Pre-Marital Planning

When contemplating marriage, remember that love may be blind, but it is wise to proceed with both eyes wide open. This wisdom is never truer than when that marriage will form a blended family. After all, both parties are blending their respective assets and, oftentimes, their respective children.

It is estimated that one in three remarriages end in divorce, especially when children are involved. So, how does a couple “unblend” their assets when things do not work out as planned? Further, if the remarriage stays intact when one spouse dies, what happens with the assets of the deceased spouse?

In light of these realities, the parties should consider negotiating and signing a premarital agreement before saying “I do” that addresses these issues. Once the premarital agreement is signed it takes affect when the marriage is legal. The agreement should clarify asset ownership during the marriage, asset disposition upon divorce, spousal support, and asset division upon death.

Once those details are covered, be mindful to ensure that the agreement will withstand future legal challenges. To help make the agreement bullet-proof ensure that both parties:

•  Provide full written disclosure of their assets and liabilities;
•  Provide adequate time for negotiation and reflection well in advance of the wedding day;
•  Ensure that the agreement is voluntary and not unconscionable (i.e., unfair);
•  Ensure that each party understands the consequences of the agreement; and
•  Ensure that each party has independent legal representation.

While admittedly not very “romantic,” a premarital agreement can start the remarriage off on the right footing. Not only will both future spouses know what their future rights and responsibilities will be, but their children will know the rules of the road, too.

When it comes to assets, certain rights that attach only after the marriage is official need to be addressed. One common asset that requires careful attention is your retirement fund. If it is an ERISA retirement fund, then your surviving spouse is automatically the primary beneficiary, even if your own children have been designated as your primary beneficiaries. Accordingly, your premarital agreement should address this and provide that your new spouse agrees to “waive” these ERISA rights after the wedding.

Another area of concern involves gifts or an inheritance received after the wedding. For example, if you will inherit the family business from your parents, then this needs to be addressed in your premarital agreement so it will be your “separate property” when received.

Naturally, the estate plans of both parties will need to be created or revised after the wedding so they are consistent with the agreed disposition of assets upon the death of one spouse or after the deaths of both spouses. Thereafter, careful attention is required to ensure that all separate and marital assets are titled and designated to pass as planned.

If you are married already, consider a “post-nuptial agreement” to address all of these “premarital agreement” matters.

© 2015 Integrity Marketing Solutions. All Rights Reserved.

Directing Your Health Care Decisions

Something very important happened on April 14, 2003. Did you miss it? That is the required compliance date for the Health Insurance Portability and Accountability Act (HIPAA), a law which was enacted in 1996. The HIPAA “privacy rule” imposes strict guidelines on the disclosure of “protected health information” (or PHI) without a medical patient’s express permission. These privacy protections are designed to help us, but they can be problematic if your spouse or other loved one needs to “go to bat for you” with health care providers when you are incapacitated due to an injury or illness.

What HIPAA Requires

Before your spouse or loved one can discuss your health care condition, obtain your medical records or seek a second opinion, they must have a written document executed by you, with very specific language required by HIPAA. Yes, you read that right. Even spouses do not have such authority simply by virtue of their wedding vows to care for one another “in sickness” and in health.

Advance Health Care Directives

Every comprehensive estate plan must include an Advance Health Care Directive (also known by other names, like a Health Care Proxy) that is HIPAA compliant. Period. This goes for every adult American who has reached his or her 18th birthday. With adult children tending to wait longer than previous generations to marry and with aging parents living longer than past generations, this has become a uniquely “Baby Boomer” challenge. Are you in that “Sandwich Generation” perhaps? A key component of the Advance Health Care Directive is the Durable Power of Attorney for Health Care Decisions through which the patient appoints Agents to make his or her medical decisions when the patient is unable to do so.

The Three Variables

There are three variables at play when it comes to making these essential health care decisions. Unfortunately, we only know one of the three right now. However, that variable is why plans need to be made today, not tomorrow.

The first variable we do not know is what and when. What is going to trigger the need for your Agent to act? Is it an auto accident five minutes from now or a stroke down the road?

The second variable we do not know is health care related. What technology, treatments, procedures and pharmaceuticals will be available at that what and when time? What insurance will be around to pay for your care? As you can see these are wild card circumstances we cannot anticipate.

The third variable is the one you know today. Who do you know and trust to make your what and when decisions based on the available technology, treatments, procedures and pharmaceuticals … should you ever be unable to make your own decisions?

Communication is Key

As with most important areas in life, communication with your spouse and loved ones is key when it comes to making life and death health care decisions for you. Have you had the conversation? If you are unsure where to start, then you might consider a resource called “Five Wishes” produced by “Aging with Dignity” which is available online.

In addition to your spouse and loved ones, you should discuss your “wishes” with your primary care physician and spiritual advisor. That way everyone will be on the “same book and page” when needed.

© 2015 Integrity Marketing Solutions. All Rights Reserved.

Understanding the Probate Process

Simply put, probate is a court process through which a decedent’s assets are identified, any debts, taxes or expenses paid, and, finally, the inheritance is either distributed outright to loved ones or is administered and distributed to them through a trust.

Identify, Gather & Manage

Since organization and recordkeeping are the dynamic duo when it comes to a successful probate, most probate problems can be mitigated, if not avoided completely, by minding the basics. Many families have found helpful tools to simplify this task. For example, hard copy and digital organizational tools that are easy to use and comprehensive may be found on the Internet. Whatever tool one chooses to use, the only one that will work is the one you will use … and maintain.

Settle Financial Matters

Rarely does anyone leave this life without a few financial matters to resolve. Whether the roofer, the IRS or the funeral home, chances are good your estate will have some financial liabilities to pay on your behalf. Except for “known” creditors, all states provide for an outside time limit for unsecured creditors to make a claim against the estate. This provides protection for estate beneficiaries after the probate is closed.

Inheritance Distributions

When using a will, there are three basic approaches to inheritance distributions at the close of the probate process.

• Outright: As soon as the probate steps are completed, the inheritance is distributed without any “strings” attached.
• Staggered: Outright distributions are made at certain beneficiary ages or triggering events (e.g., one-half at age 25 with the balance at age 30).
• Long-Term Discretionary: Distributions are made to or for the benefit of beneficiaries in the judgment of the trustee, offering the greatest protection from squandering, divorces, lawsuits or bankruptcies.

Probate Perspectives

Probate is not the same in every state. Therefore, given the mobile nature of our society, you should have your estate plan reviewed and perhaps revised if you relocate. For instance, in some states the probate process is simple and streamlined; while in others it can be more complex and cumbersome.

Significantly, too, some states provide minimum statutory fees to the attorney and estate fiduciary based on the value of the assets subject to probate. Other states require the attorney and estate fiduciary to track their actual time and the probate judge ultimately approves, disapproves or revises the fees based on whether they are reasonable.

Not surprisingly, in those states where probate is more complex, cumbersome and expensive, many estate planning attorneys advise clients to avoid probate. Common probate avoidance approaches include funded revocable living trusts, transfer on death designations and beneficiary designations for life insurance and retirement funds.

Ultimately, an estate planning attorney can advise you regarding the benefits and detriments of probate planning or probate avoidance planning.

© 2015 Integrity Marketing Solutions. All Rights Reserved.

More Reasons to Plan

If wishes were horses, then rides would be free. In a perfect world all families would remain connected relationally and geographically throughout all stages of life. When we grew old and needed long-term care, then our family would care for us either in our own home or in their homes. And, if our family members were no longer able to care for us, then we would have ample personal resources to pay for professional care in an institutional setting. At life’s end, there would be assets left over for our loved ones to inherit.

But this is not a perfect world.

On the other hand, reality is summed up well in what has been called the 70-70-70 Problem:
• 70 percent of the people over age 65 will need some form of long-term care during their remaining lives;
• 70 percent of the public does not believe they will ever need such care; and
• 70 percent of the public mistakenly thinks that if they did need such care, it is already covered by their Medicare insurance.

What About Medicaid Planning?
Most Americans qualify for Medicaid by default. They thought they were among the 30 percent who would dodge the bullet, but they go into long-term care and spend down their own resources to the eligibility limits. There was no planning to protect any of their assets. In fact, even assets that were “non-countable” in determining initial Medicaid eligibility may later be subject to Medicaid Estate Recovery at death.

What many people don’t realize, however, is that Medicaid planning can help preserve family assets, especially when one spouse needs long-term care and the other spouse needs financial security. Every case has its own unique issues and legal strategies to meet those unique issues. This definitely is not a “do-it-yourself” project, the Medicaid rules are very strict and such planning should only be done with an experienced elder law attorney. Mistakes could trigger severe penalties in the form of lengthy periods of ineligibility.

One approach is to acquire sufficient long-term care insurance to cover the period between the initial transfers and the Medicaid application filing. This preserves more personal resources on the front end until filing and on the back end should a period of ineligibility be assessed. Again, Medicaid planning is not a do-it-yourself project. Consult an experienced elder law attorney with a thorough knowledge of Medicaid.

State Filial Responsibility Laws
Can adult children be held financially responsible for the care of their indigent parents? The laws of 29 states and the Commonwealth of Puerto Rico say yes. In fact, at one time about 45 states had filial responsibility laws on the books until Medicaid assumed greater responsibility for the long-term care of indigent parents. While not all states with these laws on the books are actively enforcing them, that does not mean you should ignore them.

With state and federal Medicaid funds stretched and no end in sight with our aging population, circumstances could turn on a dime. If your parents are able to qualify physically but unable to pay financially for long-term care insurance, then this might be the perfect time to consider paying their premiums yourself or along with other family members.

© 2015 Integrity Marketing Solutions. All Rights Reserved.

Estate Planning Hazards

Life is chock full of road hazards. Estate planning helps avoid the known hazards and best prepare for those unknown by learning from the experiences of others who have been down the road before. Let’s consider two common sources of dangerous estate planning hazards: beneficiary designations and joint tenancy ownership.

Beneficiary Designations:

• virtually any titled asset may pass directly upon death
• non-probate transfer laws
• simple; no attorney required

… But watch out for:

• certain terms of your estate planning legal documents (i.e., will, trust) not applying
• disinheriting some of your heirs
• wishes not taking intended effect due to out-of-date beneficiary designations

Joint Tenancy Ownership:

• most common form of asset ownership (i.e., bank or brokerage account, real estate)
• Tenancy by the Entireties is available to assets held solely between spouses
• trusted non-spouses may be added as joint tenants (i.e., family members, friends)
• upon one joint tenant’s death, the remaining joint tenants continue to own the asset (without probate)

… But watch out for:

• one living joint tenant must not be incapacitated
• liabilities through your joint tenant (i.e., divorces, lawsuits, creditors)
• remarrying may ultimately send assets from the children of the previous marriage to new spouse (or stepchildren)

Closing Thoughts

As with any decisions affecting beneficiary designations and asset titling, be sure to consult with an experienced estate planning attorney. Otherwise, you may fall victim to some extremely unpleasant legal hazards.

© 2015 Integrity Marketing Solutions. All Rights Reserved.

Crucial Coordination

Sometimes we are most vulnerable in life when we do not know what we do not know. You may need to shore up your estate plan to provide smooth sailing ahead for you, loved ones and assets.

Estate Plan Essentials
While a distribution plan for assets after death is an important aspect of estate planning, the process begins with life planning. Our bodies and minds may not keep up with our rise in birthdays. Falls, strokes or Alzheimer’s could leave us legally incapacitated.

What then?

You need legally appointed trusted family members or friends making your personal, health care and financial decisions, including carrying through your wishes of appointed guardians for any minor children in the home. Take steps to allocate inheritance based on what you know about each unique circumstance – special needs, problems with addiction, divorce, bankruptcy…

Without a plan, a judge will decide, costing your family money, time, emotions and privacy.

Retirement Plan Requirements
If you want to protect retirement fund distributions – usually a large part of estates — from the potential creditors of adult children, then special alternative arrangements need to be made now. As in the case of Clark v. Rameker, “retirement funds” were not entitled to any special asset protection treatment, subject to the creditors of direct beneficiaries who are individuals.

Long-Term Care Logistics
Expect sticker shock like $7,000/mo. for long-term care. Cash and savings pay initial expenses, then liquidated investments. Finally, retirement dollars are withdrawn and subject to ordinary rates of income taxation. Created with pre-tax dollars, the funds have grown tax-deferred until withdrawal.

Elder law attorneys can help you qualify for Medicaid or acquire long-term care insurance that allows you access to the cash value of the policy, pays for your long-term care, if needed, or a life insurance death benefit to your loved ones, if not.

Work with experienced legal counsel who can coordinate a seaworthy strategy with your financial advisor and insurance professional.

© 2015 Integrity Marketing Solutions. All Rights Reserved.

No Federal Estate Tax, No Problem?

The 2015 federal estate tax exemption will rise to $5.43 million per individual (from $5.34 million in 2014) due to an inflation adjustment. This means only about 3,700 estates, or 0.12% of the total, are expected to owe federal estate tax this year.
But don’t be fooled. Regardless of federal estate taxes, issues of personal dignity, family conflict and your life’s legacy are fundamental to proper estate planning.

Your Personal Dignity

Important decisions affecting you must be made, despite your lack of legal capacity, including the payment of bills or taxes. At 18, an adult must appoint agents through proper Durable Powers Of Attorney to make personal, health care and financial decisions in the event of incapacity. You can legally prepare to ensure that your wishes are honored should the worst happen.

Avoiding Family Conflict

20 percent of Americans age 50 and over in an AARP/Scudder Investment Program study cited problems among surviving family members due to their inheritance. Fortunately, the laws of most states provide solutions for the specific distribution of cash and tangible personal property. Communicating these solutions is key and making updates to documentation to match changes in situations or goals.

Protecting Your Legacy

Proper planning can ensure your family is provided with a thoughtfully prepared, efficiently implemented and effectively administered estate plan that protects your legacy at death and for generations to come.

About Those Taxes …

As of January 1, 2015, 19 states and the District of Columbia will collect a state death tax. State death taxes, which kick in for estates valued at only $1 million or less in several states, could take a big bite out of your legacy. Also, be aware that many states impose a nonresident estate tax on real and tangible personal property situated within the state. So even if you reside in a state without a death tax but own property in another state, death taxes could still be an issue.

© 2015 Integrity Marketing Solutions. All Rights Reserved.

SWEETHEART WILLS

Nothing says “I love you” like a last will and testament, especially “sweetheart wills.”

Most married couples want to honor their vows to care for one another, “as long as we both shall live.” Sweetheart wills designate the surviving spouse as the direct inheritor of everything owned, separately or jointly. Fortunately, if desired, one may specify cherished collections, etc., instead to other loved ones or charities.

If your family is blended, then watch out! Without careful planning, you will leave everything to your new spouse, with nothing left for your own children.

Some states appoint guardians (back-up parents) for orphaned minor children through a will. Always select an additional successor or two who share your basic beliefs and values, in case the primary guardian you appoint is unwilling or unable when needed. Get their, “Okay,” before you appoint them.

A valid will does not automatically avoid probate if you become ill or die. Who will handle your financial or medical decisions if you are legally incapacitated? A will only has legal authority upon your death and the subsequent delivery of your original will to the probate court within the timeframe required by statute. The red tape of probate involves an attorney, a probate judge, additional expenses and a public processing of your assets, of which anyone can get a copy.

These potential drawbacks can be avoided. Before you make any legal moves regarding your estate, make sure you contact an experienced estate planning attorney to fully educate you on your options.

THE WILL TO PLAN

Although it may feel life is busier than ever, the Bureau of Labor Statistics claim five hours of each day is “leisure” time spent watching TV, reading, playing sports or games — but not estate planning. A Harris Interactive poll supports that some subjects would prefer doing taxes or getting a root canal!

Most Don’t Have a Will
Do you have a Will, one of the most basic estate planning documents? Many don’t, including parents with minor children, a document that would name back-up parents in the event the children are orphaned. What about a Living Will to direct end-of-life medical procedures? The same Harris study found half of those over 65 have a financial planner to handle the funds but no healthcare power in place, even though we realize the need to get these basic planning plans into place.

Despite Good Intentions
Psychologist Piers Steel of the University of Calgary says procrastination keeps folks from planning. However, his studies in his book, “The Procrastination Equation,” revealed that putting off making these quite difficult decisions actually creates a sense of more pressure and lowers the overall well-being of an individual, including health and salaries!

Beating Procrastination
Having a sound plan in place provides peace of mind. Steel says the trick is to reframe what appears to be a broad, ambitious task into concrete, manageable, immediate goals.

Start by calling and scheduling an initial consultation. Focus on one quick, easy decision at a time.

Pick up the phone.

The Charitable Remainder Trust:
A Great Way to Donate

Americans are known for their individual and collective generosity, whether in good or bad economic times. Interestingly, the charitable tax deduction has been part of the Internal Revenue Code since the federal taxation of taxpayer income began. Accordingly, taxpayers have some control over whether to be involuntary philanthropists (paying taxes) or to be voluntary philanthropists (making charitable gifts). One practical roadblock to making substantial gifts is the continuing need of many taxpayers for the lifetime income generated by their assets, even highly appreciated assets that generate little or no income. Fortunately, charitable trusts are designed to allow you to donate a generous gift to your charity, while benefiting yourself and your loved ones with tax and non-tax benefits.

The Charitable Remainder Trust
The Charitable Remainder Trust (CRT) is a popular form of “split-interest” charitable gifting. In short, a CRT can help you increase your current income, enjoy current income tax deductions and eventually leave a substantial financial legacy for your favorite charity (or charities).Is something this good for taxpayers and charities too good to be true? No, actually Internal Revenue Code § 664 was enacted in 1969, specifically authorizing “split-interest gifts” like the CRT. The federal government sought to encourage taxpayers to support private sector charities by making it possible for charitably-minded taxpayers to give and receive.

If you think a split-interest gift like this might fit into your charitable plans, call our office to learn more or schedule an appointment. Every individual circumstance is different, so we would need to look at the entire picture to know whether this might be a good strategy for you.