When it comes to estate planning there are many related aspects of an estate plan that must be considered. For example, if you are small business owner it is equally important to make sure that your business succession plan is in order as well. In many situations, the business is a significant part of an individuals entire estate and yet many times addressing issues as to the value of the business, the future sale of the business or any succession plan is put on the back burner. The benefit of setting up an estate plan is that it forces you to address all of the various assets that you own. Not only does estate planning cover who will inherit your home, your life insurance or your retirement benefits, but it will also force you to address your company and what planning you have done to ensure that the value passes on to your heirs.
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When it comes to making decisions about who should serve as your Trustee, Guardian, medical and financial Power of Attorney, many people choose the best person for the job at the time they are setting up their estate plan. However, when you find yourself handling the estate of a loved one who has passed away and you realize all of the work that is involved it may cause you to step back and re-visit your own estate plan and make sure that you have chosen the right people for the job. Recently, I dealt with a woman who’s brother died and she found herself serving as the executor of his estate. When she realized all of the things that were involved in handling his final matters including the sale of his house, dealing with his children, the transfer of his car and his final tax returns, it caused her to revisit her own estate planning documents to make sure that the people she had designated for this job in the event of her death are aware of their appointment. Although there is no magic time frame to review an estate plan, it is something that should be reviewed every-so-often. Not only to make sure that the individuals that you have designated are still qualified to do the job that the individual you have designated are still willing to do the job. If you have not reviewed your estate plan in the last seven to ten years, now would be a good time to revisit it.
Before you say “I do” many issues need to be discussed. Unfortunately, many times the “I do’s” usually turn into “I don’t’s”. Making sure that you have reviewed your finances with your spouse-to-be is important. It is important to not only discuss your finances and outstanding debts, it may be even more important to also address the issue of a Pre-Nuptial Agreement. Many times one of the spouses may have significant retirement accounts, a business that was set up well before the marriage or there may be a possibility of inherited assets. A Pre-Nuptial Agreement addresses how assets are going to be held during the marriage and ultimately how they are going to be handled in the event of divorce. Talking about your finances before the “I do’s” and/or a Pre-Nuptial Agreement is not romantic. However, it may be necessary to ensure your future wedded bliss.
Making sure that you have your Will, Trust and Estate Plan in order is very important, but there are steps beyond that that must be considered.
This year, the first wave of Baby Boomers turn 65, the age when developing Alzheimer’s disease increases significantly. In fact, there is an estimated 10 million Baby Boomers who have developed Alzheimer’s during their lifetime. That means that one out of eight Baby Boomers will die with or from Alzheimer’s. As family members plan for the futures of their parents and grandparents a lot these facts need to be taken into consideration. Additionally, families need to consider that there are only 7,600 geriatricians and that almost everyone over the age of 65 needs a doctor. It may be important for you to get a jump on this process to ensure that you have a doctor who is qualified to address your issues as you get older.
Additionally, with the knowledge that almost 9 million people are afflicted with Alzheimer’s or dementia and yet there are only 1.6 million nursing home beds providing care for family members with dementia is an important issue that needs to be addressed. Many family members attempt to care for a parent or grandparent in their home and all of this comes at a price. Many children find themselves working part-time, quitting their job and/or affecting their own personal health to make sure that a parent is cared for. Statistically, care givers health will fail 40% more than a non-care giver because of the stress that is involved in taking care of someone else. Planning for who will inherit from you and who will oversee your finances is obviously important, but taking all of these medical facts into account should not go unaddressed.
There have been many discussions about the importance of special needs planning. The first step for special needs planning is to make sure that you have a Living Trust to protect that special needs child’s government benefits, but you need to take the planning a step further. For example, if you have a special needs child that has lived with you his entire life and is now in his 50′s, do you want your home held in Trust for his lifetime benefit? If so, have you made necessary provisions in your Trust to pay the taxes, insurance and/or improvements on the home. Additionally, have you considered whether additional health care will need to be provided in the home and if there are sufficient funds to pay for this if there are not community or government funds for this in-home care. What if that special needs child is no longer able to live in the home due to health conditions or costs? Should the home be sold or should it pass on to other beneficiaries? Finally, have you taken into consideration the time and/or support that the rest of the family may need for the rest for this special needs child? When it comes to planning, the future belongs to those that prepare for it.
It does not take February 14th or Valentine’s Day to be around the corner for love to be in the air. Studies show that more and more older couples are finding love later in life and that it is not just for the young at heart. Many individuals find themselves entering into a new relationship as late as their 50′s, 60′s and even some in their 70′s. Although it would be fun to focus on how wonderful it is to find new love it is also important to take a more practical approach as well.
Many times when individuals get married later in life, they have accumulated previous wealth as well as they have children from a previous marriage. When facing new relationships later in life, it is important that these financial issues and issues related to children are discussed. What that comes down to is discussing your estate plan. For example, if you own the home and your wife is going to sell her home and move in with you and you were to die first, would you allow your new wife to live in the home for the rest of her life or for a period of time? Will your new wife be responsible for paying any debts and expenses while she lives there? Will you provide for your spouse in any other monetary way, such as right to lifetime income from a retirement account and/or the recipient of life insurance proceeds to help pay off any outstanding debt she may have accumulated in purchasing a new home together? Enjoying love a second time around is wonderful, but do not forget the practical aspects that go along with it.
The terms “young people” and “nursing homes” usually do not go hand-in-hand, but over the last eight years the number of younger residents entering a nursing home has risen about 22%. Many of the younger nursing home residents are suffering from physical disability and in some cases many mental health institutions have closed forcing these patients to be turned over to a nursing home facility. With medical advances improving, which allow younger patients who have suffered a traumatic injury to continue living, many of them are unable to return home. The only source of 24 hour care is the nursing home. While many young people think about nursing home care for our parents and grandparents, many of us do not plan for our own care. The thought of a 26 year old having to share a room with an 89 year old is probably not a choice for any of us. When it comes to planning for your parents nursing home care costs or your grandparents nursing home care costs, many young people now need to consider planning for their own potential nursing home care costs. Although long term care insurance may not be the route for them to go at this point, a younger person may want to consider disability insurance. Disability insurance can provide a partial replacement of income in the event they are unable to continue their job and that replacement of income may give them options, such as the right to continue living in their home.
In addition to addressing these future concerns the parents of these young people also need to consider reviewing their estate plan. The parents estate plan would have anticipated that their child would outlive them and be in a position to inherit money. If you have a disabled child that is living in a nursing home and is receiving medicaid, passing an inheritance directly to them may cause them to loose their government benefits. If parents have set up an estate plan, it may be important for them to revisit it to ensure that their estate plan incorporates special needs provisions that money be held for the benefit of that child for comforts and luxuries that they may need within the nursing home, but does not provide for outright distribution.
We have talked repeatedly about why it is not a good idea to put your children’s names on your accounts. Most of our discussions involves the fact that having a child’s name on your home or bank account can subject these assets to their debts or liabilities, their divorce issues and/or their bankruptcy. However, there are even more reasons not to make your children joint with you on bank accounts, investments and/or real estate. If you have a Last Will and Testament or a Living Trust and that Trust provides that all of your assets are to be divided equally at the time of your death amongst all of your children, but you have put your daughter on your bank accounts, on the deed to your house and on your investments, legally you have overridden the Trust and the Will. In other words, once you put your daughters name on the account, the money is legally hers and she does not necessarily have to abide by the terms of the Will or the Trust. You have made these separate asset accounts and by making her joint you have said to the bank, the investment, and to the Register of Deeds, “everything passes to my daughter when I die”. Ultimately, your child may honor your wishes, but that child will have no legal obligation to. If you have made accounts joint with your children, you need to consider revisiting whether this conflicts with your estate plan or whether this will create problems at the time of your death. Joint ownership with a child is a quick fix and should not be your estate plan.
After much discussion, President Obama has signed the 2010 Tax Relief Act, which will create significant estate tax relief through 2011 and 2012. Last year the estate tax went away and individuals could pass an unlimited amount at the time of their death without any estate tax consequences. In 2011, a $5 million dollar exemption will apply and any estates over the $5 million mark will be taxed at a top rate of 35% and not the 55% previously proposed. The gift tax will still remain at a 35% top rate for any lifetime gifts over $1 million dollars. Additionally, the income tax rates for individuals will stay at 10%, 15%, 25%, 28%, 33% and 35% instead of moving into the higher brackets previously proposed. Despite the increased tax credit this is not a reason to think that you do not need to do an estate plan. The estate tax law only relates to whether or not your assets will be taxed at the time of your death. Your estate plan identifies how you want your assets divided at the time of death and who you want to put in charge. This is a completely different aspect that needs to be considered above and beyond the tax consequences.
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