Posts By: Gene Osofsky

Creating an estate plan often involves serious discussion with your advisors about tax planning, asset protection, and charitable giving; but it is important to remember that at its core, estate planning is about protecting your family—and as this article in the Wall Street Journal reminds us, for many people the word “family” also includes our four-legged friends.

Some people will be tempted to roll their eyes and joke about Leona Helmsley at the mention of including your pet in your estate plan, but most will agree with article author Max Alexander that ensuring your pet will be taken care of after your death is not a frivolous indulgence but a simple matter of responsibility.

Providing for the care of your cat or dog does not necessarily mean leaving millions of dollars in a pet trust, what it really means is taking steps to ensure your pet doesn’t end up out on the street or in a cage in the local animal shelter. The Wall Street Journal suggests four simple steps pet lovers can take when planning their estate, including:

  • Choosing a “pet guardian”
  • Deciding whether or not to provide financial assistance for the care of your pet
  • Adding language to your will or trust regarding the care of your pet
  • Writing down a list of instructions for your caregiver

Over 50% of U.S. households own a dog or a cat. Those pet owners know that in return for companionship, love, and devotion pets rely on their owners for the basic necessities: food, shelter and protection. Why gamble with the future when ensuring their care can be so easy?

Posts By: Gene Osofsky

Among the many changes in tax law to go into effect in 2010 was the change in cost basis for inherited assets. Previously, all inherited assets were “stepped-up” from their original value at date of purchase to their fair market value at date of death. In this way, if inherited assets were sold shortly after death, litttle or no capital gains tax was owed. However, in 2010 inherited assets do not receive this automatic “step-up”; instead they will be valued at the lesser of the decedent’s basis or the fair market value as of date of death. The result is that for decedents dying in 2010, the decedent’s tax basis and the fair market value as of date of death will have to be determined for every asset. As you can imagine, this will cause paperwork nightmares for heirs.

What we suggest is making a list of your assets and their values and tax basis information now, while you are still alive and your memory is fresh. This is not a list that has to be shared with anybody until after your death, but the mere existence of your list of assets will save your family and heirs hours of headaches (and heartache) later on.

If the thought of taking the time and energy to sort through files and records to gather this information makes you want to run for the hills, imagine how your heirs will feel! To ease the burden, try making your list one asset at a time, over the course of many days. However you choose to create your list, you can be sure your heirs will thank you.

(Note: There is some cushion to this harsh new rule:  There is an exemption amount of $1.3 million of gain from this carry-over basis rule, and another $3 million exemption applying to assets inherited from a spouse. Any excess, however, will be subject to to the new carry-over basis rule.  The duty to allocate this exemption among assets going to different persons will be that of your executor or successor trustee. Choose that person wisely.  )

Posts By: Gene Osofsky

January of 2010 has brought with it a lot of change that is keeping financial and estate planners on their toes. In addition to the repeal of the estate tax (discussed in a previous post), we have been presented with new Roth IRA rollover rules that took effect January 1st, and which now allow anybody, regardless of income, to convert their traditional IRA to a Roth IRA. The question now is: Is it worth it?

The answer to that question will be different for everybody, because the amount that will be taxed upon conversion depends entirely on the kind of contributions you have made to your traditional IRA in the past. If you have made more non-deductible contributions than tax-deductible contributions to your traditional IRA you will almost definitely want to take advantage of the conversion opportunity. If you have made fewer non-deductible contributions you may be looking at a higher tax bill. However, the fact that the tax bill can be spread out over two years (but only if the conversion is made this year) should give even those who have made mainly tax-deductible contributions reason to consider the switch.

If you think you may want to make the switch, talk to your advisor. Your financial specialist can tell you the pros and cons of switching based on your personal IRA history. The nice part is that if you do decide to take advantage of the new rules, the decision doesn’t have to be permanent. Those who convert their traditional IRA to a Roth IRA in 2010 will have until October 15, 2011 to change their minds and switch the account back to a traditional IRA.

Posts By: Gene Osofsky

Now that it’s 2010 and congress has failed to take action regarding the repeal of the estate tax, we see a lot of articles discussing whether the lack of taxation for a year is a good or bad thing; sometimes these articles go even further, arguing whether estate tax in general is a good or bad thing. These are all interesting discussions, but our firm is more concerned with how your estate plan will hold up this year when it was likely designed to weather very different circumstances.

To this end, we have found that CBS’s Money Watch.com has published a very useful article about what the lack of estate tax in 2010 could mean for you and your family. The entire article is educational, but if you scroll about 1/3 of the way down the page you get to the crux of the article, a section titled “Steps to Take Now.” This section provides you with practical advice on what you can do, and what in your estate plan may need to change in order to keep up with the changing times and taxes:

  • Keep good records
  • Have an attorney review the “formula clauses” in your estate plan
  • Be aware of the tax laws for your state of residence
  • Give your estate plan a “check-up” as soon as possible!

As you and your attorney are reviewing your estate plan, keep in mind that the estate tax situation is likely to change again in 2011 (and may even change before 2011, effective retroactively), and try to plan accordingly. As Money Watch author Deborah Jacobs writes, “Whatever might be happening in Washington, no one should postpone the necessary steps. Just because Congress is inefficient and disorganized doesn’t mean that you must follow suit.”

Posts By: Gene Osofsky

With the New Year has come a dramatic change in the estate tax: for persons dying in 2010, there is suddenly no estate tax no matter how large the decedent’s estate.   Although that may sound good, you had better think again.  Many couples set up their estate plans years ago  on the assumption that at least a portion of their estate would be subject to tax upon the death of the 1st spouse. They then designed their trusts or wills so as to allocate the tax free portion to the children, allocating  only the remainder to the surviving spouse. That often made sense when the tax free portion was only a part of the estate and there was substantial additional value to allocate to the surviving spouse. But for 2010, the tax free portion is suddenly 100% of the estate!   Thus, for estate plans that still describe the children’s portion in terms of the tax free portion (or use legal formulae with similar effect), that may now suddenly require that– for the estate of a parent who dies in 2010 — the children may now get the entire estate!   This is of special concern where the parent has remarried and the bulk of his / her estate is the decedent spous’s own separate property.

As noted in the Wall Street Journal article entitled “Repeal of Estate Tax Creates Planning Dilemmas“,

“You could be in a situation now where everything would go into a trust downstream to the kids and nothing is left to the spouse,” said Greg Rosica, a tax partner at Ernst and Young. “There is a need to revisit the basic estate planning documents to make sure that what you intend to have happen really does happen.”

There are more surprises waiting: the estate tax is scheduled to return with a vengeance in 2011. Beginning in that year, only the first One Million Dollars will be free of estate tax (as compared with $3.5 million in 2009). Complicating the matter still further is that Congress could enact remedial legislation later this year to address these concerns. If it does so, Congress may attempt to make the changes retroactive to the beginning of this year; but, whether this effort at retroactivity will be upheld will likely ultimately be decided by the courts, perhaps years down the road. In a word, there is suddenly much uncertainty in the estate planning arena, and this uncertainty may be with us for a long time. Couples concerned about this should have their plans reviewed by a competent professional. At a minimum, they might revise their plans to build in flexibility mechanisms in order to address future changes in the law as they unfold.

Posts By: Gene Osofsky

If you are a Caucasian woman, aged 35 or older, possibly married, definitely working at least part-time—then there is a good chance that you are now or will soon be serving as a caregiver for an aging parent or relative; at least, this is according to the new report released by the National Alliance for Caregiving, AARP, and MetLife.

The entire report, entitled “Caregiving in the U.S., A Focused Look at Those Caring for Someone Aged 50 or Older” is 73 pages long, but you needn’t read the entire thing to get an insider’s peek at the state of caregiving today. And the report isn’t limited to caring for an aging relative; it includes statistics on those caring for special needs children, as well as family members of any age.

Some of the more interesting statistics listed in the report are:

  • 40% of Caregivers are aged 50-64.
  • 63% of those receiving care are over the age of 75.
  • 67% of Caregivers are women.
  • 76% of Caregivers are Caucasian.
  • 89% are caring for a relative (36% of the time it is the caregiver’s mother.)
  • Over half of caregivers are employed while caregiving; and…
  • Caregivers provide an average of 19 hours of caregiving per week (in addition to their regular employment.)

It is worthwhile to note that according to this study most of these caregivers are unpaid for the care they give, which makes sense if they are caring for a family member and are doing it voluntarily—but a full 43% said that they felt they did not have a choice to take on the role.

Our office can’t prevent you from one day needing a caregiver (or one day having to serve as a caregiver) but we can help you plan for when that day may come. Thinking and planning ahead can keep you—and your loved ones—from ending up in a situation where you feel you have no choice.

Posts By: Gene Osofsky

  • Did you know that Jimi Hendrix’s estate took twenty years to finalize because he didn’t have a will?
  • Have you heard about Heath Ledger’s two year old daughter who got nothing when he died because Ledger neglected to update his will after she was born?
  • Can you imagine how difficult it would be to sit down and try to talk about your estate plan with twelve of your children from nine different mothers? That’s what Ray Charles (brave man) did.

We make no secret on our blog of how important we think it is to talk about estate planning to friends and family; we also admit that we know how difficult a subject it is to broach, and we’ve tried in the past to offer advice on how to make the discussion a little easier. Now we can recommend a book that can help you not only come to a better understanding of the ins and outs of estate planning, but also provide fun and interesting topics to serve as conversation starters with your family over the holidays.

The book, Trial and Heirs, by Andrew and Danielle Mayoras, “uses real celebrity stories to help you avoid estate ‘errors’ as you plan for your ‘heirs’… and gives you a front row seat in the courtroom while the authors replay the scenarios and point out what went wrong, the winners and losers, and what you can learn from it.”

Probate, estate planning, and trusts may seem like something for the rich and famous—something removed from the lives of the average Joe; but the truth is that there is nothing more universal than death and the process of dealing with the aftermath. Rich or poor, famous or unknown… we all have to plan for the inevitable.

Posts By: Gene Osofsky

Do you know who will take care of you when you are too elderly to take care of yourself? According to the statistics your caregiver is likely to be a woman, and most likely to be your daughter or daughter-in-law. What this means is that unless you have a plan for your future long term care, the financial burden of caring for you will fall to her and her family.

“Financial burden” refers not just to the expense of paying for food and medical costs, but to loss of income incurred over years of care-giving. “Women take time away from their careers to care for family members,” writes George I. Connolly, “and… lose an average of $659,130 over a lifetime in reduced salary and retirement benefits.”

Many people think that government programs will pick up what they can’t pay for themselves, but relying on government programs can leave your family footing just as much of the bill as they would without them. You may want to consider other alternatives as well, such as investing in long-term-care insurance and setting up a Long Term Care Estate Plan. If you aren’t sure about your options, or how to start planning for the future, call our office for help.

If you are a daughter of aging parents, now is the time to talk to your parents about the future. Studies show that you are the one who is likely to shoulder the responsibility of caring for them as they age. Doing so will affect your family, your career, your finances, and even your health.

The subject of aging and elder care is a difficult one, but not one to be left to the last minute. Talk to your family about your wishes and plans for the future, then bring your  Elder Law attorney into the discussion. Once you have an idea of your wishes, an expert can help you feel better about your options, and put you on the right path for keeping your family healthy, happy, and financially secure in the years to come.

Posts By: Gene Osofsky

Cicero said “In nothing do men more nearly approach the gods than in giving health to men,” a quote which underlines the important role of anyone involved in your health care, whether it be a doctor or an agent. A health care agent is the person who makes medical decisions for you if you are unable to make them for yourself, decisions which often pertain to life and death, and can include the very difficult decision of whether or not to continue your life with artificial means. You certainly want to have someone in this role who is close to you, someone you can trust, but that is not the only criteria you may want to think about. You’ll want to make sure your agent is also someone who will ask smart questions, work thoughtfully with your doctor, and take an active role in making sure that your wishes are followed. The role of health care agent can be very “close to the gods” indeed, and should be taken seriously as such.

If you have a vague idea of what a health care agent is and does, but aren’t quite confident in the fact, the California Office of the Attorney General has provided this very informative article on the subject, which addresses not only the definition of health care agent, but also includes helpful tips on how to choose the best person for the job, as well as important things to keep in mind if you are the person who is acting as agent for someone else.

Posts By: Gene Osofsky

Most of us look forward to these winter holidays as a time to spend with family, enjoy the spirit of giving, and even relax a few days away from the stress of our jobs. Every year we hear about how stressful the holidays are, and yet we look forward to them anyway. Why is it that estate planning—another activity rife with benefits that admittedly comes with a little stress—is often avoided at all costs? In truth, the things we do to make our holiday planning more enjoyable and less stressful can be applied to estate planning as well:

  1. Don’t wait until the last minute. Not doing our shopping (or planning) ahead of time often means we won’t get what we want. The same can be true of estate planning. Some areas of planning (specifically planning for Medi-Cal, retirement, and long-term care) should begin at least a few years before you think you’ll need it.
  2. You can’t please everybody. Just as blended families have to come to terms with the fact that they won’t please every in-law every year, you have to accept that you may not be able to please all of your children or heirs in your estate plan. In the end, an estate plan is about your assets and your wishes.
  3. Planning ahead makes execution easier. Everyone knows that braving the stores at the height of the holiday season is much easier if you’ve thought ahead and already know what you’re getting. Estate planning also benefits from a little bit of forethought, and the whole process runs smoothly if you go into your attorney’s office already having made a list of assets, goals, and people you trust.
  4. Expect to get what you pay for. Paying $5 for the tree in the corner of the lot doesn’t mean you’ve gotten a deal; more often it means you’ve gotten a tree that will lose all its needles in the next 2 days. Don’t make the mistake of getting a “deal” on an estate plan that won’t withstand the test of time.
  5. Don’t forget the extras. That radio controlled car looks nice under the tree, but it’s not much fun if you’ve forgotten the batteries to make it go. Your estate plan may also require some “extras” to make it work: funding, memorandum of intent, letters of notification to fiduciaries, etc.

With a little planning your holidays—and your estate—can be easy and stress free. Contact our office to get started on your estate plan before the year is over.