PREFERENCES FOR FUNERALS AND DISPOSITION OF REMAINS

My wife has told me very clearly, “Now listen, when I die, I don’t want to be eaten by bugs. So, I want you to cremate me. I want you to put my ashes in a box and then into a columbarium where the family can come visit me.”

I am glad she has told me this—and I take her words very seriously.

It’s not easy to talk to your husband, much less your child about your possible illness and death. Usually, the children say, “Oh, Mom and Dad, you’re going to live forever! We don’t want to talk about that stuff.” To them, it’s almost as if talking about death might make it happen sooner.

But talk about death you must. Your estate plan should include instructions for your funeral and final disposition of remains. Instructions may include authorization for use of your body for organ donation, medical training, or research. You can also specify the nature of your funeral, and perhaps most importantly, who will make the decisions about your funeral.

Once again, failure to give instructions about funerals can lead to confusion and strife within a family.

Take the case of a woman I know who died with no plan, and five kids that hate each other. She had no durable power of attorney for healthcare, nor a living will with instructions for disposition of her remains. Her five children, of course, could not agree, so the funeral home cremated the body and divided the ashes into five separate urns—one for each of them to do with as they pleased. No kidding.

Remember, however, that writing a document is not a substitute for discussing the details with your loved ones in advance. When you become seriously ill or die, decisions will have to be made very rapidly, and the documents may not be available.

DON’T FORGET THE POSSIBILITY OF PRE-NEED PLANNING

Your preparations may include pre-need planning, which I strongly recommend. With these arrangements, you go to a funeral home and pick everything out from the red carnations to the Studebaker-themed casket. Not to mention the white cake with strawberries and French crème filling to be served at the memorial service.

You can plan it all ahead and pay for it ahead of time. But you don’t pay any monies directly to the funeral home— what if they are not around when the time comes? Instead, the money goes to an insurance company, which pays out a death benefit to cover these expenses at guaranteed rates.

Pre-need offers a pretty good deal, saves additional heartache, and makes the to-do list that much shorter when someone dies.

THE ROLE OF THE LIVING TRUST IN INCAPACITY

As we saw in the case of Jack, a living trust may be even more important during your incapacity than it will be after you die.

Let’s again begin by distinguishing between a will and a living trust. A will is only valid at death. Before a death, a will is only a piece of paper.

A living trust, on the other hand, is a living document which has binding legal effects from the moment it is signed. It lives with you and helps you and your family throughout your lifetime. Then, it continues to protect your estate and your loved ones after you die.

In Mistakes #10 and #9, we learned a lot about living trusts. If needed, go back and read those chapters now to see how a living trust creates a bucket for your assets, which can efficiently be passed into the control of others. You are the grantor of the trust, which exists for you as the beneficiary. While you are alive and capable, you are also the trustee, controlling the trust.

But in your living trust, you will designate a series of fallback trustees to take over when you die or become incapacitated. We lawyers call these people “successor trustees.” The moment you are incapable of acting as trustee, someone else can immediately take over—whether it’s your spouse, a child, a lawyer, a bank, or whoever you choose. Using their powers as trustee, coordinated with the power of attorney for property you have granted to them or to others, this person can pay your bills, manage your investments, or whatever else needs to be done.

While you are alive, your trustee can do this work only for your benefit. Why? Because even though you are lying unconscious in a hospital, you are still the legal beneficiary of the trust.

I should mention at this point that for a variety of legal and tax reasons, a living trust is not the appropriate bucket for certain kinds of assets, including annuities, IRAs, 401(k)s, 403(b)s, and TSA investments. Other vehicles are needed for those assets, and we will deal with them under Mistake #5. For now, however, you just need to know that a proper durable power of attorney for property can give the same person similar control over these other kinds of retirement plans and investments. That’s why both kinds of documents must exist, and must be designed to work together.

Your attorney can also advise you on the use of an irrevocable trust as part of a strategy to obtain public assistance benefits such as Medicaid and Veterans Administration aid to help pay for long-term care and nursing home bills.

Our knowledgeable attorneys can help you with all your living trust needs. Attend one of our seminars for a FREE consultation.

GRANTING DURABLE POWER OF ATTORNEY AND NOMINATING A CONSERVATOR

Please do not be confused by the term “power of attorney.” Many clients believe this term has something to do with the lawyer preparing their estate plan. Clients sometimes mistakenly fear that they are giving over some kind of power to their lawyer to make decisions for them. This is not true.

When you grant “durable power of attorney” to another person—any other person—you are designating that person as your agent, to act on your behalf. This may be your spouse, your child, a friend, or anyone, as long as he or she is an adult (eighteen or older) and not under a conservatorship or incarcerated. Now and then, someone may indeed choose an attorney for their agent, which adds confusion to the term.

“Durable” means “continuing even when you are incapacitated.” Indeed, these documents are generally written so that these powers are only granted while you are incapacitated and unable to act on your own. These are called “springing” powers of attorney, because they spring into action upon your incapacity.

If you are elderly or facing a long-term illness, you may consider gently easing someone you trust into the role of your “agent,” helping you through powers of attorney, over a period of time. This might be a sibling, a spouse, a child, or someone else you truly trust. This person should understand that if you have a stroke or other sudden decline, they will have to jump in with both feet.

If you think you may someday need to go further, and give full control to someone as conservator, you should nominate a person for that job too. This nomination is contained in the durable power of attorney for property (conservator of the estate nomination) and in the advance healthcare directive or durable power of attorney for healthcare (conservator of the person). These nominations may also be available in a separate document—apart from the durable powers of attorney for property or healthcare.

If it came to the need for a conservatorship—if, for example, you became a danger to yourself or others—a court would have to investigate and confirm your nomination. Your nominee would have to go through a criminal background check, a credit check, and more. But you would have had primary input. If you have not made a nomination, state laws indicate a priority of appointment typically based on your family tree and the laws of “intestate succession.”

Regardless of the situation, clear your decision with your designees and nominees while you still can. It’s a heavy responsibility to take on either power of attorney or to become a conservator, and you want to make sure everyone will agree to serve.

Do not surprise a loved one with this responsibility when you are hit by a car. For one thing, they may say no.

If you are the person caring for someone with a mental incapacity, you may at some point have to consider a conservatorship. Sometimes, you simply have no other choice.

I know a woman who is taking care of her husband with dementia. He had always been a loving and gentle husband and father. But the disease is destroying his judgment, and little by little he is becoming violent. Recently, when they were in the drive-through line at a burger place, he just randomly let loose and clocked her. Knocked her out cold.

Now, it is truly her responsibility to go to court and apply for a conservatorship to have him institutionalized against his will. It happens.

DURABLE POWER OF ATTORNEY FOR PROPERTY

In Mistake #9, we learned that living trusts are not generic, cut-and-paste documents. The same is true with power of attorney documents. For starters, you will be asked to grant separate powers for property and for healthcare decisions.

When you grant property power to your agent, you are authorizing this person to make decisions about your property and your finances while you are incapacitated—and to take specific responsibility for paying your bills, maintaining your online accounts, contributing to, managing, or withdrawing from your IRA, and the thousand other financial responsibilities we all face.

You may or may not, however, want this same person making healthcare decisions for you.

DIVIDED POWERS FOR PROPERTY

You should also understand that even powers of attorney for property may be best divided.

If you own a business, you may want a different person to make business decisions during your incapacity than the person making your personal financial decisions.

You may want a different person making your investment decisions than the person handling your day-to-day finances.

You may also want to grant powers of attorney which are not durable, but end when you lack capacity. This may prevent, for example, a business partner from taking some action while you are out with a stroke.

Nondurable powers may empower a spouse or a business partner to make crucial decisions every time you are on vacation in remote locations, and then disempower them again when you return.

Another important question involves gifting. Most power of attorney documents I have seen do not include gifting authority—in other words, the agent you name during your incapacity generally does not have the right to give away your property to anyone else.

However, the power for one spouse to make a gift of their assets to another may be crucial in public assistance benefit planning, as you will see under “Monetary Fallbacks for Disability,” below.

Work closely with your attorney to discuss these decisions and craft these documents. Consider your choices carefully—they may be the most important choices you ever make.

POWER OF ATTORNEY FOR HEALTHCARE

If you are incapacitated with an illness, even if you are just under sedation for an hour-long operation—who do you trust to have your best interests at heart and make the right calls with doctors? Approve treatments? Argue with hospitals to keep you longer?

If you lose mental capacity due to stroke, dementia, Alzheimer’s, Parkinson’s, or other common conditions, who do you trust to move you from nursing facilities to home and back again?

Every one of us should choose a trusted person, discuss the responsibilities with that person, and update your choice as often as necessary. The power to make medical decisions for us when we cannot do so is called a “durable power of attorney for healthcare,” and is granted through a pretty straightforward document.

The document says simply, “If I cannot make healthcare decisions for myself, then this person or these people can make them for me.” You can name more than one person to serve jointly, or you can name them to serve consecutively. If this person cannot serve, then the power falls to the next, and etc.

Once again, a “power of attorney for healthcare” has nothing to do with the attorney writing the document. You can grant the healthcare power of attorney to anyone.

If you have a primary residence in one state and a vacation home in another, we recommend to our clients that they create a durable power of attorney for healthcare for each state, because a lot of the related laws are state-specific.

HIPAA AUTHORIZATION

A second document works closely with the power of attorney for healthcare decisions.

The Health Insurance Portability and Accountability Act (HIPAA) created significant restrictions on who has access to your healthcare information. Although it boosted privacy, it also created barriers to swift decision-making and intervention by loved ones. If a doctor or hospital divulges your health information to someone without the proper authorization, they face huge fines—as much as $50,000 per violation, in some situations.

As a result, all health professionals and organizations take HIPAA rules very seriously.

The HIPAA authorization you sign gives authority to one or many people to have full access to your health information. As previously discussed in the Introduction, you may want to expand this authorization well beyond the person you have granted your power of attorney for healthcare. For example, you may want a home healthcare worker to be able to call up and check on your prescriptions, even if you don’t want this person to make major medical decisions for you.

Think through your HIPAA authorizations carefully with an expert lawyer. In some cases, for example, you may want to have separate HIPAA authorization documents for different people and circumstances.

Although HIPAA is a federal law, there is no federal HIPAA form. Each state has its own. In my home state of California, for example, a HIPAA authorization must be printed in fourteen-point type to be valid!

LIVING WILL AND ADVANCE HEALTHCARE DIRECTIVES

A “living will,” sometimes known as an “advance healthcare directive,” tells medical personnel, loved ones, and the person you have given power for healthcare decisions your preferences for medical care in dire circumstances, “in advance.” A living will generally comes into play only when you are in the late stages of a fatal illness, fall into a coma, or have suffered an extremely serious injury.

Please do not confuse “living will” with “living trust.” They are completely unrelated documents, with different purposes.

In most cases, the goal of a living will is to give permission to loved ones to let you pass away in order to avoid unnecessary suffering. Most living wills say, in essence, “If I’m a goner, let me go.”

When my grandmother had a heart attack, my grandfather called the paramedics. It was a massive heart attack. The paramedics rushed over, got out their paddles, and shocked her heart back to life. Then they put her on a ventilator and took her to the hospital. But she never recovered consciousness, and never showed signs of recovering the ability to breathe on her own. The doctors said there was no hope, and indeed, when I looked at her, I could see that her soul had probably already left her body.

My grandmother had created no living will and had never even discussed this possibility, so the decision to terminate life support was made even more difficult for my father and his two older brothers. After a week, my father and his brothers made the agonizing choice to terminate life support. Ten years later, my father still asks me, “Did I do the right thing?”

I tell him that I was very close to my grandmother. And then I say, “Of course, you did.” I say this because there really was no alternative. But the choice would have been much easier if she had made her own desires clear in a living will.

I will not go into all the specific details of a living will, such as how it relates to “Do Not Resuscitate (DNR)” and “Physician Orders for Life-Sustaining Treatment (POLST)” orders. Instead, I refer you to your attorney. Just make sure you get the appropriate legal and medical advice.

For more information or to receive a consultation with one of our attorneys, attend one of our FREE seminars.

Four Tax-Efficient Ways to Pay Long-Term Care Insurance Premiums

It’s an unfortunate and often hard reality to contemplate, but up to 80 percent of Americans will face a period of sustained disability before their deaths. What is harder is that most of those Americans will not have done even the most rudimentary planning for this event or for the extended care it will require.

The truth is, long-term care (LTC) is expensive and we know that paying premiums can be a burden to some households. We recently covered how a quality estate plan can help you in terms of disability and long-term care, and today we are sharing four ways the tax code can help you with the expenses for long-term care premiums.

1.  Health Savings Account (HSA)

As of 2018, depending on your age, the HSA can provide up to $5,200 to help fund your LTC premiums as well as toward premiums on LTC benefits for a spouse. “The funds can offset premiums on a traditional LTC insurance policy, or a hybrid life or annuity policy that includes LTC benefits such as an LTC rider” (1).

2.  Deduct LTC premiums as a medical expense

If you are not using HSA withdrawals to fund LTC premiums and your medical expenses exceed 10% of your annual adjusted gross income (7.5% for individuals 65 years or older), you may be able to deduct your premiums on qualified LTC coverage on your individual tax return.

3. Tax-Free 1035 Exchange of Annuity

By nature, long-term care insurance is tax-free allowing clients to benefit by allowing, “like-kind property to be exchanged without triggering taxation on any gain in the contract” (1). This means clients may be able to exchange either a partial (if insurance allows) or full annuity contract for either a new contract with LTC benefits or a traditional LTC policy.

One important thing to note, however, is in order for tax-payers to take advantage of this exchange, the funds must be assigned or obtained directly between prior life insurance or annuity company, directly to the new company and not to the individual or policy owner.

4. Tax-free 1035 Exchange of a Life Insurance Policy

There may come a time where you have an existing life insurance policy but due to unforeseen events you need to exchange or create a new policy that includes LTC coverage. Individuals can switch out their life insurance policy with a 1035 tax-free exchange making it possible for them to add or create a new policy that includes an LTC or chronic illness rider if they require one. For more details, you can read the full article from Highland Brokerage.

An estate plan is more than just distribution of assets, it establishes a plan for you and your loved ones in the event life circumstances require difficult medical decisions to be made, including provisions for long-term care. Our knowledgeable attorneys can provide you with a free consultation at one of our seminars and answer all your estate planning questions.

Source (1): https://blog.highlandbrokerage.com/4-tax-efficient-ways-to-pay-long-term-care-insurance-premiums/

Supporting Your Children & Saving For Retirement – Are You Out of Balance?

One of the hardest balances to strike as a parent is when to step back and let your children create their own independence. Even when they grow into adulthood, they are still our kids. Wanting our children to be successful adults in today’s world means many parents are working to save for retirement while still providing for their children financially. If you are in this boat, know that you are not alone. A 2018 survey conducted by Merrill Lynch found that 79% of US parents provide financial support to their adult children, from groceries and phone bills to weddings and down payments on their children’s first homes. But at what cost?

Are you sacrificing your own future financial security for your children right now?

The good news is that there is such a thing as balance and this applies to your finances and family as well. Parents are well advised to begin by educating their children on budgeting, investing, the value in making their payments on time, and not using credit to buy things they want but don’t need. These lessons can be helpful at any age and as more millennials are leaving home later, parents have the opportunity to be a financial role model for their children and show them how to take concrete steps for monetary success.

Retirement will come whether you have savings or not, but there are ways to walk the tightrope of still providing for your children after they fly the nest, without creating a sense of entitlement or bankrupting your account. Contribute to your child’s savings, be clear on whether any money you provide is a gift or a loan with clear repayment terms for everyone involved, establish a purpose for the money, and timelines for how long you will you provide financial support – all of these ways can successfully allow you to help your kids without bankrolling them indefinitely.

Estate Planning is another valuable tool to ensure your money protects your heirs in the future. You can, for example, set up a trust for the benefit of your children into which other relatives can place money, perhaps to fund their college education. Or what if your child is twenty-five but still sits at home all day playing video games? You may want to create a trust that provides for them while still encouraging them to get a job and become an active part of the community. Not all trusts are the same and we want to help you understand the difference!

Our licensed attorneys can help you create a plan that protects your legacy and your children. Not just with the distribution of assets, but by relieving them from having to make potentially life-changing and difficult decisions in the future. Providing for your children financially is just one piece of the puzzle as a parent. To truly protect yourself and them you need to create a well rounded estate plan for the future, one that encompasses retirement and beyond. Attend one of our FREE seminars and a licensed attorney can answer all your questions about the future and doing what is best for your family.

 

 

 

AVOIDING A CONSERVATORSHIP

Since incapacity before death is an 80 percent probability, you should plan for it. And you should plan to avoid a conservatorship if at all possible.

A conservator, sometimes called a “guardian,” will have much more power than someone with “power of attorney.” Once a conservator or guardian has been appointed over you by a court, you lose your liberty, along with considerable rights over your life. Someone else will tell you where to live, who to visit, and when. You won’t vote anymore. If you are a gun owner, they’ll take away your guns, too.

Once a conservator has been named, he or she will have the power to ask the court to confine you to an institution against your will. They will have the power to make all medical and financial decisions for you, and you will lose the power to make these decisions for yourself and take full control of your affairs.

You may have no input on who is named conservator by a court. Why? Because you will have been found incompetent to make such decisions.

It’s likely that one of Jack’s relatives will be appointed conservator, but Jack could have prevented much of this family strife, hassle, and expense simply by hiring an attorney to create a proper estate plan which took into account the very high probably we all face of incapacity.

If he trusted Mary, he could have named her as trustee for his living trust in case of his incapacity (see below). As trustee, she would have had immediate access to his accounts and his investments. Whether or not her decision to fly him to Boston proved best in the long run or not, the decision would have been made without lawyers, legal expenses, or bitter court proceedings.

Which means there might have been enough money left over to do it right. Plus, everyone might still be getting along.

With a proper estate plan that takes into account disability, people don’t have to argue about who is in charge, and the person in charge has the power to take the necessary and immediate actions.

Let’s look at all the documents you need to put together with your attorney to plan ahead.

EVERYONE NEEDS THESE DOCUMENTS

Earlier in the book we outlined the basic documents that make up an estate plan. Please flip back to the Introduction for the detailed summaries.

You should consult with an expert attorney because you may need every one of these documents in place, not just at the time of your death, but during any disability.

As I said before, every adult over the age of eighteen should have at least the first three documents below signed and available at all times. Any adult with assets, and certainly any adult with children, should have all the documents available and updated throughout their lives. At a minimum, these documents include:

  •    Durable Power of Attorney for Property
  •    Advance Healthcare Directive (Power of Attorney for Healthcare)
  •    HIPAA Authorization
  •    Living Will
  •    Living Trust
  •    “Pour-Over” Will

As you have seen in the case of Jack and his family, the failure to create all of these documents added considerable confusion, strife, and expense to an already-difficult health situation. It also led to an unnecessary legal process and the loss of his rights through a conservatorship.

Let’s see how these documents function during a disability.

GRANTING DURABLE POWER OF ATTORNEY AND NOMINATING A CONSERVATOR

Please do not be confused by the term “power of attorney.” Many clients believe this term has something to do with the lawyer preparing their estate plan. Clients sometimes mistakenly fear that they are giving over some kind of power to their lawyer to make decisions for them. This is not true.

When you grant “durable power of attorney” to another person—any other person—you are designating that person as your agent, to act on your behalf. This may be your spouse, your child, a friend, or anyone, as long as he or she is an adult (eighteen or older) and not under a conservatorship or incarcerated. Now and then, someone may indeed choose an attorney for their agent, which adds confusion to the term.

“Durable” means “continuing even when you are incapacitated.” Indeed, these documents are generally written so that these powers are only granted while you are incapacitated and unable to act on your own. These are called “springing” powers of attorney, because they spring into action upon your incapacity.

If you are elderly or facing a long-term illness, you may consider gently easing someone you trust into the role of your “agent,” helping you through powers of attorney, over a period of time. This might be a sibling, a spouse, a child, or someone else you truly trust. This person should understand that if you have a stroke or other sudden decline, they will have to jump in with both feet.

If you think you may someday need to go further, and give full control to someone as conservator, you should nominate a person for that job too. This nomination is contained in the durable power of attorney for property (conservator of the estate nomination) and in the advance healthcare directive or durable power of attorney for healthcare (conservator of the person). These nominations may also be available in a separate document—apart from the durable powers of attorney for property or healthcare.

If it came to the need for a conservatorship—if, for example, you became a danger to yourself or others—a court would have to investigate and confirm your nomination. Your nominee would have to go through a criminal background check, a credit check, and more. But you would have had primary input. If you have not made a nomination, state laws indicate a priority of appointment typically based on your family tree and the laws of “intestate succession.”

Regardless of the situation, clear your decision with your designees and nominees while you still can. It’s a heavy responsibility to take on either power of attorney or to become a conservator, and you want to make sure everyone will agree to serve.

Do not surprise a loved one with this responsibility when you are hit by a car. For one thing, they may say no.

If you are the person caring for someone with a mental incapacity, you may at some point have to consider a conservatorship. Sometimes, you simply have no other choice.

I know a woman who is taking care of her husband with dementia. He had always been a loving and gentle husband and father. But the disease is destroying his judgment, and little by little he is becoming violent. Recently, when they were in the drive-through line at a burger place, he just randomly let loose and clocked her. Knocked her out cold.

Now, it is truly her responsibility to go to court and apply for a conservatorship to have him institutionalized against his will. It happens.

DURABLE POWER OF ATTORNEY FOR PROPERTY

In Mistake #9, we learned that living trusts are not generic, cut-and-paste documents. The same is true with power of attorney documents. For starters, you will be asked to grant separate powers for property and for healthcare decisions.

When you grant property power to your agent, you are authorizing this person to make decisions about your property and your finances while you are incapacitated—and to take specific responsibility for paying your bills, maintaining your online accounts, contributing to, managing, or withdrawing from your IRA, and the thousand other financial responsibilities we all face.

You may or may not, however, want this same person making healthcare decisions for you.

DIVIDED POWERS FOR PROPERTY

You should also understand that even powers of attorney for property may be best divided.

If you own a business, you may want a different person to make business decisions during your incapacity than the person making your personal financial decisions.

You may want a different person making your investment decisions than the person handling your day-to-day finances.

You may also want to grant powers of attorney which are not durable, but end when you lack capacity. This may prevent, for example, a business partner from taking some action while you are out with a stroke.

Nondurable powers may empower a spouse or a business partner to make crucial decisions every time you are on vacation in remote locations, and then disempower them again when you return.

Another important question involves gifting. Most power of attorney documents I have seen do not include gifting authority—in other words, the agent you name during your incapacity generally does not have the right to give away your property to anyone else.

However, the power for one spouse to make a gift of their assets to another may be crucial in public assistance benefit planning, as you will see under “Monetary Fallbacks for Disability,” below.

Work closely with your attorney to discuss these decisions and craft these documents. Consider your choices carefully—they may be the most important choices you ever make.

POWER OF ATTORNEY FOR HEALTHCARE

If you are incapacitated with an illness, even if you are just under sedation for an hour-long operation—who do you trust to have your best interests at heart and make the right calls with doctors? Approve treatments? Argue with hospitals to keep you longer?

If you lose mental capacity due to stroke, dementia, Alzheimer’s, Parkinson’s, or other common conditions, who do you trust to move you from nursing facilities to home and back again?

Every one of us should choose a trusted person, discuss the responsibilities with that person, and update your choice as often as necessary. The power to make medical decisions for us when we cannot do so is called a “durable power of attorney for healthcare,” and is granted through a pretty straightforward document.

The document says simply, “If I cannot make healthcare decisions for myself, then this person or these people can make them for me.” You can name more than one person to serve jointly, or you can name them to serve consecutively. If this person cannot serve, then the power falls to the next, and etc.

Once again, a “power of attorney for healthcare” has nothing to do with the attorney writing the document. You can grant the healthcare power of attorney to anyone.

If you have a primary residence in one state and a vacation home in another, we recommend to our clients that they create a durable power of attorney for healthcare for each state, because a lot of the related laws are state-specific.

HIPAA AUTHORIZATION

A second document works closely with the power of attorney for healthcare decisions.

The Health Insurance Portability and Accountability Act (HIPAA) created significant restrictions on who has access to your healthcare information. Although it boosted privacy, it also created barriers to swift decision-making and intervention by loved ones. If a doctor or hospital divulges your health information to someone without the proper authorization, they face huge fines—as much as $50,000 per violation, in some situations.

As a result, all health professionals and organizations take HIPAA rules very seriously.

The HIPAA authorization you sign gives authority to one or many people to have full access to your health information. As previously discussed in the Introduction, you may want to expand this authorization well beyond the person you have granted your power of attorney for healthcare. For example, you may want a home healthcare worker to be able to call up and check on your prescriptions, even if you don’t want this person to make major medical decisions for you.

Think through your HIPAA authorizations carefully with an expert lawyer. In some cases, for example, you may want to have separate HIPAA authorization documents for different people and circumstances.

Although HIPAA is a federal law, there is no federal HIPAA form. Each state has its own. In my home state of California, for example, a HIPAA authorization must be printed in fourteen-point type to be valid!

LIVING WILL AND ADVANCE HEALTHCARE DIRECTIVES

A “living will,” sometimes known as an “advance healthcare directive,” tells medical personnel, loved ones, and the person you have given power for healthcare decisions your preferences for medical care in dire circumstances, “in advance.” A living will generally comes into play only when you are in the late stages of a fatal illness, fall into a coma, or have suffered an extremely serious injury.

Please do not confuse “living will” with “living trust.” They are completely unrelated documents, with different purposes.

In most cases, the goal of a living will is to give permission to loved ones to let you pass away in order to avoid unnecessary suffering. Most living wills say, in essence, “If I’m a goner, let me go.”

When my grandmother had a heart attack, my grandfather called the paramedics. It was a massive heart attack. The paramedics rushed over, got out their paddles, and shocked her heart back to life. Then they put her on a ventilator and took her to the hospital. But she never recovered consciousness, and never showed signs of recovering the ability to breathe on her own. The doctors said there was no hope, and indeed, when I looked at her, I could see that her soul had probably already left her body.

My grandmother had created no living will and had never even discussed this possibility, so the decision to terminate life support was made even more difficult for my father and his two older brothers. After a week, my father and his brothers made the agonizing choice to terminate life support. Ten years later, my father still asks me, “Did I do the right thing?”

I tell him that I was very close to my grandmother. And then I say, “Of course, you did.” I say this because there really was no alternative. But the choice would have been much easier if she had made her own desires clear in a living will.

I will not go into all the specific details of a living will, such as how it relates to “Do Not Resuscitate (DNR)” and“Physician Orders for Life-Sustaining Treatment (POLST)” orders. Instead, I refer you to your attorney. Just make sure you get the appropriate legal and medical advice.

We are here to help you navigate all of these documents and create a plan that will help protect you in any situation. Attend one of our FREE seminars for a consultation with a licensed attorney.

Conner Clemons Attorney Spotlight

 

Conner was born in Seattle, Washington and moved to California before attending law school. Conner received his undergraduate degree in Political Science and English Language and Literature from Central Washington University in Ellensburg, Washington and his law degree from Whittier Law School. Conner also earned his Tax LLM from Loyola Law School and is currently working towards becoming a Certified Specialist in Estate Planning, Trust and Probate Law by the State Bar of California.

Get to know Conner in our Attorney Spotlight:

What do you enjoy doing in your free time?

I’m an avid sports fan. I go to NBA games and Dodger games throughout the year. I also enjoy investing and often spend an hour a day researching investments. I’m a strong believer in “value investing.” When I buy a stock, I hold on to it. I think when you buy a stock, you should have confidence in the company and that the company will be strong in ten years.

What is your proudest moment to date?

Getting engaged. I feel like that’s a corny answer, but it is 100% true!

What sets you apart from other estate planning attorneys?

I have a Master’s Degree in Tax Law. It allows me to see the “blind spots” in estate plans. Estate planning deals with taxes. Often times, I review old estate plans prepared by attorneys who aren’t familiar with tax law and those plans have to be adjusted to make sure they protect and benefit the client in the way intended.

 What sets you apart from other estate planning attorneys?

I have a Master’s Degree in Tax Law. It allows me to see the “blind spots” in estate plans. Estate planning deals with taxes. Often times, I review old estate plans prepared by attorneys who aren’t familiar with tax law and those plans have to be adjusted to make sure they protect and benefit the client in the way intended.

What is the most common problem you see in estate planning?

Our firm acquires retiring lawyer’s practices so I’m often reviewing estate plans that were prepared by a previous lawyer. When doing so, I’ve noticed a lot of plans have an improperly placed “Spendthrift Clause,” which end up not benefiting the client in any way. Laws and standards are changing constantly, and I strongly believe in keeping up with the times and making sure my client’s plans are as current as possible.

What would you say separates CunninghamLegal from other estate planning law firms?

We truly care about our clients and communities. We are all about education and invest in educating our clients so that they can make the best decisions for the long term. One of the ways we educate our clients is by holding seminars to talk about new laws that may have changed, new ways to pass assets to your loved ones that protect both you and them, and how to make you the most money and keep that money in your and your families wallets.

If you’d like to hear more from Conner, attend one of his free upcoming Pasadena seminars. 

FORGETTING TO PLAN FOR DISABILITY

Forgive me, but I need to start this chapter with a statement that’s both brutal and true:

A disability is often harder on a family than a death.

Why? Because if you become seriously disabled, your loved ones will have to deal with many of the same legal issues as when you die, but they will also have to take care of you. A serious disability is not just difficult and draining for everyone, but shockingly expensive. A nursing home runs from $3,000 on up to $30,000 or more a month, depending on quality and level of care. In-home help can be nearly as expensive. Both Medicare and health insurance stop paying for institutional daily care after a short time limit. And most government aid programs expect you to exhaust nearly all your assets before they step in to help.

A mental incapacity triggers the most significant consequences of all.

As I write these words, my wife acts as the primary caregiver for her mother, who has Alzheimer’s disease, and can provide little or no care for herself. As Nancy Reagan put it, we are living “the long, long goodbye.” My mother in-law was once a strong woman who raised four boys and a daughter. This makes the emotional burden on my wife that much harder. Their roles have reversed. My wife has become the parent, and the parent has become the child.

Because I have pledged myself to honesty in this book, I will say this aloud: my wife’s mother has become a 102 pound two-year-old. I do not say this to be heartless. I say it to face facts. My wife would like to be with her mother for positive moments. She’d like to take her mother out for fun activities, have what conversations they still can, and enjoy each other’s company. But the cost factors demand that my wife provide daily personal care which leaves little time for positive moments.

From the standpoint of legal and family logistics, mental incapacity can prove more challenging than death. That’s because while death is a clearly defined state, incapacity is not. To quote Yogi Berra, “It ain’t over till it’s over.” From a legal perspective, incapacity creates a twilight zone of uncertainty, which often causes strife within families, drains estates, and leads to unnecessary and debilitating court battles.

In the Introduction, I noted that 80 percent of Americans will face a period of sustained disability before their deaths. Most of those Americans will not have done even the most rudimentary planning for this event. A “last will and testament” does not adequately provide for the succession of an estate; it does nothing to provide for mental incapacity, because it’s not legally effective until death.

Remember that in your decline, someone will have to take action. If your mental agility fades, you may become a threat to yourself or other people. You may become substantially unable to resist fraud, duress, menace from predators, or the undue influence of others. If you become unable to provide for your own food, clothing, hygiene, and shelter, someone else must be given the responsibility for your person. Someone else must decide where you will live and with whom you will associate.

WHAT IF I HAVE NO PLAN?

If you enter a period of mental incapacity due to a stroke, dementia, Alzheimer’s, or other causes, there may come a point when you really should not be in control of your bank account or other affairs. At this point, if your family doesn’t step in, the government will.

If someone notices that you have started writing checks for $5,000 to the pizza delivery guy, and no family member with legal authority steps in, the county in which you reside will enter your home and take over. Certain institutions, like banks, hospitals, and senior centers are on the watch for moments like this, and they are required to report their suspicions about your mental capacity to law enforcement.

They are called “mandated reporters.”

Typically, a county social services agency will be asked to take action. And often, social services will call in a special law enforcement unit called Adult Protective Services. The actions of Adult Protective Services are not public. You cannot get access to their reports, and you cannot find out what all these people have been saying about you—so unlike a criminal, you cannot “confront your accuser.”

At that crucial moment, if you have created the proper documents to give someone a “durable power of attorney for property” in case of your incapacity, along with a “durable power of attorney for healthcare,” or an “advanced healthcare directive,” someone you have previously designated can step in and take control from the county. Importantly, this agent working on your behalf can prevent action by a court to create a “conservatorship” for you. As we will see, a conservatorship represents a serious loss of rights.

Of course, your incapacity may happen much faster, and be more serious than writing questionable checks.

JACK CAUSES A CRISIS

Let’s say Jack, who has been widowed for many years, has a major stroke at age seventy-four. Now he’s lying unconscious in a Chicago hospital. He was on the golf course and just collapsed. The doctors say that Jack may or may not recover from his stroke. In any case, he will definitely need daily physical care for years and will not be able to handle his own affairs.

Jack has two children, Charles and Mary, who live on opposite sides of the country. He also has a sister in Chicago, named Eleanor. She’s seventy. All these folks have always gotten along, but over the years, they’ve kind of fallen out of touch.

Jack owns a house with some equity, but everyone figures he’s still making mortgage and insurance payments. He has multiple bank accounts and investments, but no one’s quite sure where they are. His valuable sports car still sits on the lot at the golf course. That’s about as much as anyone knows. After all, Jack was only seventy-four, and until today, he was competently handling all of his own affairs.

Now Charles and Mary, who are both in their late forties, with careers and kids, have flown in to stand at Jack’s bedside. Eleanor and her husband have shown up too. Charles has already been over to the house, and he found that Jack did make a simple will using an online service in which he divided everything nicely between Charles and Mary, with Mary as executor. But Jack never created the essential documents you will learn about later in this chapter. He never created a living trust. And he never designated powers of attorney for property or healthcare decisions.

Plus, well, he’s still alive. So, now what?

If Jack had died, Mary would have taken over as executor, and after the funeral, she would have gone to probate court to get the will certified. She’d have struggled through the painful process we described for Bob Jr. in Mistake#10, but she would have figured out how to sell the house, settle Jack’s debts, and divide what remained between herself and Charles.

Now, however, all has become uncertain. Of the people standing next to the hospital bed, who will take control of the situation? And what about those not standing next to the bed, who may want to become involved? Many decisions will need to be made, and quickly.

The hospital (about $10,000 per day minimum and paid by Medicare) plans to discharge Jack to a rehabilitation center ($800 per day and paid by Medicare) that same afternoon. After that, Medicare may pay part of his care up to one hundred days per calendar year. Or maybe not. It depends.

However, if Jack stops physical therapy, occupational therapy, or “plateaus” while in rehab, Medicare stops paying. Then, because he has no long-term care insurance, he’s on his own. He’s looking at $3,000 to $30,000 or more per month depending on where Jack lives and the level of care required. Jack, or his family, will pay for this care out of pocket.

Since he’s not able to make his own decisions anymore, Jack’s on someone else’s watch. But whose?

Jack’s sister, Eleanor, steps up to say she knows about a really excellent care facility not far from Jack’s home. It costs only about $4,500 a month, and a friend said Jack would love it. Eleanor also takes that moment to mention that Jack still owes her $20,000, which she says he borrowed from her five years ago. She tearfully recalls how she and Jack made a childhood pact to take care of each other if anything happened. Her husband puts his arm around her in support.

Jack’s daughter, Mary, points out that she was the one named as executor in the will, so no doubt her father would like her to take responsibility now. Mary believes that the disabled are best cared for by those who love them. She thinks that any facility which only charges $4,500 a month in the Chicago area probably provides substandard care. She’s willing to have Jack flown to her home in Boston, and she will take over his care with the help of some visiting staff. Of course, even the trip would cost a considerable amount of money. She thinks she’ll also need about $35,000 from Jack’s estate to expand her guest room and add a bathroom he can use while in her care.

Her brother, Charles, gets a little annoyed with both of them. After all, his father may recover any day. Can’t they just wait until the one-hundred days (or less) are up in skilled nursing to make any decisions? And anyway, all these options are expensive. Can Jack’s estate even pay for it? How can they know? Will the house have to get sold? What if he wakes up and his house is gone? Also, right now, the hospital wants someone to sign off on the discharge plan. And by the way, the golf course would like to see the car removed from its parking lot.

Charles would love to help, but he has a job in Los Angeles he needs to get back to right away.

The next day, both Mary and Eleanor call some banks and are surprised to discover that neither of them has the right to access Jack’s accounts without going through an emergency court process. As the arguments escalate, it becomes likely that both Mary and Eleanor will petition the court to become Jack’s conservator (more about the meaning of that term in a moment) and get access to his accounts.

Soon, all three of Jack’s closest family members grow to dislike each other. Mary gets mad at Charles for being unhelpful, and she starts thinking she deserves more than 50 percent of that will. In probate court, Eleanor again mentions getting reimbursed for her undocumented $20,000 loan.

But there’s more.

As Jack’s financial records come to light, they will become a matter of public record, along with all his debts. All the other relatives within a second degree of kinship will have to be notified—including the children of both Charles and Mary, some of whom are old enough to care what happens to grandpa and his money.

Both Eleanor and Mary have petitioned to have themselves appointed as conservators, but neither understands quite what she is asking for. Whoever becomes conservator will shoulder a considerable burden, and thanks to the ill will created during a court proceeding, she may be under continuous scrutiny from the others. She will have to provide an accounting to the court, down to the penny, every two years. This will include submitting a ledger with everything in and everything out; the growth or decline of investments. The works.

Meanwhile, Jack’s care will begin eating up his estate.

Whoever takes charge will have to make tough decisions, possibly resented by the others, about selling or renting the house and liquidating investments. The legal process itself will likely consume thousands, if not hundreds of thousands of dollars—depending on the value of the assets and the length of the fight. The same attorneys who practice probate law practice conservatorship (or guardianship) law, and they do not come cheap.

In the event that none of the three closest relatives applies to be conservator (or is approved by the court), then the county judge will appoint a “neutral” party—either a private professional fiduciary or the “public guardian” to take control. The public guardian’s office is typically a county agency that looks out for the indigent. As it happens, the “indigent” sometimes have money but are poor in family. Or poor in family that cares.

For more information on how you can create an Estate Plan that will protect you and your family in any situation, contact our team today.

THE PROCESS FOR A CUSTOM PLAN

In my firm, we follow a highly defined process to make sure we’ve turned over every stone, followed up on every clue, leveraged our “lawyerly thinking,” and crafted the best possible estate plan for our clients. Our process happens to have ten steps. Your attorney may follow seven or fifteen steps. But make sure those steps can be fully articulated. If not, look elsewhere.

Here’s a quick summary of our approach:

1. Education of the client starting with a seminar or book
2. Detailed diagnostics: Who are you? Who belongs to you? What are your assets?
3. First attorney meeting
4. Review of all data by a senior paralegal
5. Input of data to professional software
6. Review of software inputs by a second attorney
7. Creation of draft documents by the software
8. Client receives and reviews documents
9. Client signs documents
10. Continuing client education and regular plan reviews

In Step 1, we want to make sure that the client gets a basic education in the issues and processes of estate planning. We don’t want anyone to come in and sit blankly in front of an all-knowing lawyer who has dressed in the traditional blue suit, white shirt, and red tie which says, “be quiet and listen to me.”

That kind of relationship might be fine in some legal work, but not in estate planning, which requires a true give-and-take. No lawyer can possibly know all the issues pertaining to your individual circumstances, so you are going to have to become educated enough to have a proper discussion. And you are going to have to trust him or her enough to discuss some of the most difficult areas of your family life.

Like many firms, we educate our clients with a seminar. Other firms will host radio shows, produce webinars, or write books like this one. But a good estate firm is always educating, educating, educating.

In this way, a client comes in empowered, not just with an understanding of the process, but with knowledge of how to identify personal issues and questions. The longer the list you develop, the better. Who will make medical decisions for you if you get sick? Who’s going to be in charge of your money? Who’s going to be in charge of your kids? Your disabled dependents? Who will handle your trust administration? The more advance work you do, the better you will use your attorney’s time, and the more tailored planning he or she will be able to do on your behalf.

In Step 2, after educating the client and identifying key issues, our office performs a detailed “diagnostic.” When you go to a doctor’s office, the staff will ask what medications and vitamins you are taking. They’ll check your temperature and blood pressure. They’ll run some blood tests. In our office, we set out to understand your family structure, your asset structure, and of course, your hopes and dreams for the legacy you wish to leave for the next generation.

I should note that the diagnostic process is more extensive for people with very large and complex estates—over, say, $10 million in assets. In such cases, we often need a number of extra discovery steps before we can move to serious planning.

STEP 3: THE FIRST ATTORNEY MEETING

That first sit-down meeting in the estate planning process often proves crucial. I always insist that an experienced attorney, not a paralegal or support staff, handles the initial, in-depth discussion. An attorney “thinking like a lawyer” will immediately see issues which might otherwise get lost down the line.

The older I get, the longer my first meetings tend to run. I admit that when I was first starting out as an estate planning attorney, first meetings might last just twenty minutes. That was when I didn’t know what I didn’t know.

My goal in that first sit-down is often to identify any “pain points.” Usually, these are not just financial, but personal. The pain points can be highly emotional: estranged children, angry ex-spouses, troubled businesses. Difficult, but vital to discuss.

Earlier I spoke about a twenty-five-year-old still at home, playing video games and smoking dope. But often it’s far worse. A client will say, “I’ve really been struggling. My daughter has an addiction and it’s destroying her life. Right now, if I were not supporting her, she might be living on the street. I don’t know how to deal with this. I lay awake at night, and I think, ‘My God, if something happens to me, what’s going to happen to my child? What if she gets too much money? Would that kill her? What will her brother and sister do?’”

Or a man might say, “We don’t have enough money. If something happens to my spouse, I can’t live on one salary. What can we do about that?” Or, “I’m worried that the stock market will crash. We’re retired and everything is invested. What if we outlive our money?”

Some of these issues may seem outside the scope of estate planning, but we try to include every issue—often with the help of allied professionals. Clients must feel comfortable bringing all their “stuff” to the table at that first meeting. No guilt, no blame: we just look each question straight in the eye.

CREATING THE DOCUMENTS

After I have all the data and have unearthed all the issues, in Step 4, I will have an internal meeting with our senior paralegal.

No doubt, I did not say enough good things about paralegals earlier. I will tell you, as a lawyer, those meetings often offer me a heavy dose of humility. A good paralegal will make sure every single data point has been covered, all the questions answered, all the proper diagnostics run, all the account numbers discovered, all the investment vehicles identified, and all the client properties recorded. We sit down and go over everything. I use my “lawyer brain” to ferret out issues, and the paralegal uses their “paralegal brain” to dot the i’s and cross the t’s.

In Step 5, we leverage the technology, which will do the initial assembly of all the documents for a complete estate plan. The software requires extensive data input. A specialized, attorney-level package will ask us far more than the fifty or so questions in an online trust-creation algorithm. It will require 400 to 500 responses, leading to highly customized drafts. This process is not a substitute for human judgment, but a tremendous aid to human brainpower and efficiency. As I noted in the Introduction, such software now leads to highly tailored and customized estate plans and saves our clients tens of thousands of dollars over manual processes.

Since neither I nor the paralegal is perfect, in Step 6, we assign a qualified attorney to the task of reviewing the software inputs.

Only then does the software do its thing and create the draft documents, which are sent for client review, along with highlights on key issues. Attached notes might read, “Is this exactly what you meant regarding that property?”

I’m compressing the steps, but I hope you understand the value of a defined process with multiple checkpoints and attorney reviews.

THAT IMPORTANT STEP 10

After an estate plan is signed, Step 10 includes continuing client education, followed by regular estate plan reviews and updates, which are best done at least every three years or as your situation changes. Changes include a birth, death, divorce, retirement, moving to a new state, changing jobs, etc.

As discussed in the Introduction, a modern attorney with a significant estate practice will include such reviews at no additional charge. In my firm, we believe free reviews to be an ethical obligation. If your attorney wants your plan to be successful, he or she must create no barrier to you picking up the phone with a question, or scheduling an appointment for a fresh look. Your attorney may, however, reasonably charge something for a rewrite of the plan.

Never skip a review. After reading the above, I hope you no longer believe in a “generic trust.” And I hope you no longer see any substitute to working through your issues with an experienced attorney. But please recognize that even the best attorney cannot write an estate plan which will stay relevant no matter how your issues change.

For more information on how we can help you through our process, contact our team today.

Certain Uncertainties in Retirement

Two financial unknowns may erode our degree of confidence.

Provided by Ascent Wealth Management

 

Maybe you have been putting off planning for retirement because you think you have time, or you are not sure where to start. We are proud to share the following article from, Ascent Wealth Management, to help you manage your confidence and the uncertainties of retirement.

The financial uncertainties we face in retirement may risk reducing our sense of confidence, potentially undermining our outlook during those years.

Indeed, according to the 2018 Retirement Confidence Survey by the Employee Benefits Research Institute, only 17% of pre-retirees said they are “very confident” about having enough assets to live comfortably in retirement. In addition, just 32% of retirees were “very confident” in their prospects for doing so. (1)

Today, retirees face two overarching uncertainties. While each one can lead even the best-laid strategies awry, it is important to remember that remaining flexible and responsive to changes in the financial landscape may help you meet the challenges posed by uncertainty in the years ahead.

An Uncertain Tax Structure

A mounting national debt and the growing liabilities of Social Security and Medicare are straining federal finances. How these challenges will be resolved remains unknown, but higher taxes – along with means-testing for Social Security and Medicare – are obvious possibilities for policymakers.

Whatever tax rates may be in the future, taxes can be a drag on your savings and may adversely impact your retirement security. Moreover, any reduction of Social Security or Medicare benefits has the potential to increase financial strain during your retirement.

Consequently, you will need to be ever mindful of a changing tax landscape and strategies to manage the impact of whatever changes occur.

Market Uncertainty

If you know someone who retired (or wanted to retire) in 2008, you know what market uncertainty can do to a retirement blueprint.

The uncertainties have not gone away. Are we at the cusp of a bond market bubble bursting? Will the eurozone find its footing? Will U.S. debt be a drag on our economic vitality?

Over a 30-year period, uncertainties may evaporate or resolve themselves, but new ones may also emerge. Solutions for one set of financial or economic circumstances may not be appropriate for a new set of circumstances.

Scottish philosopher Thomas Carlyle said, “He who could foresee affairs three days in advance would be rich for thousands of years.” Preparing for uncertainties is less about knowing what the future holds as it is being able to respond to changes as they unfold. (2)

There will always be uncertainties to manage in life, but the right information and the right team behind you can help you be prepared for any situation. We want to assist you, not only with your retirement plans but to create an estate plan encompassing your entire legacy. For more information or for a consultation from one of our licensed attorneys attend one of our FREE seminars.

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

(1)  https://www.ebri.org/docs/default-source/rcs/1_2018rcs_report_v5mgachecked.pdf?sfvrsn=e2e9302f_2   [4/24/18]
(2)  https://www.brainyquote.com/quotes/thomas_carlyle_118785   [12/17/18]

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Granada Hills FREE Seminar – March 20, 2019: What’s Your Plan? Top Estate Planning Mistakes

 

During our seminar, you will learn more about the following:

  • Your Living Trust may fail to protect your valuable IRAs (401Ks, Roth, 403(b)).
  • Your Living Trust may fail to protect your family from losing their inheritance to estranged family, divorce, lawsuits, creditors and government claims.
  • When you’re ill or disabled, the person you’ve chosen to handle your affairs may have to go to Court and face unnecessary delays and fees.
  • Your Living Trust may need special provisions so you and your family won’t get wiped out by nursing care bills.
  • Your plan may need to be revised for the new Estate Tax exemption.
  • Your Living Trust may NOT avoid Probate Court.

By attending, you will receive a free consultation from one of our licensed attorneys!

 

When: March 20, 2019 @ 10:00am & 2:00pm

Where:  Granada Hills – Granada Hills

10724 White Oak Ave

Granada Hills, CA 91344

 

Register today. Space is limited!