Orlando Estate & Elder Law

Hollywood's Take on Naming a Guardian

An Oscar nominated movie has brought to many parents' attention, the uncomfortable question of what will happen to their children after they pass away.

Imagine that your brother has recently passed away and you are notified that you have been named as the guardian of your brother's teenage son. Acting as the guardian of the teenager will not cost you anything as the estate will supply all of the funds.  However, you will need to relocate to care for the child.

None of this was communicated to you by your brother beforehand.

This is the actual beginning of the plot in an Oscar nominated movie that is currently in theaters, Manchester By the Sea. While this might make for great Hollywood drama, it does not make for the best estate planning, as The Spectator points out in "'Who gets the kids if we die?' Planning for the unthinkable."

Planning to nominate the guardians for your minor child should something to happen to you must be undertaken carefully. For obvious reasons, it is very important that you consider your options.

The guardian you choose should be emotionally and financially secure, so he or she can handle the difficulties of suddenly rearing an orphan.

It is also extremely important that the guardian not be surprised by your decision after you pass away. You need to choose someone who is willing to take on the responsibility.

Talk to your first choice for a guardian and make sure that he or she is ready to act in the role.

In the movies things might work out well when that is not done, but that is not always the case in real life.

For more information about estate planning in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: The Spectator (Jan. 31, 2017) "'Who gets the kids if we die?' Planning for the unthinkable."

Senate Committee Weighs in on Elder Financial Abuse

After receiving a report from the General Accountability Office, the Senate Special Committee on Aging held hearings to discuss the problem of guardians who financially abuse their elderly wards.

Elder law attorneys have been aware that elderly people are sometimes abused by guardians who receive inadequate court oversight. Despite the best efforts of attorneys and other elder law advocates, it has been difficult to curb the problem. Much of the evidence was derived anecdotally based on individual cases.

This has served to mask the overall scope of the problem in many states and in the U.S. as a whole. The General Accountability Office recently issued a report on the problem and offered some suggestions.

The report was the subject of hearings by the Senate Special Committee on Aging according to Financial Advisor in "Senators, GAO, Decry Elder Financial Abuse By Guardians, Complicit Courts."

One of the key recommendations is that courts should more carefully consider whether a guardian is necessary or if the elderly person could adequately be taken care of by a caregiver. If a guardian is appointed, then it is advised that the court should oversee the guardian’s actions and make assessments in the future about whether the guardian is still needed.

It was also recommended that guardians receive mandatory training on their responsibilities.

The government should have a better idea of the scope of this problem in the future. Next year, the Department of Health and Human Services will launch a National Adult Maltreatment Reporting System that will collect data from state agencies about elder abuse.

For more information about estate planning and planning for care as we age in Orlando, FL (and throughout the rest of Central Florida), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.

Reference: Financial Advisor (Dec. 1, 2016) "Senators, GAO, Decry Elder Financial Abuse By Guardians, Complicit Courts."

Redstone Case Closed? Plan For Incapacity Now!

The much watched legal battle over the competency of Sumner Redstone has reached a conclusion as a judge has dismissed the case.

Sumner Redstone is the 92 year old who owns a controlling interest in both CBS and Viacom. For that reason, markets and the media paid close attention when his longtime girlfriend sued to have Redstone declared incompetent.

The girlfriend, Manuela Herzer, claimed that she had been cast aside by Redstone, but not of his own free will. Instead, she claimed that Redstone was mentally incompetent and needed her to handle his affairs.

The case has gone on for many months.

Videotaped testimony by Redstone has now convinced the judge in the case that the case should be dismissed. The judge was convinced that Redstone does not want Herzer in his life and that if he needs assistance, it can be provided by his daughter.

NBC News reported on the dismissal in "Sumner Redstone: Judge Tentatively Dismisses Health Care Lawsuit."

It is unknown if Herzer will attempt to appeal this decision. She certainly has a financial incentive to do so.

Previously, Redstone's estate plan would have given her an inheritance worth approximately $70 million. She has since been removed from Redstone's estate plan, which his lawyers say is the reason that she brought the competency case.

One thing is clear: the judge in this case should be applauded for giving great weight to Redstone's wishes.

All too often the wishes of elderly people about who should provide their care are not given enough consideration in competency hearings. Even in cases where a court finds it necessary to appoint a guardian, the feelings of the proposed ward should be considered.

We help families plan in advance for possible incapacity, and families when incapacity arises unexpectedly.  Please contact this office for assistance in either situation.

Reference: NBC News (May 9, 2016) "Sumner Redstone: Judge Tentatively Dismisses Health Care Lawsuit."

Powers of Attorney Defeat Emergency Guardianships

Guardianship laws are meant to protect people who cannot take care of themselves. However, many people think that the laws do not do enough to protect elderly people from abuse.

The process for what happens when an elderly person can no longer handle his or her own affairs and does not have powers of attorney in place is more or less the same in every state. A guardianship petition is submitted to probate court. If the court agrees that the person is legally incapacitated, then the court will appoint someone as a guardian. This person will then be responsible for the elderly ward's financial and personal affairs.

Many people believe there is an inherent bias in most states' guardianship laws.

Guardians are required to make regular reports about the financial affairs of the ward. Although it does not always work, this helps prevent the guardian from taking financial advantage of the ward. However, most of the time guardians are not required to report on the well-being and care of the elderly person.

Consequently, courts do not know if the ward is being abused or neglected unless a third-party makes a report.

Some states are attempting to change this bias by updating their laws to add new reporting requirements.

As the Jackson Free Press reports in "State Eyes Changes to Guardianship Laws," Mississippi has appointed a task force to consider changing its requirements.

Changing guardianship laws to make elder abuse less likely is good and important work. No elderly person should have to suffer from financial or personal abuse.

However, it is also important not to rely on guardianship laws as the only way to take care of incapacitated elderly people. Everyone should get the necessary powers of attorney in place before they become incapacitated to make it less likely that a court will see the need to appoint a guardian in the first place.

Please come in if you need to update your power of attorney or if you do not have one!

Reference: Jackson Free Press (Dec. 22, 2015) "State Eyes Changes to Guardianship Laws"

New IRS Policy Helps Identity Theft Victims

Identity thieves do not content themselves with just taking out credit cards in their victims' names. They also often file fraudulent tax returns for refund checks. A new IRS policy should help victims figure out what happened.

Imagine receiving a letter from the IRS that the tax return you filed could not be processed because one had already been filed under your name and Social Security number. This is an increasing problem for many people.

Identity thieves who are able to get some basic information about a person will rush to file a fraudulent tax return before the victim does in the hopes that the IRS will send a refund to the thief. The victim then has a mess to sort out and needs to figure out what happened. This can be exceedingly difficult for the victim and even more difficult for those filing returns on the behalf of others, such as executors and guardians.

In the past, the IRS has not helped matters too much as the victim was not able to get a copy of the fraudulent tax return. However, as reported by the Wills, Trusts & Estates Prof Blog in "IRS Will Now Offer A Copy Of Fraudulently Filed Tax Returns To Identity Theft Victims," the IRS has changed its policy.

Now victims and their authorized representatives can get a copy of the return, which should help in figuring out what happened. The fraudulent return will be redacted pursuant to federal privacy laws, but not to an extent that would make viewing the return worthless.

Of course, if you are a victim of this tax scam, you should not attempt to handle it on your own, especially if you are an executor or guardian. Seek the services of a professional to make sure that you are doing things correctly.

Reference: Wills, Trusts & Estates Prof Blog (Nov. 30, 2015) "IRS Will Now Offer A Copy Of Fraudulently Filed Tax Returns To Identity Theft Victims"

Keys to Get Disinherited

If you do not want to be disinherited by your relatives, it might be helpful to know what actions often lead to disinheritances so that you can avoid them.

Normally when someone is disinherited it comes with anger and surprise. This is because often people do not think that they have done anything so wrong that a family member would take such a drastic measure.

Even people who do not get along well with their relatives tend to not think it will result in being disinherited. However, estate planning attorneys can often predict what types of behaviors might lead a person to be disinherited because the same patterns occur over and over again.

Recently Financial Advisor published a list of common actions that lead to being disinherited in "Ten Tips To Avoid Losing An Inheritance."

The list includes:

• Do not visit or call – If you neglect to spend time with or talk to a relative, he or she is likely to think you do not care for him or her.
• Only visit if the relative does something for you – Threatening not to visit unless you get something in return is likely to lead to resentment.
• Judging how they spend their money – If you argue with relatives about how they spend their own money, they might think you care more about the money than them.
• Argue over trivial matters – Arguments over little things can lead to arguments over much bigger things.
• Clean out their home – Even if your parents are in a nursing home, they might not appreciate you clearing things out of their home without permission.
• Filing for guardianship too soon – Do not rush to file for guardianship if your relatives can still handle things on their own.
• Act obsessed with their estate plan – It is good to know and discuss what a relative's estate plan is, but if you talk about it all the time, it will seem like you have ulterior motives.

Please contact my office to schedule a consultation to discuss our own estate plan.

Reference: Financial Advisor (Nov. 19, 2015) "Ten Tips To Avoid Losing An Inheritance."

One More Scary Halloween Story!

A Halloween riddle for you: What's scarier than ghosts and goblins to Americans 50 and older? Answer: Their finances.

That's the upshot of the latest Country Financial Security Index, and two other surveys I've seen lately back it up. In fact, there's a strong case to be made that many boomers have grown truly scared of investment risk as a result of what they experienced in the 2008-2009 financial crisis and market crash. The new survey of 1,000 adults from Country — a group of insurance and financial service companies — found that 81% of people 50+ have at least one financial fear. What spooks them most: being able to afford health care expenses and being able to retire comfortably. Women 50 and older were more likely than men to worry about being able to retire comfortably, 34% (men) vs. 39% (women) cited this as a fear.

Forbes recently published an article, "What Spooks Us Most About Money," in which they reported that health care expenses are the biggest fear among Americans 65 and older, according to the survey. Compare that to the top worry of Millennials, which is affording their rent or mortgage.

But here's the scariest part of the survey: about 21% of the 50+ respondents said their financial fears are holding them back from reaching their goals. That's gotta give you some estate planning chills! Many people 50+ are also undoubtedly scared of what will happen to their financial assets after they die and whether their loved ones will receive proper care.

The whole subject of estate planning gives some people the willies. It is scary to think about dying and planning for what may happen after your death. But not thinking about it could wind up haunting your family for years to come.

If you fail to name guardians for your children in your will, the court might name them for you. And if you don't have a written estate plan, your wealth could go to heirs you hardly know or do not want to have an inheritance.

Sit down with a qualified estate planning attorney and have him or her draw up a will or trust, if you haven't done so already. Ask if it would be wise for you to have one or more trusts, which can be extremely helpful if you have children or grandchildren with special needs.

Please call for a consultation and we can deal with those fears one step at a time.

Reference: Forbes (October 30, 2015) "What Spooks Us Most About Money"

Irrevocable Trusts Require Expert Planning

The death of a loved one can create a lot of financial complexity. For families that have set up irrevocable trusts to facilitate the transfer of assets from one generation to another, the tax implications can be even more complicated. However, there are some basic rules that any heir should know if they get an inheritance from an irrevocable trust.

The Motley Fool recently published an article entitled, "Tax Consequences of an Inheritance From an Irrevocable Trust," in which it noted that generally speaking, whether an irrevocable trust will be subject to estate tax at the death of the person who set it up will depend on the trust's terms and how it was created.

Because an irrevocable trust is typically a separate legal entity, it's not part of the estate of the person who created it. Its creation is usually a taxable gift that requires a gift tax return, which can have implications for eventual estate tax liability. Nonetheless, heirs receive the benefit of avoiding estate tax on the trust asset's appreciation in value.

One caveat is life insurance trusts. If the person creating the trust retained incidents of ownership in the policy (retaining power to change beneficiaries, canceling or transferring the policy, putting the policy up as collateral for a loan, or borrowing money against the policy's value), it will be included in the person's estate—regardless of the irrevocable trust's ownership. If this is the case, estate taxes may be due, and your inheritance could decrease.

The impact of income taxes also depends on the terms of the irrevocable trust. If the trust terminates at the person's death and the trust distributes assets to the heirs, your tax basis in those assets will be that of the trust. Make sure you have detailed information from the trustee before making plans to sell those inherited assets.

But if the trust continues beyond the death of the person who created it, then some complex trust tax rules apply. There may be regular distributions that the trust makes to you which will be treated as taxable income. You'll receive a year-end informational return that shows how much income is taxable and if it's ordinary income, capital gains, or other specialized types of income.

Every trust is different, so please get in touch if you have questions about setting one up or inheriting from one.

Reference: The Motley Fool (October 24, 2015) "Tax Consequences of an Inheritance From an Irrevocable Trust"

Sting and Warren Buffett Sing the Same Tune

From shirtsleeves to shirtsleeves in three generations, goes the early 20th-century American proverb. Then there's the 19th-century British version: Clogs to clogs in three generations. And from Italy, date uncertain: From the stable to the stars and back again. You'll find similar sentiments in almost every language, all expressing the same thought: It's nearly impossible to pass on family wealth and have it last beyond your grandkids. Statistics back up the folklore. Studies have found that 70% of the time, family assets are lost from one generation to the next, and assets are gone 90% of the time by the third generation. That's because a crucial element of successful inheritances is often neglected. Traditionally, the focus has been on the givers of wealth, but it should rather be on the receivers. Investing assets wisely and crafting a good estate plan are crucial to success, but so is preparing the heirs. "Estate planning is a process to transfer wealth, but it doesn't help the family develop an infrastructure to sustain it, or keep the family unified from one generation to the next," says Debbie Dalton, a Bay Village, Ohio, resident, whose family is learning how to successfully steward the wealth that her father, a chemical engineer, amassed as founder of cryogenic equipment maker Chart Industries.

The recent article in Kiplinger's Personal Finance, "5 Strategies to Keep Your Heirs From Blowing Their Inheritance," explains that preparing the next generation has a lot to do with financial literacy. In addition, it means passing down and putting into practice values that will sustain your family as well as your fortune. A successful inheritance requires parenting and money management – regardless the eventual estate size.

There are a number of challenges that come with a family windfall. Inheritors can lack self-esteem if they suspect that their success stems from their inherited wealth instead of their own efforts. Or they may feel guilty and have trouble accepting good fortune that wasn't earned, and their emotional development can be delayed if they never have to face important life challenges. They can get bored, which puts them at risk for substance abuse or other self-destructive behaviors. Lastly, heirs can get frazzled with too many options or be paralyzed by a fear of losing their wealth.

It's no wonder that rich folks like Warren Buffett and Sting have said they will "spare" their children from inheriting fortunes. They're going to give most of theirs away or spend it. Buffett said the ideal inheritance for kids is "enough money so that they would feel they could do anything, but not so much that they could do nothing." Sting told Britain's Daily Mail last year, "I certainly don't want to leave them trust funds that are albatrosses round their necks." But that attitude is rare among wealthy parents. Most parents don't want to disinherit their kids, but they want a game plan that will not only keep the family assets intact but also keep the kids grounded, healthy, and productive. There are programs to help prepare the next generation for the riches they'll inherit that are more than just money managers' advice.

Get over the money taboo. Family finances are often an unpopular topic of discussion, particularly when the parents think that family wealth might spoil their kids. Young people without preparation who suddenly come into a trust fund when they turn 21 or if both parents die in an accident can go totally out of control, just like some lottery winners. (The same goes for spouses.)

Heirs who are not ready frequently believe that their parents thought they were incapable of handling the information or couldn't be trusted with it. Be up front about the wealth you have and your plans for it.

Embark on a mission. Make sure your legacy is about more than money. Try writing a mission statement, and have family members write down the values they want to emphasize in their lives, such as education, philanthropy or self-sufficiency. This helps the family identify the long-term purpose of their wealth.

Raise money smart kids. Teach kids from an early age about budgeting and saving. Get kids a piggy bank with three slots or three separate piggy banks—one for spending, one for saving and one for giving. Tell grandparents who like to give cash to make them in multiples of three. In addition, allow older kids to budget an allowance to cover their expenses. That means looking at the monthly average spent on his or her car insurance, cell phone, and other "essentials." Give them an allowance to pay those bills. Without a budget, kids won't learn to prioritize or make decisions about money.

Give Your Kids "Financial Training Wheels." Don't wait and withhold all access to the family fortune in order to preserve it. Seed an investment account when children are in their late teens and let them make investment decisions and agree to match a percentage of the returns earned over a specific time period. The child can withdraw money from the account, but the parent can't add to the principal, which will teach them about investing and spending. It will also show them the power of compound growth as well as the opportunity cost of robbing a nest egg.

Assemble a good team. In addition to an experienced estate planning attorney, bring in mentors for the next generation, such as board directors and other successful businesspeople. This de facto advisory board is nice when your kids' friends and classmates start asking them for contributions to investment schemes or business start-ups. They want to help their friends, but the best way is to defer… so if the committee says "yes," they're a champ. But if it's "no," then it's not his fault.

You'll have the best chance of preserving both your wealth and your family with a multigenerational effort that starts when your kids are born, not when you die.

An experienced estate planning attorney can help guide you throughout.  Please get in touch with me if you would like a consultation about your estate, no matter how large or small.

Reference: Kiplinger's Personal Finance (November 2015) "5 Strategies to Keep Your Heirs From Blowing Their Inheritance"

Come on, Young Adults! This Means You!

If you think estate planning is for only the elderly or wealthy individuals, think again. Everyone has collected some stuff, what professionals like to call assets, possessions, investments — and don’t forget the liabilities (debt), like student loans, car or credit card balances. Even if you do not think you have much, it’s important to have a plan for what you do have, and what you want to do with the stuff after you pass away. There are some basic documents everyone should consider having. If you do not complete the appropriate documents, the state you reside in has its own statutory regulations and procedures to dispose of your property. If you do not plan right, you not only surrender your control over your things, but your things may not go to the party you want — such as a partner, life partner, friend or charity. So what can you do?

The website credit.com addresses important tasks that everyone needs to address, in “Why Everyone Needs a Will (I'm Talking to You, Millennials).”

Designate Your Beneficiaries. You can list your beneficiaries on your retirement accounts (401(k), 403(b), IRA, etc.) when you complete the application. Likewise, you can designate your beneficiaries on bank and investment accounts by setting up a TOD (Transfer on Death) designation. It’s easy to do and costs nothing. Remember that beneficiary designations supersede any wish you make in a will.

Draft Your Will. A will is a legal document and is a written statement of your intentions, including where you want your possessions to go and how you want the orderly disposition to happen. See an attorney, as each state has different laws.

State Your Health Care Wishes. Use a Health Care Surrogate Designation to let someone you trust make health care decisions and carry out your health care wishes in the event that you are incapacitated.

Sign a Durable Power of Attorney. This form allows someone you trust to make financial decisions in the event you are unable to do so. There is a huge difference between a limited power and durable power of attorney. Talk to your estate planning attorney about these documents.

An experienced estate planning attorney can spend time with you and review your estate issues, complete a will, health care designation, durable power of attorney, and check beneficiaries, as well as any tax issues. I work in this area a lot and can help to ensure your wishes are properly documented and you achieve what you are trying to accomplish, now and in the future.

Reference:  credit.com (September 11, 2015) “Why Everyone Needs a Will (I'm Talking to You, Millennials)”