Putnam County Estate Planning & Medicaid

Candid Discussions on Memory Loss with Your Physician Are A Better Way to Go

Early diagnosis can improve quality of life if it is dementia, and if it is not, your doctor can discuss other reasons for short-term memory loss and treatment options.
The older the patients, the less likely they are to discuss a memory problem with their doctor during an office visit, according to a review of federal government data from more than 10,000 people. This review, published in Preventing Chronic Disease, also revealed that in 2011 as few as 1 in 4 adults age 45 and older discussed memory problems with their physician during routine checkups. The journal article and its findings were reported in US News & World Report's "Too Few Older Adults Tell Doctors About Memory Loss: Study."
Routine checkups can be a missed opportunity for assessing and discussing memory problems for the majority of older adults. Experts say the stigma of memory loss and dementia may keep some from discussing these issues with their doctors.
Many think that as long as we don't mention it, memory loss might just be normal aging. However, talking about memory troubles doesn't necessarily mean you have dementia. It might be another highly treatable condition, like depression. But if it is related to dementia, recognizing it early is crucial.
Patients can meet with family members and an experienced elder law attorney to get advice on making individualized decisions for their care, rather than relying on last-minute decisions.
Memory loss and the possibility of the early onset of dementia is a difficult discussion for both the physician and patient, particularly in light of the long-term implications. However, early diagnosis of dementia is important, as even mild memory loss from early Alzheimer's disease may be improved with medication (although these prescriptions don't stop the disease's progression).
Having a discussion with your physician about memory loss and whether the lapses are occasional or increasing in frequency will allow your condition to be assessed. If specialized testing is done, then you and your doctor will know if your situation requires treatment or special planning. This is just like any other condition that requires diagnosis and, if indicated, treatment.
Reference: US News & World Report (January 28, 2016) "Too Few Older Adults Tell Doctors about Memory Loss: Study"

Grab the Bull by Both Horns: Money and Death

Don't wait until it's too late to discuss money, death and your personal values with your heirs. If your family can't manage the discussions, then you'll at least know that another tactic is needed.
We don't like to talk about money or death. Our children hate the thought of it, and it's uncomfortable. But Baby Boomers who have not had conversations with their heirs about estate plans need to start talking, and soon. A recent MarketWatch article, "How to tell your kids how much money you're leaving them," provides excellent guidance to help the process along.
A recent survey found that 72% of parents experience at least some reluctance to discussing financial matters with their children. That's not in anyone's best interest. Disorganization and miscommunication can be costly. The costs can be in dollars, as heirs miss tax deadlines and other opportunities sorting through the files, and in hurt feelings and confusion, as children struggle to understand their parents' decisions.
Here are some ideas for boomers who want to start the process:
Decide how you want to communicate. Don't ambush your children with this discussion. Instead, the first conversation should be how to have a discussion about this subject. Tell them what you want to discuss and ask them how they'd like to proceed. Ready them for several conversations so that they're not overwhelmed with everything in one sitting. If you have several kids, ask if they'd like one-on-one conversations or a group talk. Decide on a date for the first conversation, set the agenda, and review your financial and estate planning documents.
Don't start with the bottom line. You might want to jump to the big stuff and discuss who's getting what, but an estate plan involves much more than divvying up assets. It should involve values, which ideally started with parents talking about money with their children when they were young and emphasizing the value of hard work and the importance of saving. If that didn't happen, it's never too late to start. Next, discuss who you plan to designate as your health care power of attorney to make medical decisions in the event you can't do so yourself and who you'll name as your financial power of attorney to handle financial transactions on your behalf. Many people name their spouse as their primary agent, but you should also name a younger person to serve as a secondary agent if the first can't. Also, mention who you plan to name as the executor of your will.
Get some feedback. Children's feelings may be hurt if they don't understand why you designated one child over the other. Tell them your reasoning and ask for input through phrases like "Am I missing anything?" or "Tell me if I'm thinking about this the right way." But remember that you're the ultimate decision maker, and you don't need to change your plans because of your children's opinions. You can just say, "I respect your feelings, but I decided to go ahead with this plan."
If the discussion about powers of attorney and executors doesn't go well, you may think about ending it right there and not discussing your assets. If the discussion goes south, maybe you need to just let your will or trust do the talking after you're dead. You can always include a letter of intent explaining decisions posthumously.
Move carefully with the assets. If you decide to discuss your assets, proceed with caution. There may be arguments over small, symbolic items like jewelry. If so, parents could ask their children which items they'd like the most and do their best to give them some of them.
With dividing up dollars, many middle-class families don't know how much money they'll have left over, if any, after their retirement. That's reason enough to use percentages and not dollar amounts. But adult children still need to know where assets are located if they need to pay for long-term care. If you have these discussions now, it will be much easier to communicate that in the wake of a sudden accident or illness.
Your estate planning attorney can be a helpful part of this conversation, and you may even want to invite your family members to meet with your attorney as a group. You'll be able to cover any technical questions, and this will give your family members a chance to get more comfortable with the concept of life continuing after you are gone.
Reference: MarketWatch (January 29, 2016) "How to tell your kids how much money you're leaving them"

Decision on How to Structure Executor Fees Often Missing in Wills

Without clear direction of what executor fees should be, large estates may get caught up in protracted battles, while medium sized estates may find family members at odds with each other.
A jumbo sized battle in a high profile and seemingly never-ending estate matter highlights what may appear to be a minor detail in estate planning but what is in fact an important consideration: the executor fee.
According to a recent Wall Street Journal article, "Battle Involving Leona Helmsley Estate Spotlights Issue of Executor Pay," the New York attorney general has challenged the proposed fee on the estate of real estate mogul Leona Helmsley. The $100 million sought by the executors, including two of Helmsley's grandchildren, is "astronomical" and should be reduced by 90%, the state Attorney General Eric Schneiderman said.
An issue in this case is that the will does not specify how the executor fees should be calculated, while ruling out the use of a fee schedule in state law, according to the attorney general's filing.
Many wills don't mention executor fees, and state law then determines the fee. Many states base the fee (also called a "commission" in some states) on a sliding percentage of the assets of the estate. In New York, the commission starts at 5% of the first $100,000 and declines to 2% on amounts above $5 million. So in New York, the total fee on a $1 million estate would be $34,000, or 3.4%. There are variations in every state, but the average on an estate of that size is typically about $30,000, or 3%.
Many states allow for extraordinary fees for especially complex estates or estates involved in litigation. States also are different in which assets are included in calculating the executor fee. Some states say only that executor fees must be reasonable, subject to court review. In those states, you should detail fee arrangements to help avoid legal battles later.
In states with fee scales, individuals may cap the fee in their wills at an amount below the amount allowed by statute. Others will provide for payment to an estate planning attorney as executor based on their hourly rate, if they think the cost will be lower than the state's asset-based scale.
In the Helmsley case, the executor fee calculated using the state schedule would have been a $200 million. The $100 million requested by the executors was equivalent to $6,437 an hour based on records of how much time the executors spent working on the estate.
Compensation for executors who are friends or family usually isn't a big deal when the families aren't uber wealthy—particularly when the executors are also beneficiaries. Typically the executors will waive a fee because paying tax on the fee at ordinary-income rates wouldn't be good if instead they receive the money as a bequest tax-free.
If you are asked to serve as someone's executor, be proactive and ask what directions the will contains with regard to executor fees. Being an executor is a time-consuming and complex task, regardless of the size of the estate. There is a lot of responsibility, and the potential for problems, including being sued, is very real.
Reference: The Wall Street Journal (January 29, 2016) "Battle Involving Leona Helmsley Estate Spotlights Issue of Executor Pay"

Will Your Business Die When You Do?

Some businesses do not outlive their owner's involvement, but many do. What does it take for a business to continue when the founder is no longer at the helm?
If you think of your business as a legacy that you wish to pass on to a family member, a partner or a valued employee, start planning now to create a business succession plan. Don't limit your thinking to a family member taking over for you. There are many different ways that small businesses continue after the owner has passed control of the company, but all require advance planning.
Interestingly, business.com's recent post, "The Show Must Go On: The Importance of Business Succession Planning," explains that there are some key underlying factors that determine whether a business succession plan is necessary. In some instances, it's easiest just to sell the business entirely, but other times there are partners who may want the business to continue operating after the founder is no longer involved. After determining if the business has the potential for long-term viability, an owner should have a succession plan that includes selecting a successor and getting the business appraised.
Selecting a Successor
Sometimes a small business owner will select a family member to assume the leadership role. However, you may not know if that person has the skills or experience to make a go of it and ensure that the business will continue to grow. You can't assume your children will want to continue the family business, and there actually may be other business partners or key employees who are better suited to take over. In any event, it's important to select and train your successors in all phases of the business. Then the business owner needs to be able to step aside and let the successors start to make the transition.
The Valuation of the Business
There are three ways to determine the value of a business. Let's look at each one. In the Asset Approach, the value of a business is determined by examining the stated assets and deducting the liabilities. However, this look focuses mainly on the balance sheet and doesn't consider important elements such as market conditions or good will. The Income Approach analyzes business income, requiring a review of past earnings, projecting future earnings and factoring future cash flow and capitalization to arrive at the present or future value of the business. Finally, the Market Approach, which is basically a comprehensive analysis of comparable companies that have been sold in the same industry, accounts for differences in the size, duration, and market risk of the business. An objective evaluation of present or future value of a business requires the services of a business valuation expert such as a CPA with business valuation credentials.
Creating and implementing a well-thought-out succession plan helps business owners in several ways. If the value of the business is determined, there should be no need for valuation in the event of death, and the price for a partner's share can be agreed upon. Also, a succession plan, along with a comprehensive estate plan, can expedite the settlement of an estate if the owner dies.
To develop a business succession plan suitable for you and your business, you should involve trusted advisors, including a CPA, tax advisor and estate planning attorney.
Reference: business.com (January 21, 2016) "The Show Must Go On: The Importance of Business Succession Planning"

Will Boomers Refine the Concept of Inheritance?

Did you spend your entire life accumulating wealth just to leave it to the next generation, or do you plan to spend it all and have a good time while you are still living?
The same generation that redefined American culture is making changes to the concept of inheritance as well. A recent article in Forbes, "How Boomer Parents Feel About Leaving Inheritances," looked at two studies concerning inheritances to find that Baby Boomers are of two minds when it comes to leaving inheritances to their children. Some have no intention of leaving anything behind. They don't lack for generosity; they just have a different way to share. Others are planning on leaving assets to their offspring, but are not sure that their heirs will be able to manage an inheritance wisely.
The Hearts & Wallets report, Funding Life After Work: Impact of Parenthood & Wealth Transfer on Retirement Solutions for Baby Boomers, reveals that roughly 40% of those surveyed plan to leave inheritances. About 30% expect to spend all their money, and the other 30% aren't sure. There's one item that the majority of the parents had in common: they're afraid of running out of money. And those who plan to leave inheritances are extremely terrified of running out of money!
Interestingly, ultra-wealthy parents appear to be more apt to give their kids inheritances, according to a US Trust survey of high net worth individuals with at least $3 million in investable assets. Some 57% of the respondents think it's important to leave a financial inheritance to the next generation—which is somewhat less than the 66% of Gen X'ers and 74% of Millennials who felt this way. However, only 27% of the parents surveyed have told their children how much they are likely to inherit. One reason for this is that only 20% strongly agreed that their children will be prepared to handle the wealth they'll receive.
The wealthier boomer parents interviewed were also more apt to leave inheritances than ones with fewer assets.
Many boomer parents who won't leave inheritances aren't stingy with their cash—they're just giving their children and grandchildren money while they're still around to watch them use the cash to fulfill their dreams (and also watch to be sure it's used wisely). Some call this phenomenon "investing in their children while they are growing."
Those who do plan to leave inheritances see this generosity as "the ultimate insurance policy against ever running out of money" and earmark some of their assets for their children. They'll only tap in retirement for the amount they'll have beyond that. Yet these parents are afraid that they may have to tap into their principal one day.
Regardless of your position on inheritances, having an on-going conversation with heirs about your plan will be more instructive than making family members wait until the will is read to find out what you wanted, and why. If these conversations are difficult, consider including a trusted estate planning attorney in the family discussions.
Reference: Forbes (January 21, 2016) "How Boomer Parents Feel About Leaving Inheritances"

Maybe the Biggest "OOPS!" In Estate Planning

We can't say it often enough: make sure to update your beneficiary designations. Even if you never get divorced or have children, you should still check those designations every few years.
Updating beneficiary designations is usually the simplest part of estate planning, but it's also the most likely part of estate planning to be overlooked. You have beneficiaries on pretty much every account, from 401(k)s to life insurance policies. Do you know who your beneficiaries are?
USA Today says that it's not just because many of us have the majority of our assets tied up in products like these. The article, "Your ex could get rich if you don't update your beneficiaries," explains that it's also because beneficiary designations on a 401(k) or IRA are legally binding and often take precedent over anything in your will. This can lead to some serious unpleasantries if your beneficiary information isn't updated.
Many times a person who has worked at the same company for 20 years has a beneficiary designation that they set up on their first day of work, and they never think about it again. However, their lives are rarely the same fifteen or twenty years down the line. For example, they might be divorced and remarried, or they might have children or grandchildren who weren't even a twinkle in someone's eyes way back then. Leaving an estate to an ex-spouse or disinheriting your own children is not a rare event when people don't update their beneficiary designations.
Even if family circumstances are friendly, when that money passes to someone else, they can't just give it back. The IRS allows gifts of under $14,000 tax-free annually, but anything over that is going to be subject to taxation.
Always remember that the beneficiary designation trumps a will. You can avoid a lot of trouble (and fees!) if you approach beneficiary designations the right way. One trick to avoid taxes as long as possible is to skip a generation with a tax-deferred retirement account like a 401(k) or IRA that you leave to your grandkids instead of your kids. Once you reach age 70½, you'll have to withdraw money from these accounts, but leaving the cash directly to a younger family member allows them to keep it growing tax-free for a few more decades.
Think about your accounts and how you'd want them to be passed on to your family, instead of leaving inheritance up to chance. Part of this is reviewing your beneficiary information regularly.
Many accounts allow you to designate beneficiaries with a simple online form, so you can ensure the orderly transfer of wealth in just a few minutes. Some others may take more time to update, but you'll be glad you did it—and so will your heirs!
Here are some common events triggering a need to update beneficiary designations:
• Marriage or divorce;
• Birth of a child or grandchild;
• Death of a previous beneficiary; and
• When a minor beneficiary comes of legal age to inherit.

Here are some of the financial products that are most likely to designate a beneficiary:
• CDs, checking accounts or other bank accounts;
• Life insurance;
• Retirement accounts (401(k) or IRA);
• Some stocks, bonds, and mutual funds.
• Pension plans;
• Annuities with a death benefit;
• Corporate profit-sharing plans; and
• 529 college saving plans;

Reference: USA Today (January 14, 2016) "Your ex could get rich if you don't update your beneficiaries"

Responsible and Loving Adults Know the Importance of Life Insurance

Adults with spouses and children need life insurance to protect those they love. Maybe that's corny, but it is true. Don't let the complexity scare you; your family will thank you.
Just as we are still reluctant to discuss death, we still have a predilection to push back against discussions concerning life insurance. Too morbid. Too complicated. But in "10 Things You Absolutely Need To Know about Life Insurance," Forbes presents a compelling argument to go past any preconceived notions that cause anyone to avoid this important personal finance tool.
With the proper information, you can simplify the decision-making process and arrive at the right choice for you and your family.
Here are some of the things you absolutely need to know about life insurance:
You really need it if you are someone's spouse or the parent of dependent children. If you are retired or financially independent and no one would suffer financially if you weren't around—OK, you don't need life insurance.
Life insurance doesn't just slap a monetary value on your life. Rather, it helps compensate for the financial consequences that accompany the loss of a wage earner's life. It can help those left behind cover the costs of final expenses, outstanding debts and lost income. After an unexpected death, life insurance can lessen financial burdens at a time when surviving family members are dealing with great loss. It can also give peace of mind to the policy holder.
Life insurance is a risk management tool, not an investment. There are some life insurance policies that have an investment feature, but they're not really an optimal investment. There are usually better and more efficient strategies.
There are two kinds of life insurance—term and permanent, also known as whole life insurance. Term life is the simplest, the least expensive, and the most widely applicable. The life insurance company bases the policy premium on the probability that the insured will die within a stated term—typically 10, 20 or 30 years. The premiums are guaranteed for the length of the term, then the policy becomes cost-prohibitive to maintain—or you can decide to let it lapse. This means that you could pay premiums for decades and "get nothing out of it." That's good news because it means you were protected during that time.
Permanent life insurance includes the same probability-of-death calculations but also includes a savings mechanism, often referred to as "cash value." It's designed to help the policy exist into perpetuity. Whole life has an investment component, and variable life has investment options more like mutual funds. Universal life is a less expensive permanent life insurance alternative with added flexibility but increased interest rate risk for the owner.
Choosing the right life insurance policy doesn't have to be complicated. It's better to set up something you can work with and understand than to postpone such an important decision due to the policy's intimidating complexity. In many circumstance, a good rule of thumb is to purchase enough life insurance to replicate all or most of the insured's income for a term as long as the household expects to need that income.
We can't say it enough – it's better to discuss with your loved ones what would happen in the event of an untimely demise than it is to let them struggle through a terrible time with no planning or advance discussion. By meeting with an estate planning attorney and purchasing the appropriate life insurance plans, your loved ones will be prepared in some way – and they will be grateful to you for looking out for them.
Reference: Forbes (January 5, 2016) "10 Things You Absolutely Need To Know About Life Insurance"

Poor Tax Planning Could Hand Your Heirs a Financial Disaster

You might have the best of intentions, but a poorly structured estate plan could end up requiring your heirs to use much of their inheritance to pay taxes on that very same inheritance.
Even the most successful families create disasters for their heirs. Unless you are a tax lawyer or estate planning attorney, chances are you don't know how to properly plan for the taxes that are due on the sale of assets. A report from Fox 61 News, "Tips to avoid an income tax and estate planning time bomb," discusses how important planning and timing are to helping your heirs avoid inheriting a tax bomb.
For example, parents may decide to deed a home to their son while they are alive to protect it from long-term care costs or to avoid probate. Because the child didn't pay the parents the fair market value of the place, it's considered a gift, and a gift tax return may be required depending on the value of the home. The more the property is worth at the time of its sale, the greater the gain and the larger the tax bill will be.
These parents unknowingly planted an income tax bill bomb for their children by gifting property during their lifetimes instead of allowing the children to inherit the property after their deaths.
However, if the parents had used a revocable trust to own the home, then the residence would be passed on after death. In this scenario, the heir would not owe any income tax, provided the property was sold for what it was worth at the date of death. This works regardless of how much the property is worth at the time of the parents' passing.
Young or old—it doesn't matter—if you don't have an estate plan, have one created now. Start with the basics, and if you need to, do the additional planning as it applies to your situation. Speak with an experienced estate planning attorney. In addition, remember these tips:
• Review and update your beneficiary designations.
• Review and update your insurance policies. Check the amount of coverage and make sure it still meets your family's current needs.
• Consider purchasing long-term care insurance to help pay for the costs of long-term care in case you and/or your spouse ever need it due to illness or injury.
Plus, at a bare minimum, everyone over the age of 18 needs a Power of Attorney for Heath Care, a Living Will, and HIPPA authorizations. Also, a Revocable Living Trust may be better than a will at incapacity because it avoids the court's control over your assets. And while you are at it, review and update the guardian designation for any minor children.
All of these issues can be resolved with an experienced estate planning attorney. Be sure to discuss all relevant aspects of your life, including anticipated changes in health, finances and those of family members.
Reference: Fox 61 News (January 4, 2016) "Tips to avoid an income tax and estate planning time bomb"

New Baby's Arrival is a Good Time to Review Estate Planning Documents

You may not need a complete overhaul, but the arrival of a new member of the family should prompt a review to ensure that all of your children are protected.
Few things in life are more joyous than the arrival of another new baby in the family. Among the necessary tasks is a review of your estate planning documents. If you had a will prepared for your first child, it is possible that the existing documents simply need to be updated. But don't wait. Make sure that you also address guardianship issues, should anything tragic occur in your family.
In the post "Will another baby affect your current will?"New Jersey 101.5 advises checking on your will to see whether it identifies your "children" or "descendants" as your beneficiaries—and then defines those terms to provide that children born after you executed your will are included.
If it does, then it is probably not urgent to update your will to include your new child's name. However, if the will was drafted without that flexibility and only identifies your first child by name as the beneficiary, then you need to talk with your estate planning attorney and have your will updated.
While you're at it, review your beneficiary designations for your life insurance policies and retirement plans. In those documents, you may have named your first child specifically as a beneficiary. If so, an update may be necessary.
Also, be careful of naming your estate as the beneficiary of any retirement assets. If you do, it can have unintended adverse income tax consequences after your death.
If your estate includes significant assets, such as retirement accounts and trusts for your heirs, a new child in the family is also the time to sit down with your estate planning attorney to ensure that all of your wills and retirement account beneficiary designations are up-to-date and that tax planning has been optimized.
Reference: New Jersey 101.5 (January 12, 2016) "Will another baby affect your current will?"

When Your Legacy is Land, Estate Planning is Especially Important

When the family business is farming, estate planning can protect your heirs and your land, creating a legacy for generations to come.
Farmers are well versed in the cyclical nature of life, particularly those who deal with livestock. But thinking about your own demise is different than considering the eventual end of animals bred and raised solely for consumption. Talking about death among family members is difficult. But planning in advance for the next generation will help with survivors' ability to work the land and continue a legacy.
A recent AgriNews article, "Estate planning can lessen grief for survivors," emphasizes that the land is key. It's the heart of the business. Estate planning is about protecting that land.
You should seek the advice of a qualified and experienced estate planning attorney who is well-versed in current estate laws and farm business operations in the state.
This conversation and the plans you make with his or her help could preserve family and business relationships, avoid giving any more to the government than necessary, and provide peace of mind to both you and future generations.
An estate planning attorney may suggest a trust for your specific situation. One common issue with creating a trust without help is that you can miss a legal nuance in the moveover process of the property. This will stall execution of a plan, so it's critical that you and your attorney think through the entire process to ensure what you want can happen without any problems.
Another common issue, especially with farmland, is thinking that dividing property equally is what you must do. Not so. If some of the heirs are not farmers, it might be easier to equally divide the money from selling off the land.
Protect your land and help your children, whether they intend to continue to work the land or seek a different business and lifestyle. Meet with an estate planning attorney who can help you with the process so that your wishes may be clarified and documented properly.
Reference: AgriNews (December 31, 2015) "Estate planning can lessen grief for survivors"