Posts By: Gene Osofsky

Fruit baskets, kitchen gadgets, and Kindles aren’t the only gifts you can give loved ones this year (although you’ll see below that video game systems still make the cut.)  Instead, why not give something unique that will leave a lasting impression and help protect your loved one?  Here are a few non-traditional ideas for friends and family of every age.

Young Adults: What do you get the kid who already has all the video games he could want?  How about a meeting with a financial planner?  It may not sound exciting, but young adults are leaving home with less financial experience than ever, making it difficult for them to know how to budget for their own household, plan to eventually buy a house, or even stick to a strategy to pay off credit debt or student loans.

Parents of Young Children: A nomination of guardians drafted by a qualified estate planning attorney is an excellent gift for young parents. So also are advanced healthcare directives and a last will and testament.  All of these will help protect the young family as well as provide peace of mind.

Baby-Boomer Friends and Family: The big concern among Baby-Boomers right now may be planning for their own long-term care.  After seeing their own elderly parents deal with the dramatic cost of long term care, Boomers may now be turning a concerned eye to their own futures. What about arranging a consultation with an Elder Law attorney to help them review and update their own estate planning?

Elderly Parents and Grandparents: Forget your teenage nephew; your elderly grandparent is the person who could benefit from having a video game. According to this story in the New York Times game systems such as the Xbox Kinect and Nintendo Wii Fit help get the elderly up and moving and can significantly improve their balance.

This year, forget about the impersonal gift cards or scented candles; instead give a gift that will leave a legacy.

Posts By: Gene Osofsky

Can you remember what you were doing in your early 20s?  Can you imagine what kind of life you’ll be living in your 70s or 80s?  We experience incredible changes as the decades roll by—not just to ourselves, but in the world at large. With our lives changing so much, our estate planning documents and strategies should hardly remain static. Here is a guide to how your estate plan may or may not evolve through the decades.

In Your 20s: You’re young, just finishing school and starting in your career, unlikely to be married yet… the last thing you’re thinking about is estate planning! At this time of life, who gets your “stuff” may not be as important as who will make your decisions. Choosing your financial and healthcare agents and creating your power of attorney and healthcare directive are the important things to do at this time.

In Your 30s: Marriage, children, home ownership—most of these things happen in your 30s, and your estate plan should reflect that. Now is the time to choose guardians for your young children, decide with your spouse how your joint property will be distributed, and get serious about life insurance.

In Your 40s: This is when your strategy may switch from simple direction of inheritance to more serious asset protection. You’ve worked hard and saved, and you’ll want to think about the best way to maximize your assets with trusts and tax planning. Consider  investing in long-term care insurance.

In Your 50s: As your children start to become independent you may have more freedom with your income.  Some people choose to create charitable trusts, some prefer to invest for retirement, and still others decide it’s time to take a risk and start over with a second career.  Your estate planner can advise and help with all of these.

In Your 60s: Ah retirement! Making the big change from work to retirement means making changes to your estate plan as well. If you’ve been keeping up with your planning through the decades all that is required now will be some basic maintenance; changes to account for marriages of your children, the birth of grandchildren, and your own relocation to someplace warm and sunny.  But beyond the basic maintenance, you may want to start doing some basic planning for long-term care —just in case.

In your 70s and Beyond: Health is the key word now.  Our life-spans are getting longer, but so are our illnesses.  You need to be ready.  Tighten up your estate plan, and although it may sound morbid, talk to your doctors and family about your end-of-life decisions. Consult with an Elder Law Attorney about options for funding long term care expenses,  and seek assistance in revising your estate plan to coordinate with those options. You may be surprised to learn that you may be able to qualify for a government subsidy under the Medi-Cal program while still preserving your assets for your loved ones, providing that appropriate authorizations are in place.

The life alterations that come over a span of decades are difficult enough; you don’t want to have to find a new lawyer every time your circumstances change.  Our firm makes it our business to keep up with you at every stage.

Posts By: Gene Osofsky

Q.  My wife and I have a Living Trust and a combined estate worth roughly $2 million, including the equity in our home.   I understand that the federal estate tax returns on January 1, 2011, and that couples having a combined estate worth more than $1 million may once again be subject to tax. Is this true? Is there anything we can do to about this? 

A.  Yes and yes. As things now stand, the federal estate tax is scheduled to return with a vengeance on January 1, 2011.  For individuals who pass away after that date, the estate tax exemption will drop to only $1 Million per person, and the excess above that amount will be subject to a very hefty estate tax that can be as high as 55%.    In your case, if your trust leaves everything outright to your spouse without special “tax savings” provisions, the tax that will be due upon the death of the survivor owning a $2 Million taxable estate would be approximately $435,000. 

While Congress could still act to change that result, legislative efforts over the last several years to do so in anticipation of January 1, 2011, have thus far failed. 

 Background:  During the last decade, the exemption from estate tax gradually went up each year from a starting amount of $675,000/person in the year 2000, all the way up to $3.5 Million/person in the year 2009 and, for persons dying in 2010, there is no estate tax whatsoever.   For many persons who  designed their estate plans during the last decade and whose estates were valued at less than the applicable exemptions, estate taxes became less and less of a concern and many plans were put in place that did not incorporate tax planning.  This often made sense when the exemptions were greater than the value of one’s estate, but tax planning now suddenly becomes important once again for many folks.  Consider that the value of the equity in your home, a 401K, plus some savings & investments can easily add up to more than $ 1 Million, once again exposing your estate to tax upon death. 

With the exemption scheduled to drop once again to $ 1 Million and the federal estate tax scheduled to return at a rate of 45% to 55% for amounts above that, tax planning once again becomes important. This is especially so in your situation.  Without proper tax planning, your children would be faced with a hefty tax bill and might need to sell some or all of your estate in order to raise money to pay the tax by the due date, nine (9) months after death of the surviving parent. 

 The good news:   There are strategies that may reduce or even eliminate this burden, with more strategies available to married couples.  However, they must be set up during your lifetimes.  These may include creating “sub-trusts” within your Living Trust which would be “activated” upon the first death in order to preserve the decedent-spouse’s full exemption. This technique can effectively double the exemption over the span of two lifetimes; using life insurance to fund the anticipated tax liability; and, making intra-family gifts during lifetime to reduce the value of your taxable estate. Other available strategies are sometimes known by their funny sounding acronyms, e.g. QTIP, ILIT, QPRT, GRAT, IT, GSTT.     If you also wish to design your plan so as to permit access to available government benefits to help pay the cost of long term care, the strategies might also include creating MIDGTs or VIDGTs to protect the home.  Our recommendation: have your plan reviewed by a competent professional. An ounce of prevention may be worth a pound of cure.

Posts By: Gene Osofsky

Most people think that having a trust is about controlling (to an extent) what happens to your assets after you die.  This is true, but a trust actually has a much broader scope: a trust can also protect and provide for your loved ones—and more importantly, it can protect and provide for you—if you should ever become incapacitated.

In basic terms, incapacity means that you are no longer able to make decisions for yourself. Sometimes it is easy to determine incapacity: the person is in a coma or unconscious and obviously unable to make decisions.  But sometimes it’s more difficult.  What about whether or not a person is able to make rational decisions?  What if someone is suffering from Alzheimer’s, Dementia, or even a severe mental illness… should that person be making important financial decisions?

It is important to include a definition of incapacity in your trust, because this one word carries a lot of weight.  It is when you are incapacitated that your successor trustee will take over, when the agent nominated in your Healthcare Directive will get the authority to make health care decisions for you, and may also be the point in time when your financial Power of Attorney goes into effect.  With so much hanging on a single word, it’s important to know exactly what that word means.

Every standard trust should have a definition of incapacity,  as determined by a court of law pursuant to statutory definitions of incapacity.  This essentially means that you are deemed incapacitated when a court of competent jurisdiction determines that you are unable to legally handle your own affairs.  However, an alternative provision is also often included in trusts and companion legal documents, i.e.  upon a written determination by your treating physician(s) that you can no longer handle your financial affairs competently.  Many trusts require that this determination be made by two (2) phyicians, each providing a separate certification of incapacity.  This requirement is fine if you are really concerned about relying upon only one medical opinion.  However, in practice, we have found that there are often logistical problems in securing the written opinion of two physicians, especially if you are residing in a facility such as a nursing home.  Usually, only one physician makes the rounds there, and securing an evaluation by another phyician is often difficult and impractical.  Hence, we tend to prefer the requirement of only one (1) physcian for most plans that we prepare for seniors. 

There are many reasons why you would want to have an option in your documents that provides an alternative to the court determination of incapacity.  The primary reason is that court proceedings can be lengthy and expensive.  While your agent may be spending days or weeks going through the legal process, your estate may be languishing and your trusee or financial agent may be powerless to take action on your behalf.  Giving a licensed physician the power to determine your incapacity will likely circumvent the expense and lengthy delays often associated with the court process. Further, when we designate a physician, we generally prefer not to require that the decision be made by a specific individual, as that person may not be readily available or may no longer be your treating physician.  Our recommendation:  specify that such a decision may be made by your then current, treating physician if available and, if not, by an examing physician.

Posts By: Gene Osofsky

Baby-boomers are called the sandwich generation—and with good reason.  They were expecting to pay for their own retirement and their children’s college education; but now recession upon recession has toppled their elderly parents’ savings, and Boomers find that they are faced with the prospect of shouldering the financial burden of their parents’ final years as well.  The pressure of providing for so many people at once can quickly become overwhelming, and using one’s own savings or retirement fund can begin to look like an easy solution to immediate financial concerns.

Although it may seem like an easy fix to looming financial debt, don’t give in to the temptation to use your own savings.  Before you give in to fear and drain your retirement, get some professional financial advice.  This special edition recently released in the New York Times shows that it is possible to prepare for what’s coming—both for your parents and yourself.

Our first recommendation is to discuss your situation with a trusted financial advisor.  After that, one of the primary suggestions offered in the Times is to talk to your parents about their situation.  It may not be easy; be prepared for your initial advances to be met with resistance.  Aging parents often worry that they will lose control of their own finances, or that giving decision-making capacity to one child will lead to anger or hurt feelings among their other children.  Instead of gearing up for a fight, the article mentions a few ways to gently lead into the conversation (including talking about family philanthropic projects.)

Another discussion you won’t want to skip is one about Long-Term Care Insurance.  This article by Ron Leiber discusses different kinds of insurance, whether or not you’ll need it (you will), and how to pay for it.

The world of “old age” is changing.  People are living longer than their predecessers and are experiencing more long-term health issues.  In some situations, elders may be able to rely upon Medi-Cal to subsidize the cost of residence in a nursing facility, provided that appropriate planning is in place.  However, care outside of the nursing home environment usually requires reliance upon savings and/or long term care insurance if available.  For veterans, a tax-free Veterans Pension may be available, even if the disability is not related to military service.  Serious discussion and serious planning are essential to surviving the challenges of the “new” old age. 

Posts By: Gene Osofsky

Have you ever seen the “1001 Must Do” books series?  1001 Movies You Must See Before You Die, 1001 Books You Must Read Before You Die, or maybe 1001 Natural Wonders You Must See Before You Die?  Let’s face it, 1001 things is a lot of pressure!  This is why we like this article in the San Francisco Gate, which lists only 16 estate planning things to do before you die.

Creating your estate plan can seem complicated and scary, but it’s not as daunting as you think—especially if you have the right person helping you.  The article mentioned above lists 16 things to do in order to get your affairs in order, but even those 16 things can be pared down to only 5 essential tasks:

1. Make a list of your assets-include your home and other real property, checking and savings accounts, retirement assets, life insurance, investments, as well as high ticket physical items and heirlooms.

2. Make a list of your debts-including credit card debt, remaining mortgage debt, auto loans.

3. Choose your beneficiaries-consider not only children or grandchildren, but also any charities you would like to support.  Think about what you want for your legacy beyond the first generation.  Also, although it can be difficult, consider what you would want should your children or grandchildren predecease you.

4. Decide who you trust to be your agents/executors to handle your affairs-getting your affairs in order means choosing people to make decisions when you are unable.  Agents with power-of-attorney will make financial decisions if you are unable, health care agents work with your doctors to determine your medical care, and trustees will control any assets you place in trust for the benefit of yourself or your beneficiaries.

5. Meet with an estate planning attorney-creating an estate plan is not as simple as checking a few boxes and signing a will. An estate plan requires an evaluation of your assets and goals, careful research into federal and state laws, and a determination of which of the myriad of documents best meets your needs. Have an experienced attorney help make your plan perfect.

Posts By: Gene Osofsky

According to a recent report put out by the Alzheimer’s Association, 5.3 million people have Alzheimer’s disease.  Chances are that you or someone you know has been touched by this illness.  In spite of these overwhelming statistics, Alzheimer’s continues to be a disease that sneaks up on individuals and their families, quietly tearing apart lives with uncertainty and confusion. As elder law attorneys, we sometimes see this heartbreaking confusion in our own offices when elderly clients or their families come to us, concerned that a loved one no longer has the capacity to sign or make decisions about legal documents.

A new article in the New York Times discusses the slow and sometimes invisible development of Alzheimer’s disease, and some of the earliest warning signs that your loved one may be suffering.  “New research shows that one of the first signs of impending dementia is an inability to understand money and credit, contracts and agreements.” This comes as particularly bad news to families who put off their estate planning year after year, each time telling themselves “We’ll do this next year for certain.”

By the time families come into our office with their suspicions about their aging loved one it may be too late for us to help.  “Lawyers have guidelines, published in 2005, that include warning signs of diminished capacity, like memory loss and problems communicating and doing calculations. The guidelines instruct lawyers to look at the legal requirements for capacity in specific situations, like making a gift. But many questions remain.”

Plans created after the suspicion of Alzheimer’s or dementia has set in can be fraught with doubt, and often cause conflict among family members.  We have seen the rifts and heartbreak the illness causes in even the strongest of families.  We urge you to take care of important legal and estate planning issues early, before questions of competence can cast the shadow of doubt over your wishes.

Posts By: Gene Osofsky

The legalization of marijuana is on the ballot in California this November, but California isn’t the only part of the country where marijuana is making news.  The use of marijuana for medical purposes is being debated around the nation—especially as concerns elderly patients in nursing homes which receive federal funding through Medicare or Medicaid.

This article on the New York Times’ New Old Age Blog reports on this issue, and just how concerned and confused nursing home facility administrators are about what their options are and how to proceed. “Any patient using medical marijuana breaks federal law. Marijuana is listed as a Schedule 1 drug, which means the federal government considers it to have no medicinal value. Despite this, physicians in 14 states and the District of Columbia are allowed to recommend it. . . Many facility administrators wonder how they can comply with federal law and preserve their reimbursements and at the same time permit residents to medicate with marijuana.”

Federal funding isn’t the only conflict attached to the medical marijuana issue.  Nursing homes in New Mexico (a state where marijuana was legalized for medicinal purposes in 2007) report that “the lack of dosing direction has caused problems. . . Pills in nursing homes are in what they call vacuum packs: you have to pop a pill out one at a time. They don’t do that with marijuana. It’s an amount of marijuana in a small plastic bag, so there is no way to track if someone took one or two pinches.”

Another issue to consider is the stigma attached to marijuana use, and complaints from other patients or residents.

Medical marijuana is generally prescribed to seniors to help them deal with chronic pain. Oregon’s long-term care ombudsman, Mary Jaeger, asks in the article above “Wouldn’t any one of us, in our own homes, feel that we have the right to live our lives by our own values and choices, to preserve our own dignity and, frankly, to live pain-free?” Will seniors moving to federally supported nursing homes have to find other ways to deal with chronic pain?  And more importantly… will they be willing to do so?

Posts By: Gene Osofsky

As the average life-span increases—and the cost of medical care along with it—more and more people are beginning to see the need for long-term care insurance.  Simply having a retirement plan isn’t enough anymore. Saving for retirement now means not only saving for your living expenses, it means preparing and saving for your health care expenses as well; expenses which will most likely include major medical procedures, eventual in-home care, and perhaps even long-term nursing care.

The idea of long-term care insurance is no longer a new and strange one, but it’s still not a concept most people feel completely comfortable with. What kind of long-term care insurance should you be looking at?  Can you get coverage for your entire life? (Probably not.) What types of care and services will be covered? (Each policy will vary.) Can you get a policy that goes into effect right away, or is there a waiting period? (There is often a waiting period.)

Not all long-term care policies are created equal.  The U.S. News and World Report recently published an article advising 7 things to look at when choosing a long-term care policy. Some of the things you’ll want to pay attention to include the benefit amount, the benefit period, which services are covered, and inflation protection, just to name a few.

Choosing a long-term care policy is an important step, and not one to be taken blindly.  If you are confused about long-term care policies, or unsure of which one may be right for you, don’t hesitate to ask the advice of a professional. Insurance agents, financial advisors and estate planners may all be able to help answer your questions or point you in the right direction.

Posts By: Gene Osofsky

With all the recent news about what will happen with estate taxes, the process of probate has come up quite a bit.  Sometimes probate is mentioned in a low-key, matter-of-fact kind of way; at other times it is presented as something scary, and to be avoided at all costs. We know our readers have seen the term often enough here in our blog, but under the circumstances we thought it a good idea to go back to basics, and have a discussion of exactly what is probate, and what’s all the fuss?

Probate is the process by which the court identifies the assets of a person who has died, and facilitates the distribution of those assets  and transfer of title to the persons entitled to them. It sounds like it should be simple, but even in the best of circumstances there are procedures that must be followed to the letter, and the actual process (depending on the size of the estate and the laws of the state in which the property is being probated) can take anywhere from 6 months to a few years.

You may wonder why probate can take so long, especially if the deceased person has left a will making their wishes clear.  A good will can certainly make the process easier, but even with a will, there are certain steps that must be followed to complete the probate process, some of which can be very time consuming.  Some of these steps include:

  • The appointment of an executor or personal representative
  • Verification of the will
  • Taking an inventory of assets belonging to the deceased
  • Giving notice to creditors
  • Paying valid claims against the estate
  • Preparing and paying taxes
  • Notifying beneficiaries
  • Distributing the assets to the beneficiaries or heirs

If you think that just reading the above paragraph takes your breath away, imagine the confusion of having to actually go through all of those steps—and possibly more!

Whether or not your estate will eventually be subject to a lengthy or expensive probate often depends on a number of factors: the size of your estate, how your assets are held, and how cooperative your next of kin may be. But one way to increase your chances of avoiding probate is to have clear (and clearly valid) estate planning documents which are designed to do just that. This would usually mean a revocable living trust.  If however, your assets are valued at less than $100,000 at your death, then in California there is a simplified procedure to avoid probate even if you do not have a revocable living trust and provided that your designated beneficiaries or heirs cooperate with one another. There are other ways to avoid probate by titling assets in a certain way, but these alternatives are usually only effective in limited circumstances and often create other problems. These include: joint tenancy, Pay On Death (“POD”) and Transfer of Death (“TOD”).

If you are concerned about probate, or would like to know more about how you can protect your assets and help your loved ones avoid a lengthy probate, contact our office—or a qualified estate planning attorney in your home state—to discuss your options.