Category Archives: Uncategorized

February 27, 2018 admin

Long-Term Care Insurance 101

Statistically, most people who are age 65 and older will need some form of long -term care at some point in their lives. That care could be anything from in-home care to a long-term stay in a skilled nursing home. The costs for this continue to rise. The median cost of a semi-private room in a nursing home in 2017 is $7,148 a month! When you consider your options, there are only three ways to pay for that care: 1) Private pay; 2) Government benefits (Medicaid); and 3) Long-Term Care Insurance (LTCi).

If you have a high income that will continue even when you are not working, you may be able to pay for your care out of pocket. Medicaid, on the other hand, only pays for those who have minimal assets and income. For the rest of us, LTCi is the best way to pay for care, if we can afford the premiums and are healthy enough to qualify. Ultimately, LTCi is there to protect your life savings from the devastating costs of long-term care.

LTCi can allow you to maintain your independence and provide you with peace of mind as you enter your golden years. These policies will pay for care when you need assistance with Activities of Daily Living (ADL’s) such as bathing, toileting, dressing, eating, and getting in and out of bed or when you need a protective environment due to Alzheimer’s or dementia. There are a couple of options available as you contemplate a long-term care insurance policy: Traditional LTCi and Asset-Based LTCi.

Traditional LTCi

With traditional LTCi policies, you pay a monthly premium and the policy pays only if you need long-term care. Most policies have common features and benefits, to include the premium amount, the waiting period, the benefit period, the benefit triggers and the level of care covered. Each of these features and benefits are essential to understand when tailoring a policy that meets you current and (anticipated) future cash flow, how long you can afford to pay out of pocket before the insurance starts, how much and how long the insurance will pay, when benefits begin, and what type of care is covered (e.g., in-home care through skilled nursing care). Since insurance policies are “contracts,” you should get appropriate legal advice before signing on the dotted line.

Problems with Traditional LTCi

Many companies who issued traditional LTCi policies are no longer doing so. Why? More policy holders were wearing out mentally and physically, but living longer than forecast. Other companies have elected to offset the cost of such increased claims by increasing premiums. If the premiums are increased across the board, it is permissible. As a result, some consumers have cancelled their policies.

Asset-Based LTCi

Some companies have recently begun offering asset-based LTCi products. With this type of LTCi, consumers do not pay premiums for the basic coverage. The consumer can take existing investments, including qualified retirement funds in some cases, and convert them into products that utilize life insurance and/or annuities. This “hybrid” life insurance or annuity will pay out during your lifetime, if you need long term care. If you die without needing care, the benefit passes to your beneficiaries.

Buyer Beware

Regardless of the type of policy you decide to get, be sure the insurance company will be around to pay claims when you need them. Make certain that the insurer is rated as financially solid by one of the services that rates insurance companies, such as A.M. Best, Moodys, Standard and Poor’s or Weiss.

January 26, 2018 admin

Donor-Advised Funds 101

Giving USA 2017 recently reported that charitable giving continued to rise last year, with an estimated $390 billion donated to charitable causes.

The report found that total giving in the U.S. reached record levels for the third year in a row. This increase and the overall size of charitable contributions reveals how important charities are in our society. Total giving to charitable organizations amounted to 2.1% of the GDP. That is an increase of 2.7% in current dollars and 1.4% in inflation-adjusted dollars from 2015.

Traditionally, religious organizations see the largest share of charitable donations, with many of these contributions going to the donor’s local place of worship. The same was true in 2016, since there was a 3.0% increase in donations. Religious donations accounted for 32% of all donations, or $122.94 billion.

Have you ever heard of a donor-advised fund (DAF)? This increasingly popular method of giving may be worth considering for your own unique circumstances, especially if you want to make a bigger impact with your own giving, whether sacred or secular.

The Donor-Advised Fund (DAF)

The DAF is a philanthropic vehicle established by a public charity that enables you to make a charitable contribution, receive an immediate tax benefit and also advise the DAF regarding grants from the fund over time.

Some say a DAF is like a charitable savings account: a donor contributes to the fund (makes a deposit) when she wants and then recommends grants to her favorite charity when ready.

Here are the basic steps to a Donor-Advised Fund:

You make an irrevocable contribution of personal assets;
You get the maximum IRS tax deduction immediately (similar to giving directly to your favorite charity);
You choose the name of your DAF account, select its current and successor advisors and the charitable beneficiary or beneficiaries;
Your contribution is added to the DAF account where it is invested and grows tax-free; and
At any time thereafter, you can recommend grants from your DAF account to any qualified charity.

A DAF is typically a separately-identified account that is maintained and operated by a section 501(c)(3) organization (known as the sponsoring organization). Each account is made up of contributions from individual donors. When the donor makes the contribution, the organization is legally in control of that asset, but the donor (or the donor’s representative) still has advisory privileges regarding the investment of account assets and the distribution of funds to charity.

DAF Abuse

The IRS is on the lookout for organizations that may misuse DAFs. These organizations – promoted as DAFs – may be established for the purpose of generating questionable charitable deductions and providing impermissible economic benefits to donors (such as tax-sheltered investment income for the donors) and management fees for promoters. Do your due diligence and make sure that you are working with a reputable and legal DAF.

In the end, be sure a DAF fits within your overall estate plan for you and your loved ones.

December 28, 2017 admin

The “3 P’s” of Estate Planning

Just like cleaning the garage, many of us are very content to procrastinate when it comes to completing our estate plans. Like the garage, we may be overwhelmed and need a nudge to get started. It is the same with estate planning. Your first step is to understand the “Three P’s” — People, Property, and Plans — and how they relate to your unique circumstances.

People

This should be rather straightforward: identify the most important people in your life. Start with yourself, your spouse (if married), children, grandchildren, your parents, in-laws, siblings and other family members or close friends.

Next, list any charities, special causes, schools, or faith organizations that are important to you. Take the time to consider the positive impact that others have had on your life. Any pets? Do not forget those “friends” whether they have feathers, fins, or fur. Start making that list and take notes, if helpful. This is where the planning process (and fun) really starts.

Property

Inventory your assets in general, not every dollar or heirloom. Start by creating a list of the assets you own or control. Do not worry about the specific account numbers or dollar values. All you need is a rough estimate of what you have.

For example, list cash, stocks, bonds, and real estate, along with their round number values. You should also note whether you own a given assets in “joint tenancy” or as a “tenant in common” with someone else. While you are at it, identify any wills, trust agreements, life insurance (the death benefit, not the cash value), business interests and any inheritances you may receive.

Plans

Next, think about the plans you want to make for the people on your list (including yourself) and what should be done with the inventoried assets, if you become incapacitated or at your death. This is where the heavy lifting comes in (thinking-wise).

Here are some important questions to consider:

Who do you want to make your personal, health care, and financial decisions, if you become incapacitated due to an injury, illness or old age?
Who do you want to raise your minor children, if orphaned?
How do you want your assets distributed to your loved ones and charities?
Do you need to provide for someone in your family with special needs?
Do you need to protect the inheritance from some of your loved ones, as well as for them?

It is true that squandering, divorces, lawsuits and even bankruptcies have devoured many inheritances, when left to irresponsible heirs. Careful planning can help make sure that an inheritance is a blessing and not a curse.

Do you want your estate to avoid or pass through probate? Do you know the difference?
Do you need to minimize estate taxes and maximize the elimination of capital gains taxes?
Would you rather be a “voluntary philanthropist” versus an “involuntary philanthropist” when choosing which assets to benefit your favorite people and causes?

This is a short list of the considerations you should address when approaching the estate planning process. In the end, these “Three P’s” will help you enjoy estate planning peace of mind. The garage can wait … for now.

November 27, 2017 admin

Ten Tips for Aging in Place

Who wants to go to a nursing home? No one! Some of us may have no choice. However, by developing a plan for aging in place, we may be able to prolong or even avoid going to a nursing home. Consider the following ten tips to help you develop a plan to stay right where you are – home.

Talk with family members, so they are aware of your wishes. Speaking with trusted family members ahead of time ensures that you are all “on the same page.” This makes things much easier. Make sure that they know who your doctors are, who your advisors are, etc. Doing so allows them to continue your plan, if you are no longer able to do so.
Get estate plan documents in place. It is important to have legal documents like a durable financial power of attorney, durable medical power of attorney and advanced medical directive in place, in case you become incompetent. These documents allow you to name a trusted loved one to make legal decisions and health care decisions consistent with your wishes. Without these documents, you will find yourself in an unpleasant court process that could have been easily avoided.
Make safety modifications to your home. While we all love being at home, there are hazards that can cause accidents. Adding things such as support bars in the bathroom, a walk-in bathtub and a chair lift (if you have stairs) can prevent injuries from falls that can require a long-term stay in a care facility.
Hire someone to help with chores and/or caregiving. Get help with activities that most often lead to accidents. This is a great way to prolong your ability to live at home. Accidents from activities like cleaning house or bathing can and do send people directly to a nursing home. Prevent the preventable.
Make a care plan, in case you need in-home assistance down the road. Even if you do not need anyone to help now, you may need someone down the road. It is important to decide ahead of time who would provide care, how you will pay for it, who could provide meal delivery, etc.
Make sure to utilize all options for mobility. If you have difficulty getting around the house and/or can no longer drive, it is important to maximize your options for mobility. Decide whether you want a power chair or motorized scooter. Learn your options for private transportation companies for seniors. They can take you to doctor’s appointments, the grocery store, etc.
Get involved with local senior groups to ensure continued socialization. It is important to have regular interaction with others. Doing so, enhances your quality of life and keeps your mind sharp.
Utilize a medical alert system. Make sure you can contact emergency services if you fall or have some other medical emergency. This can mean the difference between life and death.
Learn and take advantage of technology. Many of the things that used to require a “trip,” such as paying bills, can be done at home on a computer or tablet. Use a tablet as a reading device or to play games to help keep your mind stimulated.
Consider getting a pet. Having a pet can greatly enhance your quality of life. A pet can help reduce the feeling of loneliness that can come with living alone.

Use these tips and develop a plan to age in place.

October 30, 2017 admin

Beneficiary Designation Basics

“Oh, I’ll just put down my nephew as the beneficiary of my life insurance policy at work.” Looking back, it was almost an afterthought.

That was 10 years ago on your first day of new employee orientation, when you were right out of school. You now have a spouse, one child and another on the way. You have not thought about updating the beneficiary designation in light of your changed circumstances.

Beneficiary designations are important and can have serious consequences. On the one hand, the lump sum payment of life insurance to your nephew may be just enough to fuel his last drug and alcohol bender in Vegas. At the same time, your widowed spouse and minor children will default on the mortgage and struggle to make ends meet. Unfortunately, this is not uncommon.

Naming Beneficiaries

Make sure that your primary and secondary beneficiary designations are up-to-date and are coordinated with your overall estate plan. Do not forget to designate a secondary beneficiary, in case your primary beneficiary fails to survive you. Otherwise, the proceeds will become subject to probate. In most instances, this is best avoided, unless done by design as part of a comprehensive estate plan.

Did you know that designating a beneficiary for your life insurance policy has absolutely no effect on your retirement plan designation? Each of your life insurance policies and retirement accounts requires a separate beneficiary designation form. This provides considerable flexibility. For example, you could have the same primary (your spouse) and the same secondary (your children) designated on each. Alternatively, you could designate any other combination of family, friends or charities.

In addition, if you have more than one primary or secondary beneficiary, you will need to determine the percentage of the proceeds each is to receive. For example, if your two sons are your primary beneficiaries, you might split the proceeds at 50 percent to each. You should also keep in mind that if your two sons are minors, policy proceeds and plan distributions typically will not transfer directly to them, until legal adulthood. The court will, therefore, need to appoint an adult to oversee the proceeds until each son respectively reaches age 18 or 21 (depending on your state).

Your Will or Trust?

Did you know that beneficiary designations pass independent of any distributions directed under your estate planning documents like a Last Will and Testament or a Revocable Living Trust? In our example above, the nephew would inherit the life insurance proceeds, even though a Last Will and Testament states that all assets are to be distributed to the surviving spouse. If you have minor children or loved ones with special needs, then you may want to designate your Last Will and Testament or Revocable Living Trust as the beneficiary. In that way, the proceeds will be administered and distributed according to your instructions.

Keep Them Up-to-Date

As you can see, it is imperative that you keep your beneficiary designations up-to-date and aligned with your overall estate planning objectives. A good rule of thumb is to review your designated beneficiaries and your estate planning legal documents at least every two years or after any major life event, like a marriage, divorce, or the birth or adoption of a child.

September 28, 2017 admin

Buy-Sell Basics

Imagine that you have been in business with your best friend from high school for about 20 years. One day, he sits down in the chair across from your desk and tells you that he is getting a divorce. After expressing your sentiments, he then tells you that he is moving to Las Vegas to become a blackjack dealer. Therefore, he wants to cash out his share of the business and start his new life in Nevada.

What is a Buy-Sell Agreement?

A prudent way to protect the business from such news, is to create a buy-sell agreement as soon as possible. This document lets the business continue operations in the event that something catastrophic happens to an owner, an owner decides to retire or decides to take a job at a casino on the Strip.

The buy-sell agreement immediately defines a buyer’s interest and stipulates the triggers that can prompt a change in ownership. It facilitates continuity of management without involvement from unwanted shareholders or partners. It also ensures that profits need not be shared with unwanted individuals. Determining how the departing owner (or a deceased owner’s family) will be compensated, eliminates unneeded conflict in calculating the value of an owner’s interest or how much management authority a decedent’s loved ones should have as the business continues operations.

Types of Buy-Sell Agreements

There are two basic ways to structure a buy-sell agreement: (i) a cross-purchase agreement; and (ii) an entity purchase agreement. With a cross-purchase agreement, the remaining owner buys the departing owner’s interest directly. With an entity purchase agreement, the business is the buyer of the departing owner’s interest. In addition, there is a “hybrid” approach that combines elements of the first two structures. However, it is less common.

Purchase Price and Valuation

Once the structure is set, the purchase price must be determined. When performing a valuation of a business interest, the value of the assets held by the business, goodwill, depreciation and the accounting method used to conduct business operations should be examined. A third-party professional should be engaged for this task. The valuation will determine the value of the business and apportion that value between the owners, given their relative ownership interests.

Insurance

Another consideration is to guard against an unforeseen event that could cripple the entire business. Therefore, business owners (or the company) should purchase life insurance policies on the life of each co-owner. If one owner dies, the remaining owner (or company) would have the insurance proceeds to pay the surviving family members for the decedent’s interest in the business.

Estate Planning

Finally, buy-sell agreements can be worthwhile estate planning tools for business owners, given the document’s ability to settle most disposition and management issues before they arise.

There are numerous benefits to creating a buy-sell agreement for your business and your loved ones. Think of it as an “estate plan” for the business. However, nothing will happen unless you take action. Procrastination is, after all, the deathbed of good intentions. Do not delay.

August 31, 2017 admin

Choosing an Assisted Living Facility

Deciding whether to put a loved one in an assisted living facility is a big decision. It can be a difficult and even traumatic time for your loved one. As a result, choosing the right facility is essential.

Some Warning Signs

Here are common warning signs shared by facilities to avoid:

Poor attitudes of the nurse’s aides;
Bad opinions of the residents about the facility;
High noise levels in the facility;
The facility discourages you from visiting other facilities before making a decision;
The facility does not allow pop-in or unscheduled visits;
The facility is not adequately staffed; and
The facility does not have adequate life enrichment activities.

Each warning sign is cause for concern. However, if a facility has more than one, then you should look elsewhere. There are also some other considerations.

Costs & Services

You must know the monthly costs and what services are covered by the costs. Assisted living costs are typically lower than the costs of nursing home care. Some facilities have tiered pricing, depending on the level of care/services provided. You should determine if there will be extra charges for some services beyond the normal monthly rate. You then need to decide how to pay for the care. With some exceptions, Medicaid does not pay for assisted living care. However, most modern long-term care insurance policies will. If you are a qualifying veteran or widow, you may qualify for Aid and Attendance benefits to help pay for care.

Care Provided

If the facility meets your budget, look at the quality and level of care provided. Does the facility offer help with the activities of daily living that your loved one needs? Make a list of the areas where your loved one needs assistance and ask how the staff will ensure that those needs are met. If your loved one has a cognitive impairment, are there safeguards in place to protect against wandering? Sometimes it is necessary to administer medications. Does the facility have adequate and proper staff to do so? How does the facility coordinate and ensure access to doctors, dentists or therapists in the community?

Meals & Nutrition

Another important consideration is the food service offered at the facility. Does the food taste good? Does the facility offer balanced meals and a variety of foods? Is the dining facility itself clean and inviting? Is it the kind of environment where your loved one will want to sit, eat and talk with other residents? Does the facility offer room service, if the resident does not feel up to visiting the dining hall? Does it cater to special diets, if necessary?

Quality of Life

What kinds of social activities does the facility offer? Does it have a balanced assortment of activities in the facility to entertain and engage the residents? Does the facility provide access to a variety of activities in the community? Providing access to a variety of activities, both in the facility and in the community, is a great way to promote socialization and increase the quality of life.

Finally, and most importantly, does the facility “feel like” home?

July 24, 2017 admin

Pre-Marital Planning

Congratulations. A wedding is a big event. It takes a lot of planning to make the big day a success.

Hindsight is 20/20

Like so many things in life, when something does not play out as planned, we tend to look back and try to learn from our mistakes. What would I have done then, knowing what I know now? In many instances, a bit more planning and better information could have made all the difference. For instance, a catered wedding reception in a beautiful city park sounds wonderful. On the other hand, if it is a February wedding in Fargo, then maybe the warm confines of the American Legion hall might be a better alternative.

Marital Reality

The same can be said for another aspect of pre-marital planning. Beyond renting the hall and hiring a DJ for the reception, have you considered any planning to protect your assets and loved ones in the event of a divorce? This is definitely not the most exciting or romantic topic to consider. On the other hand, in the context of a family business, your family members and key employees may not want to be in business with your future ex-spouse.

According to commonly cited statistics, our nation’s divorce rate is high. It is even higher for those who were married before. If you are entering a marriage with significant assets or children to protect, then you should consider a pre-marital agreement.

The laws of every state regarding the division of property in divorce can be complicated and may vary dramatically from state to state. Each spouse typically retains his or her “separate property,” which is the property owned prior to the marriage and any property received as a gift or an inheritance during marriage. But a “prenup” can help smooth out some of the rough spots, if the marriage is dissolved.

Premarital Agreements

A premarital, prenuptial or ante-nuptial agreement is a written contract signed by the two individuals about to be married. Signing the agreement may mean that one or both of the individuals are giving up some rights he or she might otherwise enjoy under the law, in the event of divorce or death. Along with some restrictions regarding what such an agreement can contain (e.g., there is no waiving of a child support obligations), for a premarital agreement to be valid, it should be:

In writing and signed by each of the future spouses;
Accompanied by a complete financial disclosure by each of the future spouses prior to signing;
Reviewed by separate attorneys representing each party before signing; and
Presented to both parties with sufficient time before the wedding for an independent legal review.

Premarital agreements can be very effective vehicles to ensure that assets remain in the family. However, they do have some drawbacks, such as being challenged in a divorce because assets were not disclosed at the time of the signing or one spouse felt pressured into signing on the eve of the wedding.

Final Thoughts

You can only control what you can control in life, but what you control can make all of the difference. The same thing is true with pre-marital planning. Love may be blind, but it is best to enter a marriage with both eyes open.

June 22, 2017 admin

Finding Fiduciaries

Baseball Hall of Famer Bob Lemon said that the “two most important things in life are good friends and a strong bullpen.”

Lemon was a great pitcher and not an estate planning attorney. However, he may have been onto something, especially when it comes to choosing someone to handle your financial matters in the event of your incapacity or death.

You want to make sure that you have a strong bullpen when it comes to managing your finances should you become incapacitated, administering your estate at your passing and then distributing what is left to your ultimate beneficiaries as you direct. The same person is often appointed to be responsible for all of this managing, administering and distributing. But who should that person be?

The Usual Lineup

The first people who we ordinarily consider are those closest to us – our own family members. As you go through life, this lineup can include parents, relatives, spouses and adult children.

Family members are the natural choices for a variety of reasons. After all, they know and care about you and your immediate family. What they lack in legal, financial and tax expertise, they may make up for with integrity and common sense. In short, they will not steal from you and yours, and they will know when to get professional assistance to carry out their duties.

On the downside, you may not have any family members with integrity and common sense. Even if they do, will they have the time required to ultimately fulfill all of the legal, financial and tax responsibilities? This is a lot to ask of someone and it can also change family relationships. If Uncle Bob must refuse his nephew’s request to purchase a shiny red sports car, then that can change their family relationship forever. Uncle Bob could also become incapacitated or die himself.

Consider Professional Help

If the downsides of having family members as your financial backups outweigh the upsides, perhaps you might consider going with a professional. Some accountants and attorneys may serve in the managing, administering and distributing roles. Corporate trustees are another alternative.

One of the main advantages is their “independence” from family relationships and emotions. A third-party professional will follow your estate planning instructions and have no hesitancy when it comes to denying the request for a shiny red sports car.

However, a non-family member professional will be on the clock and time is money. Nevertheless, the services provided for a price by the professional would still need to be provided by a family member or someone they hired. In the end, the professional might just be the “closer” you need in your bullpen to ensure victory in late inning play.

Double Team Approach

Alternatively, when it comes to the “bullpen” that manages your finances, administers your estate and distributes the inheritance, consider combining the trusted family member with the competent expertise of a professional third-party. That way your family member can see to matters of the heart, while the professional minds the legal, financial and tax matters.

June 1, 2017 admin

Alzheimer’s: Staying in Control

An Alzheimer’s or dementia diagnosis can be devastating to the whole family. However, there are ways to minimize the negative impact on yourself, your loved ones and your finances. Are you worried about losing control over where you will live, what your life will be like and how your assets will be managed for you?

Where and How Will You Live?

Home sweet home. After all, home is where the heart is. Do you want in-home care, if you can afford it? Alternatively, is there a particular assisted living facility you would prefer, that is in close proximity to your family and friends? If you are ever in a facility, do you want visitors and, if yes, how often? Would you want to spend time outside enjoying nearby parks? You can make these and other choices now, so they will be honored later. However, they should be clearly expressed in appropriate legal documents. At a bare minimum, make sure that you have a current advance health care directive. This will allow trusted loved ones to talk to your doctors, obtain your medical records and advocate for your interests in terms of treatment and day to day care.

How Will Your Assets be Managed?

We have all heard tragic tales of “elder abuse,” particularly when it comes to financial matters. Some of the culprits are strangers, but too often they are someone you know. A general durable power of attorney is essential to empower trusted loved ones to handle routine financial matters from cashing your checks, to paying your bills, to filing your tax returns. Of course, a last will and testament should be executed to express your wishes to the probate court regarding the ultimate distribution of your estate. However, what if you want to avoid probate? If that is your goal, then you might want to consider a different approach that can give you enhanced control over your assets today, tomorrow and even for generations without probate.

Consider a Revocable Living Trust

A revocable living trust (RLT) is a legal agreement that you create to hold title to your assets. You appoint the trustee (asset manager) and the beneficiary. You will normally be the trustee as long as you are able and you are the only beneficiary as long as you are alive. You are the only person who can change the terms of the trust. If you become unable to change the terms yourself, then the trust becomes “irrevocable” and no longer subject to change. Should you get to the point where you are not competent to manage your financial affairs, a successor trustee (previously named by you) can step in and manage those assets, according to the trust terms that you previously established. Even though your general durable power of attorney and advanced health care directive allow you to give “authority” to others so they may act for you, the trust allows you to give that authority along with a mandatory set of instructions for them to follow. That set of instructions you provide can make a huge difference in your quality of life.

Your Life and Lifestyle

Through your custom-designed RLT you can set the rules of the road for your financial life, even if your life includes living with Alzheimer’s or dementia. For example, your RLT can specify that your money be used to pay your adult child to provide care for you in your home, if that is important to you.

As the sage jurist Oliver Wendell Holmes advised, put not your trust is money, put your money in trust. That is advice you can take to the bank.

Estate Planning Updates