Orlando Estate & Elder Law

Landlord: Post-Retirement Job?

In today’s economy, it seems that everything old is new again … albeit with a bit of a twist. Years ago, it was common for older couples – and frequently widows – to rent out rooms for extra income. Taking in boarders was a viable way to supplement income.

Well, the idea is back, with a bit of a twist. As Baby Boomers face the cold, hard facts of retirement, they are increasingly changing the definition of the term to include at least some form of work. While you may not be ready to hang out a shingle on the front gate, “Rooms for Rent,” you might consider becoming a landlord. In fact, the venerable Wall Street Journal writes that it may be just the ticket, especially given the uncertain prospects for stocks and bonds and the meager interest rates on savings accounts.  

Think about it. It’s a buyer’s market now, so purchasing a multi-family home is more financially feasible. And, the trend toward the renter’s lifestyle is picking up steam.  All this means you have a low cost of entry into a market that is expected to expand. Starting to make investment sense? 

Sure, it’s a career of sorts, but you also need to think of it as an investment. Weigh everything in the short term, including start-up and maintenance costs, as well as the marketability of the location you’re considering. But then also keep your long-term goals in mind, including appreciation and eventual sale. Buying in a depressed market, after all, is only a steal if that market bounces back. Finally, don’t overlook the possible danger of having all your eggs in one basket since being a live-in landlord will unite your home, equity, and employment, into one potentially risky asset. 

Like any retirement move, don’t make this one too quickly. Discuss your plans with a professional who can help you sort out the details, including how an investment rental property could affect your Social Security benefits. Remember, too, that this lifestyle may not suit you. In which case, you would be wise to explore other, more enjoyable options.

Reference: The Wall Street Journal Online (June19, 2011) “Want a job? Become a landlord.”

 

 

 

Letter of Instruction Beyond Your Will

If you’re a member of the Baby Boomer generation, there’s a good chance you have not done even the most basic of estate planning. In fact, only 56 percent of us have a will, according to a 2011 survey by Rocket Lawyer. So, if you have covered that base, give yourself a well-deserved pat on the back … but not too heartily. As SmartMoney recently pointed out, most people overlook another crucial element in their estate plan: a letter of final instruction.

The letter of final instruction is a non-legal document that guides your family through important tasks after your death. For example, your family might not know where you keep important papers like a deed or a marriage or birth certificate. They may need your passwords to access accounts on your computer. You also may want to list the contact information for people you would want notified, like friends that your family members may not know well. Trusts & Estates magazine recently ran a list of items you might want to include.  The idea is not so much to set down demands or to solve possible squabbles, because the document is non-legal, but just to supply the answers to those questions that could otherwise prove troublesome for your family.  

Of course, this letter is just a small (and non-legal) part of your estate plan. You still need to cover your legal bases with at least a will, living will, health care surrogate designation and durable powers of attorney. 

Reference:  SmartMoney (June 9, 2011) “The Missing Link in Your Estate Plan”

 

Affordable Care Act Targets Long Term Care

When the time comes, as it does for many of us, that we need assistance in our daily living, the unfortunate fact is that too many of us end up in nursing homes – not because we need constant nursing care, but because there no other good options. A provision of the new Patient Protection and Affordable Care Act may help change that.

According to a recent article in the LA times, the most ambitious part of the Act as it relates to long-term care is the Community Living Assistance Services and Supports Act, or CLASS – a voluntary, consumer-financed insurance plan to cover long-term care expenses. CLASS, scheduled to go into effect in January of 2014, is an insurance plan, similar to those currently available in the private market, with a few notable distinctions. First, the program will be administered by the government. Second, any working adult age 18 or older will be able to enroll, regardless of any pre-existing medical condition, and the benefits will be good for as long as someone needs long-term care. Perhaps even more importantly, the government plan will offer benefits that could be used for a wide variety of expenses, including hiring a home care provider and doing home modifications.

Take note that Senators June Thune and Lindsey Graham on April 14 of this year introduced the Repeal the CLASS Entitlement Act.

Nonetheless, the CLASS Act highlights a widespread move in the country to shift resources from nursing home-based care to home-based care as a viable and far less expensive option. The cost of nursing home care ranges from about $40,000 to $85,000 a year, according to a recent report by John Hancock Financial Services Inc. The average cost of a home health aide, on the other hand, is about $37,000 a year. The most precious detail, of course, is that the patient can remain at home. 

 

Avoid Unpleasant Surprises for Your Estate's Beneficiaries

There are a number of decisions to be reached when planning for your estate and not least among them is the choice of personal representative ("executor" in some states). A poor choice of a personal representative, or a disconnection between personal representative, estate, and beneficiaries can hobble even the best of estate plans. Indeed, Reuters offers one unfortunate beneficiary’s troubles in a recent article on the topic and offers some solid suggestions to consider.

The beneficiary was Stephanie Stephens, who, in the end, was surprised to find that the estate she received had shrunk by $129,000, something she angrily blames on the personal representative. Apparently, the estate had incurred a $104,000 loss when the personal representative failed to pull the assets from the flames of the 2008 financial meltdown and, insult to injury, that personal representative was then entitled to a fee of another $25,000. Needless to say, she wasn’t happy. Whether or not the personal representative was to blame may be debatable (since it was the beginning of the recession, after all) but there are other wrinkles to the story. For example, Stephanie hadn’t met the personal representative of the estate until after her relative passed away and so only knew him as a somewhat disinterested party. Further, she was surprised by the personal representative’s fees and felt them to be excessive.  

In this case, the beneficiary was, at best surprised (and at worst, victimized) by a situation she did not understand. Her case offers an example of a kind of disconnect that can all-too-easily arise between personal representative, estate, and beneficiary.

Reuter’s offers three general principles to bear in mind:

Know the estate. Choosing the right personal representative has a lot to do with the nature of your estate. Is it complex or simple? Are there a lot of moving parts and assets that may be at risk? A family member can likely carry out a simple estate but a professional might be necessary for those more difficult ones.

Know the person. Just because someone is a “good person,” this does not mean they should be doing business for you. You need to know that they are well-intentioned and interested in carrying out the tasks, but above and beyond that you must also know that they have the proper skills and business mindset to carry out your plans and take care of your assets in your absence.

Let your family know - communicate. It’s a difficult conversation to have but it’s important to relate your plans directly so that your family knows your decisions. Further, you’ll want to be sure they are aware of the cost of the personal representative so it isn’t the surprise it was in Stephanie’s case (in fact, you yourself may want to be sure you are aware of the costs, too).

Reference: Reuters (June 16, 2011) “Help! Our executor cost us $129,000”

rised t�� n � 9�V7estate she received had shrunk by $129,000, something she angrily blames on the personal representative. Apparently, the estate had incurred a $104,000 loss when the personal representative failed to pull the assets from the flames of the 2008 financial meltdown and, insult to injury, that personal representative was then entitled to a fee of another $25,000. Needless to say, she wasn’t happy. Whether or not the personal representative was to blame may be debatable (since it was the beginning of the recession, after all) but there are other wrinkles to the story. For example, Stephanie hadn’t met the personal representative of the estate until after her relative passed away and so only knew him as a somewhat disinterested party. Further, she was surprised by the personal representative’s fees even and even felt them to be excessive.  

 

In this case, the beneficiary was, at best surprised (and at worst, victimized) by a situation she did not understand. Her case offers an example of a kind of disconnect that can all-too-easily arise between personal representative, estate, and beneficiary.

Reuter’s offers three general principles to bear in mind:

Know the estate. Choosing the right personal representative has a lot to do with the nature of your estate. Is it complex or simple? Are there a lot of moving parts and assets that may be at risk? A family member can likely carry out a simple estate but a professional might be necessary for those more difficult ones.

Know the person. Just because someone is a “good person,” this does not mean they should be doing business for you. You need to know that they are well-intentioned and interested in carrying out the tasks, but above and beyond that you must also know that they have the proper skills and business mindset to carry out your plans and take care of your assets in your absence.

Let your family know - communicate. It’s a difficult conversation to have but it’s important to relate your plans directly so that your family knows your decisions. Further, you’ll want to be sure they are aware of the cost of the personal representative so it isn’t the surprise it was in Stephanie’s case (in fact, you yourself may want to be sure you are aware of the costs, too).

 

Reference: Reuters (June 16, 2011) “Help! Our executor cost us $129,000”

rised t�� n � 9�V7estate she received had shrunk by $129,000, something she angrily blames on the personal representative. Apparently, the estate had incurred a $104,000 loss when the personal representative failed to pull the assets from the flames of the 2008 financial meltdown and, insult to injury, that personal representative was then entitled to a fee of another $25,000. Needless to say, she wasn’t happy. Whether or not the personal representative was to blame may be debatable (since it was the beginning of the recession, after all) but there are other wrinkles to the story. For example, Stephanie hadn’t met the personal representative of the estate until after her relative passed away and so only knew him as a somewhat disinterested party. Further, she was surprised by the personal representative’s fees even and even felt them to be excessive.  

 

In this case, the beneficiary was, at best surprised (and at worst, victimized) by a situation she did not understand. Her case offers an example of a kind of disconnect that can all-too-easily arise between personal representative, estate, and beneficiary.

Reuter’s offers three general principles to bear in mind:

Know the estate. Choosing the right personal representative has a lot to do with the nature of your estate. Is it complex or simple? Are there a lot of moving parts and assets that may be at risk? A family member can likely carry out a simple estate but a professional might be necessary for those more difficult ones.

Know the person. Just because someone is a “good person,” this does not mean they should be doing business for you. You need to know that they are well-intentioned and interested in carrying out the tasks, but above and beyond that you must also know that they have the proper skills and business mindset to carry out your plans and take care of your assets in your absence.

Let your family know - communicate. It’s a difficult conversation to have but it’s important to relate your plans directly so that your family knows your decisions. Further, you’ll want to be sure they are aware of the cost of the personal representative so it isn’t the surprise it was in Stephanie’s case (in fact, you yourself may want to be sure you are aware of the costs, too).

Reference: Reuters (June 16, 2011) “Help! Our executor cost us $129,000”

Suggested Key Words:

he{� sn� 9�V7sentative. Apparently, the estate had incurred a $104,000 loss when the personal representative failed to pull the assets from the flames of the 2008 financial meltdown and, insult to injury, that personal representative was then entitled to a fee of another $25,000. Needless to say, she wasn’t happy. Whether or not the personal representative was to blame may be debatable (since it was the beginning of the recession, after all) but there are other wrinkles to the story. For example, Stephanie hadn’t met the personal representative of the estate until after her relative passed away and so only knew him as a somewhat disinterested party. Further, she was surprised by the personal representative’s fees even and even felt them to be excessive.  

 

In this case, the beneficiary was, at best surprised (and at worst, victimized) by a situation she did not understand. Her case offers an example of a kind of disconnect that can all-too-easily arise between personal representative, estate, and beneficiary.

Reuter’s offers three general principles to bear in mind:

Know the estate. Choosing the right personal representative has a lot to do with the nature of your estate. Is it complex or simple? Are there a lot of moving parts and assets that may be at risk? A family member can likely carry out a simple estate but a professional might be necessary for those more difficult ones.

Know the person. Just because someone is a “good person,” this does not mean they should be doing business for you. You need to know that they are well-intentioned and interested in carrying out the tasks, but above and beyond that you must also know that they have the proper skills and business mindset to carry out your plans and take care of your assets in your absence.

Let your family know - communicate. It’s a difficult conversation to have but it’s important to relate your plans directly so that your family knows your decisions. Further, you’ll want to be sure they are aware of the cost of the personal representative so it isn’t the surprise it was in Stephanie’s case (in fact, you yourself may want to be sure you are aware of the costs, too).

Gift Tax Planning Before December 31, 2012

If you own private business interests or other rapidly appreciating assets, and would like to gift them to the next generation at the lowest possible tax cost, you may want to act sooner rather than later. The Tax Relief Act of 2010 included a 400 percent increase in the lifetime gift tax exemption, from $1 million in 2009 to the current $5 million ($10 million for a married couple). These provisions are due to expire on the last day of 2012. If you are considering a gifting strategy, you are wise to start exploring your options now, while you have time to carefully consider, since giving away assets requires careful thought and planning,

There are several strategies we could use to maximize the value of the exemption, to include an advanced strategy known as an installment sale to an Intentionally Defective Grantor Trust (IDGT). Gavin Morrissey of Commonwealth Financial recently wrote in detail about how this strategy works. The bottom line is that this complex strategy, when properly executed in the proper circumstances, can result in quite significant tax savings.  As Morrissey points out, the strategy works best when the assets to be transferred are rapidly appreciating – such as private business interests or pre-IPO stock.

Reference: ADVISORONE.COM (June 15, 2011): Estate Planning: Time Running Out on $5M Gift-Tax Exemption.

 

Financial Elder Abuse Is All Too Common

Elder financial abuse continues to be the “Crime of the 21^st Century,” according to a recently published MetLife study on the financial abuse of the elderly, “The MetLife Study of Elder Financial Abuse: Crimes of Occasion, Desperation, and Predation Against America’s Elders.” The study shows that elder financial abuse falls into three types of crimes: occasion, desperation and predation. Additionally the vulnerabilities of aging increase the risk of elder financial abuse, and there is a continued lack of focus (and prosecution) on the perpetrator.

 Elder Americans are now estimated to lose $2.9 billion every year, with significant patterns in the nature of these abuses. 

Most cases of abuse, 51 percent, are perpetrated by strangers, with close family and friends accounting for 34 percent. Crimes classified as “scams” committed by strangers accounted for 28 percent of all financial abuses, business-related exploits made up 12 percent, and Medicare and Medicaid fraud amounted to the most loss per case but only accounted for 4 percent of total cases. The most common perpetrator was likely to be a man between ages 30 and 59. When family or friends were involved, the study found that most cases involved forged checks, stolen credit cards, drained bank accounts, and transferred assets.

The most common victims are women, who are twice as likely to be financially abused as men, especially in their 80’s. Most cases found that it was when the victim’s disabilities were outwardly apparent due to the use of a cane, handicap tags, or simple confusion, but those living alone and in need of health care or home maintenance also are at risk.

The Elder Justice Act became law on March 23, 2010, and has significantly raised the national focus on elder financial abuse. Provisions of the Act are outlined in the study, which you can download here. Two of the provisions include required immediate reporting to law enforcement of crimes in a long-term care facility and civil monetary penalties for failure to report and a provision for penalties for long-term care facilities that retaliate against an employee for filing a complaint against or reporting a long-term care facility that violates reporting requirements.

Reference: Metlife.com (June, 2011) “The MetLife Study of Elder Financial Abuse: Crimes of Occasion, Desperation, and Predation Against America’s Elders” (study publication)

 

Charitable Giving - Get the Deduction

Giving to charity can be a very noble thing and to many of us it comes quite naturally; unfortunately it’s also rather easy to give incorrectly, at least as far as taxes are concerned. To prevent a simple but all too common mistake, the Wall Street Journal offers a mantra: “Get the letter. Get the letter. Get the letter.”

If you are making a donation of more than $250, the charity must properly acknowledge your donation before the IRS will, and that means a letter. Indeed, the IRS is surprisingly literal about this and refuses to bend or accept other means of proof, even when people go out of their way to offer alternatives. You must have a letter written by the charity that clearly delineates the amount of the donation. Further, the letter also must affirm that no goods or services were rendered or, if there was an exchange, the letter must itemize and deduct the cost of those goods and services from the overall donation.

When comes to any tax deduction, charitable or otherwise, remember the IRS likes to have hard answers and cold facts. Laura Peebles, a director at Deloitte Tax in Washington summed it up for the WSJ, “If you don't have the correct paperwork, there's no way to fix the problem.”

Reference: The Wall Street Journal Online (June 11, 2011) “One Easy Way To Lose That Charitable Deduction”

 

Small Business Grants Worth Seeking

If you’re getting a new enterprise off the ground or trying to expand your small business, finding capital may be high on your list of priorities. Unfortunately, many traditional sources of business capital have dried up in today’s economy. So, try thinking “outside the box,” and consider applying for a government grant. As a recent Wall Street Journal article points out, grants are not just for non-profits, and your business might qualify.

Federal and state governments offer grant money to businesses when they want to get things done for the public good. So, if you are working in a field that government considers “promoting the public good,” you may be able to qualify for a grant. Some of those business areas include energy efficiency, environmental technology, biotechnology, health care and information technology.

State and local level grants may be available for a wider range of business purposes, however, since local governments tend to be more concerned with encouraging commerce. On the more local levels, grant money could be available for industries such as tourism or even child care. Do some research: scour government websites, particularly www.grants.gov. You also can sign up for e-newsletters alerting you to grant opportunities. State and local governments also publicize grant information online, so make Google your friend.

If you think you’ve found something promising, it’s worth contacting the grant manager directly to see if your business is a possible fit before proceeding. Generally, they will let you know whether you are “barking up the wrong tree.”

There are professional grant writers who can help write and edit your grant application. Some grant writers charge a flat fee, while others bill by the hour. If you decide to use a professional grant writer, remember you will have to pay them whether your grant is approved or not, and their fees could go into the thousands of dollars. Beware of scammers, too, especially anyone who guarantees you “free money,” or promises to find you a grant if you buy something from them. Also, don’t bother with anyone who demands a cut of any grant you win. 

Reference: The Wall Street Journal Online (June 13, 2011) “Ask For Public Money, And You Shall Receive”

 

Assisted Living Buy-In May Be Tax-Advantaged

If you, your parent, or an elderly loved one is reaching the point where living alone is no longer an option – for medical reasons or otherwise –  it may be time to consider some kind of assisted living, whether nursing home or retirement community.  Increasingly, many families are looking at the “Continuing Care Retirement Community” or CCRC option. Even though the CCRC may be the pricier option, a little-known tax strategy recently explained in Smart Money could make it more financially attractive.

What is a CCRC? As SmartMoney explains: As opposed to a traditional nursing home where you simply pay a monthly fee, residents enter into a long-term contract with a CCRC. In exchange for a one-time entry fee and ongoing monthly charges, the CCRC provides housing and a range of on-site services. When a resident's health and personal care needs become more acute, the level of service can be increased to include assisted living, long-term care and skilled nursing care. The big advantage is that the resident doesn't have to move as his or her needs change.

Interestingly, there is another advantage: a potential tax savings. Because part of the upfront and ongoing fee is to provide medical services – whether the resident uses them or not – a medical tax deduction may be available. This strategy was upheld in the 2004 Tax Court case, Delbert L. Baker v. Commissioner (122 TC 143, 2004).

Of course, medical expenses must exceed 7.5% of adjusted gross income in order to claim the deduction.  However, if you are considering a CCRC, it’s quite possible that your applicable expenses will exceed this threshold, since their fees, including the upfront buy-in, are usually quite high. Remember, too, that the percentage of costs that qualify as medical is determined by the aggregated spending of the facility itself, rather than the individual and their level of received care. The CCRC management should be able to give you estimates of the percentages, though you may have to ask for them.

Also of note, remember that if you will pay some or all of your parent’s CCRC fees, you can claim the applicable percentage of the charges as a medical expense on your return – if you provide more than half of your parent’s support. Also, the IRS says these tax breaks apply only if the person enters into a CCRC-like contractual lifetime care arrangement, not just any retirement facility or nursing home.

Reference: SmartMoney (June 15, 2011) “A Tax Break for Retirement Community Costs”

 

LGBT ESTATE PLANNING

In honor of Gay and Lesbian Pride Month, AARP has launched a new portal within their website dedicated to LGBT elders. The portal is designed to accommodate and offer advice on the many issues that affect LGBT elders, from the mundane to the far more troubling legal and economic wrinkles. The portal includes advice about concerns regarding estate planning as well as caregiving. For a greater understanding of the nature of the associated issues and legal wrinkles, the site includes a list of upcoming hurdles compiled by Michael Adams, of the SAGE advocacy group.

 I am pleased to see AARP taking this action, as I am part of the AARP Legal Referral Network.

Reference: AARP.com (June 2011): Pride Comes in All Ages