Houston Estate Planning and Probate Blog

Friday, November 12, 2010

The Ins and Outs of Incapacity

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 discussion 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 when your financial Power of Attorney will go 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.  This means that you are deemed incapacitated when a court of competent jurisdiction determines that you are unable to legally handle your own affairs.  A really good trust will also include a definition of incapacity as determined by two physicians; which means that two independent, licensed physicians have examined you and have determined that in their opinion you are unable to effectively manage your property or financial affairs.

There are many reasons why you want to have more than just the standard definition of incapacity, the primary reason being that court proceedings can be lengthy and filled with red tape.  While your agent is spending days or weeks going through the legal process, your estate is languishing and your financial agent is powerless to take action on your behalf.  Giving two physicians the power to determine your incapacity will circumvent the red tape and prevent lengthy delays.

Call or come into our office for more information about incapacity and what it means in your trust or Healthcare Directive. 

Wednesday, November 10, 2010

Preparing Boomers for the Finance Sandwich Squeeze

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.

Ourfirst 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, experiencing more long-term health issues, and without the same ability to rely on government “entitlement” programs as their predecessors. Serious discussion and serious planning are essential to surviving the challenges of the “new” old age. 

Monday, November 8, 2010

Estate Planning As A Multi-Generational Affair

Creating an estate plan is a very personal matter; the planning party usually consists of you, your partner, and your attorney.  Although you may consider and provide for your extended family, they are not often a part of the planning process itself.  However, there are some circumstances under which estate planning should be a family affair—perhaps even a multigenerational one.

Planning as an extended family has its time and place.  This year the the generation-skipping transfer (GST) tax exemption means that more people than ever are bringing multiple generations of the family into the attorney’s office to talk about making gifts before the end of the year.  But the GST tax exemption is not the only reason extended families might want to plan as a whole unit.  Here are some other specific situations in which families might want to consider multigenerational planning:

  • Planning for succession within a family business.
  • When multiple generations of families own property together.
  • If the family is responsible for significant debt.
  • If a family has a history of supporting certain charitable foundations and desires to continue doing so.
  • To provide for family members who live out of the country.
  • To make provisions for a non-traditional family situation, such as unmarried partners.

Planning with your extended family doesn’t necessarily mean you won’t be able to create a private plan for you and your spouse as well.  It is quite possible to create individual estate plans for each nuclear family while still respecting the decisions that the extended family made together.  Of course, this process will be made much easier if the extended family and each nuclear family works with the same attorney, but it is certainly not necessary so long as each attorney and family is willing to communicate and act together.

If you aren’t sure if you should plan privately for your family or include your whole multigenerational unit in the process, give our office a call. We can help you look down the road ahead and create a plan of action that will make every member of your family feel secure.

Friday, November 5, 2010

Estate Planning Is Easier Than You Think

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.

Wednesday, November 3, 2010

Facing the Future with Long Term Care

November 2010 is Long Term Care Awareness Month, which means it’s the perfect time to talk about your thoughts, concerns, and plans for your own long term care.  According to this article by Ken Dychtwald, PhD, “average life expectancy is now at 78 and rising. And, if you're already 55 or more, life expectancy has soared to around 84.”  Furthermore, “Two-thirds of people over age 65 will need some kind of long term care.”  This means that it can never be too early to start planning for your future. 

Dychtwald points out in his article that “Uninsured medical expenses are the top financial worry among men and women age 55 and over. People... worry most about these expenses' unpredictability and potential for high costs.”  People know that their health is likely to decline slowly as they age, and people know that they will need care—possibly a lot of it—that the cost of this care is rising steadily, and that they will need a way to pay for it.  In spite of this, “many Americans are confused about what long term care actually is, and they're surprised to learn that Medicare and/or traditional health insurance do not cover most long term care needs.”

Life expectancy is rising, and the nature of “old age” is changing quickly.  We live longer, but we don’t necessarily live better; and what we’re headed for is an entire generation of people who are unprepared for the rigors and expense of “the new” old-age. Luckily, this doesn’t have to be the case.

The article above suggests that “There are three core topics in family conversations about long term care: (1) what care options are most preferred (e.g. if you needed some help, would you prefer to be cared for at home, in an assisted living facility or in a nursing home?); (2) potential roles and responsibilities of different family members' (and possibly, help from a professional care coordinator, aid or nurse), should it ever be necessary to manage care; and (3) how to pay for any required long term care (with your or a family members' savings, through Medicaid or with a long term care insurance policy?).”

We urge our readers to talk about these issues with their loved ones.  The conversations may be uncomfortable at first; but fear of the future—lack of preparation for the future—is far worse.  Discuss long term care with your loved ones and your trusted advisors. Be ready for whatever the future may bring.

Monday, November 1, 2010

The Quiet Devastation of Alzheimer’s Disease

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. Estate planners and elder law attorneys 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.

Friday, October 29, 2010

Just Say No? Medical Marijuana in Nursing Homes

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?

Wednesday, October 27, 2010

How to Find the Best Long-Term Care Policy

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.  

Monday, October 25, 2010

“Nothing Says Romance More Than A Prenuptial Contract.”

You may have your doubts about the sentiment above (which is also the opening line of a recent article in the Wall Street Journal) but many couples are beginning to see the truth of this statement.  Younger couples, older couples embarking on second marriages, and couples with family businesses or assets to protect are coming to realize that prenuptial agreements can actually take the pressure off a relationship, making more room for romance rather than less.

A recent ruling in Britain’s Supreme Court has thrown prenuptial agreements back into the limelight, not only in the U.K. and Europe, but also here in the United States.  The above-mentioned article in the Wall Street Journal offers a few basic guidelines for couples considering drawing up a pre-nup, the most important of which include: there must be no signs of duress, each party must have their own legal counsel, and nothing concerning children can be fixed in a pre-nup. 

But if you’re on the fence about whether or not a prenuptial agreement is right for you and your spouse-to-be you may be most interested in the final paragraph of the article, which states that “Prenups are romantic... You’re making a provision for somebody. You’re saying, ‘I want you to know now that you’ll be alright’... this should be part of the process of falling in love and going forward with that commitment.”

Friday, October 22, 2010

Take Care in Making Large Gifts to Heirs

Do you have a provision in your will or trust to pass your house on to your kids when you die?  If so, you may want to consider giving the house to them now, before the end of the year. According to this article in the New York Times, doing so could be beneficial to both your heirs and yourself.

 It’s easy to see how your heirs might benefit from receiving at least part of their inheritance now. The lapse in the estate taxes only last through the end of the year, “it is scheduled to come back next year with a vengeance. Unless Congress changes current law, the estate tax rate will be 55 percent (60 percent in some cases) on all but the first $1 million, except for what you bequeath to your spouse or charity.”

What may not be quite as obvious is how gifting a large asset right now can benefit you as the giver.  “By shifting real estate now, you remove the asset and any subsequent increase in its value from your estate — an especially timely move if your property’s value is depressed and you expect it to bounce back at some point. What’s more, if you wind up owing tax on the gift, the rate now is less than it may be later. Barring Congressional action, the tax rate for 2010 is 35 percent, rising to 55 percent on Jan. 1.”

Making such a large gift is not necessarily without its “hurdles” as the article calls them.  Amongst these hurdles include deciding whether you want to continue living in the house, whether to break up interest in the asset or keep it as a cohesive whole, and the potential awkwardness of having a business relationship with family.  The article offers a number of thoughtful solutions to these issues, all well worth considering. 

As beneficial as such a gift may be to both grantor and recipient, we strongly urge you to discuss the details of such a large gift with your estate or financial planner before you take any action.

Wednesday, October 20, 2010

Plan Ahead to Avoid Financial Pitfalls in 2011

A recent article in U.S. News and World Report points out that although “the Great Recession may technically be over... Consumers [still] don't want to spend and are still slowly digging their way out of the mountain of mortgage and personal debt that helped fuel the downturn.” Among those groups who are still struggling the most are seniors and retirees, many of whom took a devastating hit to their retirement investments and savings, and are still struggling to recover.

Unfortunately, according to the article, 2011 may bring with it some new financial concerns for seniors.  Some of the “major money issues” seniors will have to think about in the coming year include a zero cost of living adjustment from the Social Security Administration, changes to certain Medicare policies, a rise in income and capital gains tax rates, and the return of the estate tax, among others.

Although the article itself offers no particular solutions to these financial concerns—it merely gives a warning of what’s to come—there are steps you can take to avoid some of the worst financial pitfalls.  Because each individual situation will be different there is a danger to blindly following (or offering) standard advice across the board.  However, with consultation and careful planning there are a number of strategies estate planners can recommend that may help your family protect your assets now, and when the estate tax returns. Forewarned is forearmed, and taking the time to consult with your estate or financial advisor and plan ahead may be the best action you can take.  

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