially in light of the many recent changes to estate tax law.  The plain truth is that no matter how perfect your estate plan is when you create it, change is inevitable, and when your life (or the tax law) changes, it’s important that your estate plan change with it.

Reviewing your estate plan every 2-5 years is essential to keeping it up to date and working the way you intended it to work. Luckily, reviewing your estate plan can be quick and easy if you know what you’re looking for.  Here are 7 key components you’ll want to review:

  1. Fiduciaries-How have the people in your life moved or changed?
  2. Assets-Are your finances different than they were a few years ago?
  3. Distribution and Beneficiaries-Are there any new members of your family?
  4. Health Care-What changes have you experienced in your health recently?
  5. Long Term Care: Are long term care issues on the horizon?
  6. Capacity:  Do you see needing assistance to manage finances in the near future?
  7. Legal Updates-Have the laws changed?

If we’re lucky, our lives are constantly changing—our families evolve, our finances improve or decline, we meet and form strong relationships with knowledgeable friends and professionals. It only makes sense that your estate plan should change too.  What seemed best for your family 4 years ago might not be the ideal situation now.  By reviewing and updating these 7 components on a regular basis, and touching base with your attorney for guidance, you will insure that your estate plan will continue to protect yourself and your family the way you intended it to when you first created it.