Vacek & Thain, PLLC

Children Can Be Blocked from Your Estate

It can be a tough decision but you can prevent your children from receiving any part of your estate.

As a teenager a man had a relationship that resulted in a daughter but he did not find out until the daughter wrote to him with the news that her mother had identified him as the father while the mother was on her death bed.

This story appeared in an article entitled "Can my 40-year-old long-lost daughter get my estate?", recently featured in Market Watch with a question from a reader.

The man paid for DNA testing which confirmed that she was his only child.

Unfortunately, the father and daughter ultimately did not get along and ceased communication. The man lives with a partner who wishes to give him her house when she passes. However, this partner is reluctant to do so. It seems she does not want the daughter to inherit the house when the father passes away.

The man wonders how he can ensure that the daughter will not inherit the house.

The answer to the reader's question is very short and simple. He can have a will or living trust prepared to specifically exclude the daughter and any of her children.

Nevertheless, the article does not elaborate regarding why this needs to be done.

Accordingly, a more complete explanation would have noted what happens when a single person passes away without a will. In such circumstances, the laws of intestate succession apply. Consequently, the estate passes to any living children.

So, if you do not want a child to inherit your estate, you need a will or a living trust. However, that is not all that must be done.

The law assumes that if a child is not mentioned in a will, it was an oversight. The judge can reconstruct the will to include the child. For that reason the child must be mentioned in the will and specifically disinherited.

A meeting with an estate planning attorney can help you accomplish your goals.

Reference: Market Watch (Feb. 5, 2016) "Can my 40-year-old long-lost daughter get my estate?"

Feel free to visit our website to register for a free upcoming seminar or for more information on estate planning.

It is Possible to Go out of State for an Executor

Your first choice of an executor may not reside in your state of residence but they can be appointed to the position. However, it is important to know the potential problems.

Your first choice as the executor of your estate may not live close by or even within your state of residence – but, if you are comfortable with them, they are someone you trust and someone with strong financial knowledge and experience it is still possible to designate that person as your executor. It is important, however, to realize there can be problems.

This subject was considered in a recent NWI Times article entitled "Pros and cons of an out-of-state executor."

The two biggest drawbacks are availability and time.

Executors are often required to make personal appearances at court hearings. It can be burdensome and expensive for an out-of-state executor to make the travel arrangements. Logistically, paper correspondence may also take longer.

According to the article, some states have additional requirements when the executor is a non-resident. For example, the state of Indiana requires out-of-state executors to post a bond and appoint someone who is a state resident as a registered agent for service of process. Other states have similar requirements.

On the plus side, appointing an out-of-state executor allows you to designate the best person for the job. Many of the negatives of doing so can be mitigated if the executor hires a local estate attorney to assist with the administration.

Consider contacting an estate planning attorney to guide you in the selection of filling the important position of executor.

Reference: NWI Times (Feb. 7, 2016) "Pros and cons of an out-of-state executor."

Please visit our website for more information on estate planning.

Use the Tax Season to Look at Your Estate Plans

Your estate plan should be reviewed occasionally and linking it to the annual tax season could be beneficial.

The tax season is a time for gathering all of your key financial information and is an excellent time to take a look at your estate plan. While doing your taxes you will be gathering much of the same documentation needed to review an estate plan. In addition, the documentation will be fresh in your mind.

Accounting Web recently offered some tips about estate planning during the tax season in "Estate Planning Reminders for This Tax Season."

The advice includes:

• Review or Get a Will – Spend a little time to review your will and make sure everything is up to date. If you do not already have a will, visit with an estate planning attorney about getting one.
• Prepare a Letter of Instruction – Make a list of your assets, where they are located, and how they should be handled in your estate.
• Review Beneficiaries – Since you should have the asset documentation available as part of your tax preparation, make sure all beneficiary designations are up to date.
• Consider a Trust – Again since you already have the documentation handy, tax time is a good time to have a trust drawn up and to transfer assets into the trust.

The person who prepares your taxes and your estate planning attorney could work together. Consider it as tax time comes around.

Reference: Accounting Web (Feb. 8, 2016) "Estate Planning Reminders for This Tax Season."

For more information on how to plan your estate or better: attend a free seminar, please visit our website. 

States Evaluate Importance of Estate Taxes

Since wealthy elderly residents have been known to relocate to states with more favorable estate tax laws, a clear trend has developed with more and more states reducing or eliminating estate taxes.

A dilemma has been presented to state governments facing revenue declines. They can raise tax revenue by taxing the estates of the wealthy but they then risk their own residents relocating to more lenient states before they pass away.

When such citizens move away that means these state governments with estate taxes do not receive income or capital gains taxes from those wealthy people. In the end, such states must determine which taxes are more important to them and their budgets.

Kiplinger's Personal Finance reports in "More States Giving Heirs a Break on Estate Taxes" that the majority of states have chosen to keep their citizens rather than impose an estate tax.

So, how many states still have an estate tax? At present, this number includes only 14 states and the District of Columbia. Tennessee is the latest state to do away with its estate tax and six other states have increased their estate tax exemptions recently.

Although it might be tempting to say this trend is clear evidence that estate tax revenue is not as important as other revenue, there probably is not enough definitive evidence to make that claim. The political controversy surrounding the estate tax might play some role in this trend amongst the states.

It will be worth watching if the states still imposing the tax continue to face pressure to repeal it to keep the wealthy from fleeing to other states in their retirement years.

An estate planning attorney could be helpful in guiding you through these important issues.

Reference: Kiplinger's Personal Finance (February 2016) "More States Giving Heirs a Break on Estate Taxes"

Please visit our website for more information on estate tax or to register for a free living trust seminar.

A Headache Can Accompany Long-Term Care Insurance

The possibility of acquiring a long-term care insurance policy can bring confusion, a waste of time and a headache.

The cost of nursing home care can be extreme and more and more people are looking at possible solutions to paying those costs. An industry arose to answer those concerns and insurers began offering policies to cover those costs. While it sounds like it might be a simple solution to a difficult problem, it appears the process isn't so simple.

Recently, The New York Times discussed the complexities in an article entitled "Long-Term Care Insurance Can Baffle, With Complex Policies and Costs."

The key thing to understand is that 90% of the companies that offered long-term care policies in the past no longer do so. These companies discovered it is very difficult for insurers to make money on the policies.

Those companies still in the market offer a confusing array of policies with benefits and costs that are not always easily understood. It can be migraine-inducing for people to figure out what they are getting if they purchase a policy.

It can also be a complete waste of time for a couple of reasons.

First, 40% of people who apply for the policies are turned down for health reasons. Second, the policies do not offer life coverage. They are short term policies and if your need for coverage exceeds the policy term then the money spent on premiums is wasted.

If you are looking into long-term care insurance it might be wise to seek independent advice such as from an estate planning attorney or elder law attorney to be sure the policy is of value to you and what benefits you would actually receive.

Reference: The New York Times (Dec. 18, 2015) "Long-Term Care Insurance Can Baffle, With Complex Policies and Costs."

Please visit our website for information on estate planning.

Brain Dead Declaration Creates a Lawsuit

The issue of when a person can be removed from life support is making headlines in California as a family files a lawsuit.

A 13-year-old girl checked into an Oakland hospital for routine surgery in December of 2013 but complications soon followed for Jahi McMath that made the surgery anything but routine as she began bleeding profusely.

She suffered from brain swelling and cardiac arrest. A few days after the surgery, McMath was declared to be brain dead by the doctors. The designation is important because when a person is declared brain dead, hospitals are no longer required to provide life support or other treatment.

However, McMath's mother would not consent to her daughter being taken off life support.

After a court battle, a judge agreed with the doctors and declared McMath brain dead. Her mother continued to believe otherwise and quickly arranged for her daughter to be transferred to New Jersey as that state has a religious exemption that allows families to keep brain dead people on life support for religious reasons.

For two years McMath has continued to "live" in New Jersey on life support and her family insists that she shows signs of not being brain dead, but California has refused to remove the designation. Now, her mother has filed a lawsuit in federal court demanding that California be forced to do so.

Courthouse News Service reported this story in "Family Wants Brain-Dead Girl Declared Alive."

What this case highlights is the importance of advanced health care directives, especially living wills. The one person who does not have a say right now regarding whether she remains on life support is McMath. She is a minor so her parents' wishes would take precedence over hers in any case.

Adults can avoid this situation by visiting an estate planning attorney and making a living will part of an estate plan.

Reference: Courthouse News Service (Dec. 24, 2015) "Family Wants Brain-Dead Girl Declared Alive."

You can find more information on living wills during one of our free living trust seminars.  You can register through our website or by calling us at 281.531.5800. 

Just How Healthy Are Elderly Baby Boomers?

The baby boomer generation may be living longer than previous generations but a real concern has arisen over health issues the generation may face.

As the last of the baby boomer generation becomes eligible for Medicare in 2030, the average life expectancy is expected to be an additional 20.1 years but health issues may present major challenges.

A recent study suggests that those elderly people who will live longer will do so in poorer overall health than the elderly people from previous generations. It appears, in part, this is because medical science has done such a great job of finding treatments for diseases that often kill people early, such as cardiovascular problems. As people will be living longer, however, they will get other diseases, such as cancer and Alzheimer's, in greater numbers.

The Bangor Daily News reported this story in "Baby Boomers are more likely to spend their last years in worse health than past generations."

This has important implications.

While an individual cannot know for certain whether he or she will be one of the people who live longer and suffer from disease, individuals can play it safe and plan ahead.

Baby boomers should consider getting estate plans that include powers of attorney and advanced health care directives so if they become sick or incapacitated, the people handling their affairs will have been chosen by them.

Reference: Bangor Daily News (Dec. 29, 2015) "Baby Boomers are more likely to spend their last years in worse health than past generations."

Please visit our website for more information on estate planning.

Estate Planning For Adult Children with Mental Illness or Addictions

When their daughter had a breakdown while attending college, there was nothing that Keisha Sacher’s parents could do when she refused to come home. At age 19, she was an adult. They had no legal control over her. When she finally did return to their home, the family endured a nightmare of her drug addition, homelessness, hospitalizations and worse. The Sacher’s were aging, and they needed to plan for their daughter’s care in the future.

For parents watching helplessly while adult children struggle with mental illness and addition, there is another layer of worry. What will happen when the parents are no longer alive? In“For Parents With Troubled Adult Children, Financial Hurdles Abound,” The New York Times examine the financial challenges of helping loved ones stricken with mental illness. The solution must provide for care without placing assets in the ill person’s control, must not jeopardize their government benefits and must not worsen their condition. One solution is the special purpose trust.

A special-purpose trust is different from a special-needs trust, which is frequently implemented to pay for additional needs of those receiving government benefits where the government has strict restrictions on the recipient’s assets. A special-purpose trust can be used to provide children more of the life they might have enjoyed without mental illness or addiction, and it allows the parents the flexibility to make changes with the distributions.

Special-purpose trusts are more complicated to establish than regular trusts because of the powers they give to the trustees and the restrictions they place on distributions. However, the toughest part of creating a special-purpose trust is getting parents to accept them as necessary: parents must first acknowledge that their children will never fully recover.

Parents are advised to set out some very specific criteria for distributions into trust documents, for example, staying on medication or staying sober for a certain period of time. In addition, those with a family history of mental illness and addiction issues should get a power of attorney and health care proxy for children over 18 who are away at college. In the event that something happens to their child, the parents will have access to medical records and will be able to help.

Work through these issues with an experienced estate planning attorney to make sure that you are doing your best to help your child.

Reference: New York Times (August 28, 2015) “For Parents With Troubled Adult Children, Financial Hurdles Abound”

Please visit our website for more information on estate planning for difficult family issues.

Will Your Money Work Hard Enough When You Retire?

You are working hard in your pre-retirement years to max out your retirement funds. And while your money should always work, when you do retire your money is going to need to work even harder. It’s time for you to demand more from your money!

If you think of your money as a partner in your retirement plan, the idea that it should work hard for you makes a lot of sense. Consider these “demands” on money that appeared in “Seven demands retirees should place on their money,”from MoneyWatch:

• Growth: Make      sure you still have a growth component in your portfolio so that you aren’t      faced with attempting to live with an income that no longer covers your      costs.
• Safety: Keep      your money in a safe place and in the care of a reputable custodian who is      not part of the investment company. Two words of warning: Bernie      Madoff.
• Tax      Efficiency: Remember what Mom used to always say,      “It's not about how much money you make, but how much money you keep.”      After tax cash flow is a must.
• A      Healthy Long-Lasting Income: Ask your financial planner      to conduct a cash-flow analysis to see how your money shakes out in five,      ten, twenty and thirty years. Get help creating a plan that takes taxes      and inflation into consideration and one that increases the probability      that you’ll receive an income for the rest of your life.
• Control: Have      some control over the access to your investments. What if there's an emergency?
• Access: Set      some money aside for an emergency fund or rainy day fund, in case you have      an unforeseen expense.
• Effective      Estate Planning: Make sure that your estate plan lets      your loved ones inherit your estate in the least-taxed, most      cost-efficient wa y.

Make your money work hard! Speak with a qualified estate planning attorney.

Reference: MoneyWatch (August 3, 2015) “Seven demands retirees should place on their money”

For more information on how to protect your money, please visit our website.

Tragic Death of Bobbi Kristina Brown Holds Grim Lessons for Parents

The tragic and untimely death of Whitney Houston’s daughter Bobbi Kristina Brown holds a number of lessons in estate planning that are applicable for parents and young adults. Because of laws that control information and decisions with regard to medical treatment, it is imperative that anyone over 18 have written advance medical directives in place. Necessary documents include the designation of a healthcare proxy, a living will and a “HIPAA Release,” so that a healthcare surrogate may communicate with providers about the care of a patient who is in a coma or otherwise incapacitated. These documents and planning are no longer the exclusive purview of seniors. This is unpleasant business, but young adults who are unable to communicate their end-of-life wishes need to be as prepared as the elderly.

Parents of college-bound freshman age 18 and older need to have several documents prepared, according to a NewsMaxarticle, “End-of-Life Lessons of Bobbi Kristina's Tragic Death.” A healthcare designation, a living will, HIPPA release, and durable power of attorney should be standard documents prepared for the ‘new’ adult so that parents can act on behalf of their kids if the unforeseen occurs.

Bobbi Kristina was only 22 and the only child of the late Whitney Houston and Bobby Brown. She passed away after a very public six-month family fight over how to treat the comatose Brown, after she was found face-down in a bathtub in the Atlanta townhome she shared with her boyfriend Nick Gordon.

This story illustrates the difficulties families deal with when confronted with complex healthcare decisions. The article emphasizes the need to create advance medical directives to help family members of patients. These end-of-life instructions should be in a legal document, prepared by an estate planning attorney so that it satisfies the requirements of state law. The directives should include:

• A      Healthcare Designation. This is a very critical part of an      advance directive, as a “healthcare designation” or “healthcare proxy”      names an individual you authorized to make medical decisions for you, if      you are unable to do so on your own. This friend or relative is given what      is also called “durable healthcare power of attorney (POA).” This allows      them to speak on your behalf.
• A HIPPA      Release. This allows your proxy to communicate      with your healthcare providers about your care.
• A      Living Will. This formal statement communicates your      wishes for medical care should you end up in a “persistent vegetative      state” with little or no chance of recovery, and you can’t communicate      your wishes. Talk to an estate planning attorney as every state has its      own regulations for living wills.

It’s no shock that end-of-life planning is a difficult topic to discuss. Just 26.3% of Americans have completed advance directives, according to a 2013 study. But as the Bobbi Kristina Brown case shows, it’s important and never too early to discuss this topic with spouses, family members, partners, adult children, and parents.

Reference: NewsMax (July 31, 2015)“End-of-Life Lessons of Bobbi Kristina's Tragic Death”

Please visit our website for more information on health care documents.