Long-Term Care for Your Cat

All too often, cats are surrendered to animal shelters because their owner either died or had to enter a long-term care facility where the cat was not allowed. In order to avoid this fate, a recent article argues that cat owners need to have a long-term care plan in place for their pet. Importantly, this care plan can be simple and easy to create.

The first step in creating a long-term care plan for your cat is selecting a trusted friend or relative who may be willing to care for the cat in your absence. Discuss your designation with that person to make sure that he or she is up for the task. If you have an estate plan, you can insert a clause that gives your cat, and some money for its care, to the designated caregiver. If you do not have an estate plan, you can simply make a care arrangement with that person.

English: Portrait of a female feral cat (Felis...
(Photo credit: Wikipedia)

In your will or care arrangement, be sure to outline your cat’s routine. This may include feeding and exercise habits. Also include all medical information, including your cat’s veterinarian, where his or her medical records are located and any current medications.

Importantly, provide the designated caregiver with a spare key to your home or apartment. This will allow the person to enter your home if you suddenly become incapacitated. Finally, be sure to set some money aside for your cat’s care. When determining how much money to provide, consider that your friend will need to pay for food, veterinarian bills and any other necessary care expenses.

When You Aren’t Sure Where to Start: Having an Estate Planning Discussion with an Elderly Parent

A majority of adults find it difficult to discuss financial issues with their aging family members. Although these are often difficult and uncomfortable conversations to have, they are often necessary. Moreover, it is important to have these conversations with your parents early, before they become unable to handle their financial lives. A recent article discusses how to start this conversation, and what topics to cover.

One way to ensure that you bring up this topic is to make an appointment with yourself to do so. A good idea is to plan the discussion for after a family gathering such as a birthday party. This way, other family members can join in the conversation. If you believe that your parents and family members will be receptive to the idea, select a date and time and then invite them to join in on the conversation.

During the conversation, it is important to discuss several different aspects of your parent’s estate. The first aspect is legal. Determine whether your parent has done any estate planning. If yes, ask where the legal documents are and what estate planning tools are employed, such as wills or trusts. Your parent may also wish to explain any distributions.

Another important aspect to discuss is healthcare. Determine what types of health coverage your parent has aside from Medicare. This may include long term care insurance, or simply some money set aside for anticipated health care costs. Finally, determine whether your parent has executed a health care power of attorney. If he or she has not, encourage him or her to do so. This will be an essential step should the time come when your parent is unable to make their own decisions on their healthcare.

Don’t Keep it a Secret! – The Truth About Estate Planning Conversations

Recently, BMO Management conducted a survey concerning communication of estate plans. Although 90% of American adults surveyed stated that estate planning is “an important topic to discuss,” only 19% of those adults reported actually having detailed estate planning discussions with their parents. A recent article discusses why these results are problematic.

Family Discussion
Family Discussion (Photo credit: LRJ53)

The absence of an estate planning discussion can cause trouble down the road. This trouble often leads to fighting among heirs, and a long, drawn out process of estate distribution. Through estate planning conversations, parents can discuss the reasoning behind their estate planning maneuvers and ensure that their children understand the intent behind the estate plan.

The sooner such conversations can take place, the better. As BMO vice-president of financial planning Stephen Williams explains, “Your personal legacy depends more on the effective communication of your values, plans and beliefs than on the items that can be neatly summarized in the paragraphs in your will and trust.” If you are a parent, begin this conversation on a positive note. Inform your children of what estate planning documents you have put in place and then begin a deeper discussion of your plans. If possible, have this conversation as a family.

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Even the Wiseguys: Gandolfini’s Disastrous Estate Plan

After “Sopranos” actor James Gandolfini’s unexpected death at the age of 51, a recent article has described his estate plan as disastrous. Americans should take this opportunity to learn from the mistakes in Gandolfini’s estate plan in order to avoid making the same mistakes themselves.

James Gandolfini
James Gandolfini (Photo credit: Wikipedia)

According to the report, an estimated $30 million of Gandolfini’s $70 million estate will be paid out in taxes. There are many methods through which Americans can avoid a similar fate. These methods are all rooted in proper estate planning, which can dramatically reduce, or even eliminate, the tax burden on your estate.

One way to avoid a large tax bill is through the establishment of trust vehicles. Current federal law allows individuals to transfer $5.25 million into an irrevocable trust without having to pay gift tax on that amount. Married couples can combine their tax-free amounts to make a total of $10.5 million. The different types of trust accounts you may choose include marital trusts, life insurance trusts, and special needs trusts.

It is also important to update your estate plan as the size and characteristics of your estate and family change. Constant updates will also allow your estate to stay current with tax laws.

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Estate Planning: Lessons from Warren Buffett

One of the most interesting parts of Warren Buffett’s estate plan is how he designed it to leave his children just enough so that they can do anything they like, while also not leaving them so much that they never have to do anything. As a recent article explains, many people would like to replicate this part of his estate plan.

Warren Buffett
Warren Buffett (Photo credit: MarkGregory007)

Many parents wonder how much they can leave their children, before their children become lazy spendthrifts. However, simply leaving money to children may not be the whole problem. As Warren Buffett recently explained, “I think that more of our kids are ruined by the behavior of their parents than by the amount of the inheritance.” Parents who do not want their children to grow up as spoiled brats should focus on the environment that they raise their children in, rather than the inheritance they will give them.

Buffett also believes that it is “crazy” for your children to read your will for the first time after you have died. This is because communication is key to a smooth estate transition. If you discuss your will with your children before your passing, you stand a far better chance of avoiding disaster after your death. Although this conversation may be awkward, it is often necessary to outline your intentions and reasoning.

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Estate Planning Oversight Will Cost Koch Estate 3 Million Dollars

After the death of New York City legend Ed Koch on February 1st, 2013, his estate plan became the topic of public conversation. A recent article discussing the plan suggests that he could have saved his estate 3 million dollars in taxes had he set up an irrevocable trust.

Edward I. Koch, mayor of New York City, sports a sailor’s cap at the commissioning ceremony for the guided missile cruiser USS LAKE CHAMPLAIN (CG 57). Location: NEW YORK, NEW YORK (NY) UNITED STATES OF AMERICA (USA) (Photo credit: Wikipedia)

Koch drafted his final estate plan in 2007. Through his will, he directed that his 10 million dollar estate be distributed mainly between his sister, three sons, and secretary of 40 years. His estate plan did not utilize any type of irrevocable trust in order to facilitate these distributions. According to Managing Director of Estate Street Partners, LLC, Rocco Beatrice, using such a trust could have eliminated the entire estate tax bill of 3 million.

Koch’s estate will be required to pay New York state taxes of 16% on the amount by which it exceeds $1 million, as well as federal estate tax of 40% on the amount by which the estate exceeds $5.25 million. Assuming his estate is worth $10 million, these taxes would amount to $1.44 million and $1.90 million, respectively.

According to Beatrice, “That is a lot of money in taxes which could have easily been avoided.” Beatrice explained that, had Koch set up irrevocable trusts, the $3 million could have gone to his family, rather than the government.

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Why Everyone Needs An Estate Plan

With the current estate tax exemption over $5 million – $5.25 million to be exact – many people wonder if estate planning is necessary for them. As a recent article points out, the answer is yes.

Estate taxes are only one of a myriad of reasons why a person should put together an estate plan. The main reason for which people create estate plans is so that they can be sure that their assets will be distributed according to their wishes. No matter if you are very wealthy, or have a modest estate, an estate plan is vital if you wish to direct the distribution of your assets. Moreover, by providing instructions for an orderly distribution of your assets, you can save your heirs from the infighting that often results.

It is also important to draft a valid will if you wish to avoid probate. Many people falsely believe that if their estate is not subject to estate taxes, it is not subject to probate. This, however, is not the case. If you would not like your estate to go through the process of probate, you must put together an estate plan that utilizes various estate planning tools that will transfer the bulk of your estate outside of probate.

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Learning From Celebrity Mistakes: The Case of the Houston Estate

English: Whitney Houston talking to the audien...

The premature death of six-time Grammy winner Whitney Houston should serve as a somber reminder that wills not only need to be created, but updated every few years. As estate planner Andy Mayoras points out, “Celebrity stories like this are a great educational tool to share with clients and highlight what should be done, what was done wrong, and what was done right.”

According to the Investment News, Houston’s will named daughter Bobbi Kristina Brown as the main beneficiary. Surprisingly, Houston drafted her will in 1993 – while still married to Bobby Brown – and never updated it. The will specifies that if Houston had no living children at the time of her death, her estate would pass to Bobby Brown and specified members of Houston’s family. Furthermore, Brown is named as the guardian for their daughter Bobbi Kristina.

Even if this is what Houston wanted, she should have clarified her intentions in a modified estate plan after her split with Brown. Estate plans should be routinely updated after major life events such as divorce, death of a beneficiary, or birth.

Also interesting is that Houston’s will created a testamentary trust for her daughter. A testamentary trust is created by a will, and therefore must pass through probate. By passing through probate, it becomes a public document. Had Houston wanted to keep the associated financial information private, she could have created a “living trust.” Living trusts pass outside of probate, and therefore remain hidden from the public eye.

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What do you need to address for your family?

Your goal may be making sure your children & spouse are financially secure and to protect your assets from those who may ‘attack’ them. Perhaps you want to ensure your property and business is secure in the event of the following: death, divorce, a partner developing a debilitating disability and/or creditor’s attacks. Or it may be as simple as naming a guardian for your minor children. Most probably, your goals and needs are a combination of the above, plus other circumstances unique to you.

There’s no such thing as a ‘one-size-fits-all’ estate plan or a ‘cookie-cutter’ simple will. Different goals and unique circumstances requirepersonal attention and customized plans. Here are examples of client estate planning needs we’ve addressed in the recent past:

• An IT Professional and his business partner needed a comprehensive Buy-Sell agreement which ensured that in the event of either of their untimely deaths, the business can continue to run, but the deceased partner’s family would be paid a fair market value for his share of the business. As you can see both the family and the business needs are addressed.

• A married couple with substantial real estate investmentswanted to ensure that their personal home and assets wouldn’t be lost to a tenant, a lender or other litigant who sues them as a result of liabilities arising from their investments. We were able to implement an Asset Protection Plan which shields their family assets from liabilities than can arise from their investments. Most importantly, they also named a Guardian for their minor children in the event neither of them is around.

• One of our clients is a Physician who is married. Her husband is anon citizen. Her concern was saving money in Estate Taxes and what would occur if she died and her husband survived her, still not an American citizen. We implemented a plan, consisting of Wills and Trusts for each, that will save hundreds of thousands of dollars. Also addressed was the potential negative tax impact facing her husband upon her death as a result of his Resident Alien status. They also chose to create a Pet Trust for their dog.

Your customized plan should address your individual goals and needs. We can work together to put into effect a plan for your asset and income protection that will allow you to keep intact the Estate that you have spent a lifetime creating.

Estate Planning for Non-Citizen Spouses

When one or both spouses in a married couple living in the United States are not citizens of the United States, special planning may be required to avoid hefty tax consequences for transfers during lifetime or at death of the spouses. This is because Gift and Estate tax laws treat non-citizens (permanent & temporary residents) residing in the United States differently than citizens.

Because the taxation system regards both spouses in a married couple as one, a spouse who is a citizen can receive unlimited tax-free transfers of assets & property from his or her spouse. This is known as the unlimited martial deduction. However, the rationale for treating non-citizens spouses differently is the government’s concern that a non-citizen spouse will receive this wealth without having been taxed and then subsequently move out of the U.S. and/or transfer it where it may never be taxed by the U.S. government. Therefore, this marital deduction is not an option for non-citizen spouses.

Here are some commonly used techniques to consider when trying to replicate the benefits afforded to citizen spouses to non-citizen spouses:

– Equalize the Estates for both spouses during their lifetimes. Although the amount changes every year to adjust for inflation, in 2009 a spouse may transfer by gift up to $133,000 of property to her non-citizen spouse without incurrence of a gift tax. This amount should be used to “even up” each spouse’s estate if the value of assets titled in each of the spouses names spouses is not even.

– Maximize the Estate Tax exemption. In 2009, upon his death, a spouse may transfer to his non-citizen spouse an amount up to the amount of the federal estate tax exemption amount without triggering the federal estate tax. Note that while this exemption amount is $3.5 million for 2009, the legislature is reportedly currently acting to either make this amount permanent or to reduce it.

– Use of a QDOT Trust. In addition to giving a non-citizen spouse the option to disclaim or “pass” on what he may be getting by including a disclaimer trust, a Qualified Domestic Trust or QDOT may also be used to postpone the estate tax when more than the amount of the personal federal estate tax exemption is left to a non-U.S. citizen spouse by the other spouse. This option allows flexibility for citizenship changes of the surviving spouse, law changes after death, and a re-evaluation of financial circumstances.

In conclusion, although Estate & Gift tax laws are intended to treat citizen spouses differently that non-citizen spouses, the implementation of available techniques with careful planning can produce favorable results under the current law while retaining flexibility for changing circumstances.

What Happens If I Die Without a Will?

Last Will & Testament (commonly referred to as simply a Will) is a document that disposes of your property at the time of your death.

A common misconception is that Wills and proper Estate Planning are only necessary for the wealthy. This is not true. Whether your estate is large or small, it is beneficial to have a properly drawn Will. Not having the Will properly drafted and executed can cause delays, great expense and possibly force the Will to be interpreted through the courts.
If an individual dies without a Will there are certain consequences that may occur. Consider the following:

  • If you have not named a guardian for you minor children (as you would in a Will) , if both parents die, the courts or a social worker may have the temporary & final decision as to who should act as guardian for your minor children, not you or your family.
  • Without a Will naming an Executor, the court will appoint an Administrator for your estate who may not know your intentions.
  • After the administrator of your estate has distributed your assets in accordance with state law, your spouse may not have enough funds to live comfortably.
  • Without a Will you cannot leave personal items such as a family heirloom, specific jewelry, artwork, etc. to a particular individual such as a nephew, cousin, or family friend.

When creating a Will, it is also important to execute a Living Willand Power of Attorney. These 2 documents are also essential to any basic Estate Plan.

A Living Will (also known as a Health Care Proxy or Advanced Health Care Directive) allows an individual to appoint someone to make all health care decisions on their behalf in the event they are unable to understand and appreciate the nature and consequences of the health care decisions. You may also provide specific instructions as to your intentions.

Power of Attorney allows an individual to designate an agent to conduct all business and financial decisions such as purchasing, improving, maintaining any real or personal property, banking, or any lawful business transactions. It can be Springing (takes effect only upon disability or incapacity) or Durable (effective immediately & remains effective upon disability or incapacity). Not having one of these in place can result in required costly court proceedings.

A minor mistake in drafting and executing your estate plan may invalidate your good intentions & your lifetime of hard work & savings. A little advanced planning can ensure your family’s goals are accomplished.