Florida Estate Planning, Probate and Asset Protection

Managing Finances for Your Parents

Even when everyone is on the same page, a family is in touchy territory when adult children must begin to manage their elderly parents' finances … But the shift can be less stressful if everyone takes it slow, seeks advice and remembers that helping to maintain a loved one's well-being is the primary goal.

Families are dynamic, never static. We start out as children, but may live long enough to parent to our parents. It is a fact of life, especially when it comes to finances.

The key to an effective transition, while preserving the dignity of all involved, is communication.

A recent article in CNBC recently offered advice to adult children and their elderly parents. The article titled “When Adult Children Become Financial Caregivers” suggested six steps.

While you can read the original article for the detail, the steps are as follows:

1. Knowing the Right Time to Talk
2. Framing a Sensitive Subject
3. Building Trust
4. Sibling Responsibilities
5. Maximizing Efficiency
6. Maximizing Inherited IRA

The basic principle to bear in mind is that both the elderly parents and the adult children have to assume and understand their roles. This is key for a family transition to move gracefully. This means communication, not only between parents and adult children, but likewise between adult children working together on behalf of the family as a whole.

Naturally, this is all easier said than done. In truth, there are any number of principles and rules for this transition, but the six from the original article certainly are a helpful start.

Reference: CNBC (June 3, 2013) “When Adult Children Become Financial Caregivers”

Costly Conversations Never Had

“Finances tend to be one of the trickiest topics because people do have traditional ideas about what you should and shouldn’t talk about,” explained Amy Goyer, a caregiving expert at AARP, who is also handling her own parents’ affairs because her father has Alzheimer’s. “It’s a difficult thing to talk about,” so acknowledge that with your parents.

Some conversations just need to happen, but that doesn’t make them any easier. When it comes to our elderly parents there are many such difficult conversations.

The New York Times offers one more real life example of why difficult senior parent-adult child conversation just have to happen in a recent article titled “The Talk You Didn’t Have With Your Parents Could Cost You”.

Especially with the older generations, money is often one of those taboo subjects for the family to discuss, whether in good fortune or in bad. If you have an elderly parent or loved one, then there are more important things at stake than privacy, modesty or pride. Here are some things you need to know and they need to show. Do they have an “estate,” whether many assets or few? Do they have a will and, if yes, where is it? And perhaps most important, are they taking care of their finances currently?

The original article speaks for itself and is worthy of reading. After you read it, perhaps you might share it as a conversation starter with someone you love. Having the uncomfortable conversations can provide peace of mind for all concerned.

Reference: The New York Times (May 24, 2013) “The Talk You Didn’t Have With Your Parents Could Cost You”

When is Charitable Giving Elder Abuse?

For the last 20 years of her life, Huguette Clark, a wealthy and reclusive copper heiress, lived in a Manhattan hospital room, shades drawn, door closed. She played with dolls, watched cartoons and followed the Bush v. Gore hanging chad debacle. (She favored Gore). Within months of her arrival, the hospital, Beth Israel Medical Center, went after her for an all-out fund-raising campaign.

Have you read about the matter of the late Huguette Clark, her massive inheritance, and the hospital that may or may not have exerted undue influence on her aging mind and bank accounts? Ms. Clark was fantastically wealthy. During the last twenty years of her life, the reclusive copper heiress spent an absolutely inordinate amount of time in the hospital. She had few afflictions other than loneliness.

After her passing, it did not take long for questions to arise regarding how the hospital pushed to care for a not-so-infirm woman for so long and just so happened to be receiving sizable donations from her all the while. What may be worse is that the allegations may be true and there are some interesting, perhaps damning, tidbits.

This scenario and the questions it raises were reported recently in The New York Times in an article titled “Hospital Caring for an Heiress Pressed Her to Give Lavishly.” The article chronicles the last lonely years on Ms. Clark’s life.

Remember, she was only all-too-human. If manipulation was afoot, what should be done about it and, closer to home, how can such manipulation be prevented in our own estates or those of our already senior loved ones?

But then there is the reverse side of the coin: what if it was not manipulation at all? Then Ms. Clark’s wishes and last charitable actions are being drawn through the mud for not having been fully articulated.

Reference: The New York Times (May 29, 2013) “Hospital Caring for an Heiress Pressed Her to Give Lavishly”

Watch Your Language – End-Of-Life Health Care

“It’s a very vulnerable time,” said Amber Barnato… “A turn of phrase by a doctor can make a lot of difference.”

Words are important. Use them carefully, especially when preparing your estate planning documents. When it comes to your health care directives, the words you choose can be a matter of life and death.

A recent post over at The New Old Age Blog in “DNR by Another Name” illustrates the importance of words and their legal import. It is worth reading the original article (and perhaps even the study it discusses).

Consider this: how a doctor presents a medical choice can lead a caregiver or patient in one direction or the other. For example, as taken from the title of the article, DNR, or “Do Not Resuscitate” is a medical term of art. However, it often means the same as “please allow for a natural death” depending upon the medical situation, the decisions of the patient, and even (or often exclusively) the very word choices and/or mood of the doctor themselves.

As one planning your own late-in-life decisions, language is a topic worthy of your careful consideration. Additionally, if you are caring for an elderly loved one, then be sure both of you understand your loved one’s advance health care wishes and take steps to clearly articulate them in proper medical directives.

Do not assume anything when it comes to the ultimate health care decisions. Make sure the patient, their appointed health care agent and the physician are all speaking the same language.

Communication and documentation are essential.

Reference: The New Old Age Blog – The New York Times (May 22, 2013) “DNR by Another Name”

How To Collect Social Security Benefits … From Your Ex-Spouse

It is a little-known fact: If you're divorced, it's possible to claim Social Security spousal and survivor benefits from your ex. It is a strategy that can dramatically boost your benefits - and it will be important for more retirees in the years ahead.

Today’s retiring generations face new challenges simply not seen much by past generations. The wax and wane of Congress for one, and the dramatic rise of healthcare costs for another. An additional challenge hits a little closer to home for other retirees – those who are divorced.

If you have been divorced, it is critical that you understand how Social Security benefits take divorce into account. Demographically speaking, this is even more essential for retiring women.

The role of Social Security benefits in the retired life of a divorcee can be crucial, as discussed in a recent Reuters article titled “Column: Knowing Social Security rules can help divorced spouses.”

Basically, Social Security payments are related to your paid work during your working years. As a result, many ex-spouses simply have not built up sufficient “numbers” because of how household incomes were split back in the day. Interestingly, you may be eligible for many of the same benefits as if you had remained married to your ex.

But it is not automatic. Here are some threshold requirements:

• You must be currently single,
• You must have been married to your ex for at least 10 years,
• Your divorce must be “final” for at least two years,
• You must have reached the minimum Social Security eligibility age (62), and
• You must not be currently collecting a benefit amount greater than that of your ex.

Note: Your eligibility is completely independent of the benefits collected by your ex, but you will lose the benefits if you remarry. I recommend reading the original article for additional tips and traps.

Call or visit your local Social Security office regarding the folder of paperwork you will need to gather for qualification.

Reference: Reuters (May 9, 2013) “Column: Knowing Social Security rules can help divorced spouses”

Life Insurance and Annuities - Tax Savvy Financial Products?

LIFE insurance and annuities are supposed to accomplish straightforward goals: life insurance provides for your family if you die unexpectedly and annuities guarantee a steady stream of income in retirement. But right now, both are being promoted for their tax benefits.

Insurance and financial savings products exist to put you at ease, for the care of your loved ones and your own retirement. It should come as no surprise that two of the hottest financial products on the market today are life insurance and annuities.

Turns out these products may be tax savvy, too. But are they right for you?

Regardless, you really need to do your due diligence when it comes to life insurance and annuities. A recent article in The New York Times titled “Getting the Full Picture on Annuities and Insurance” points out the obvious – both of these products are heavily marketed. Beyond the hype, much of the marketing focuses on their tax savings characteristics.

Can these tools be tax savings devices? Indeed, if placed within a solid overall plan. Nevertheless, it is important not to lose sight of the true purpose behind these products and the cost-benefits of any particular policy.

At the very least, it would be worth your time to read the original article. It will help you understand how powerful these products can be, how you can use them, and where they might fit into an overall plan.

Reference: The New York Times (May 10, 2013) “Getting the Full Picture on Annuities and Insurance”

Promissory Notes and Medicaid Qualification

In order to be eligible for Medicaid benefits, a nursing home resident may not have more than $2,000 in assets (in most states). If used properly, a promissory note can help a nursing home resident reach the appropriate level of assets.

Medicaid can mean a world of difference when it comes to ensuring proper care for your elderly loved ones, especially when they are running out of assets. When their major remaining “countable” asset is an illiquid asset, what are their options short of depleting it or risking a fraudulent transfer?

As you may well know, Medicaid is the source of nursing home care for many indigent Americans. Still others are caught in a netherworld of being above the minimum asset threshold for qualification, but having too few assets to realistically pay for their care.  It’s a sticky situation.

A promissory note may be one alternative to explore, as noted in a recent article at ElderLawAnswers.com titled “How Can Promissory Notes Be Used in Medicaid Planning?”

The focus of the article is a recent federal case out of Oklahoma, but the basics apply generally. Essentially, an elderly woman transferred her farm and accounts to her son in exchange for a promissory note. A note is a legally binding contract to repay as fixed sum and so it clears the Medicaid hurdle in question.

In this instance, this approach indeed saved the farm and the elderly woman received her nursing home care through Medicaid. Nevertheless, a promissory note is not a full-proof plan. For one, many states reject the idea and refuse to recognize promissory notes. For another, the plan can only work because promissory notes are legally binding contracts, and so if the note cannot be repaid there are potential tax burdens that may be triggered.

The article also points out there are several tools, like the promissory note, that can prove useful when seeking legitimate Medicaid qualification. This especially is true if you plan well in advance.

Danger! The Medicaid qualification rules vary from state to state. This is not a self-help project, as you may find yourself (and your elderly loved one) in a tricky financial and legal purgatory if you make any missteps.

Reference: ElderLawAnswers (May 15, 2013) “How Can Promissory Notes Be Used in Medicaid Planning?”

Family Dynamics Can Derail Key Family Conversations

In the past, many families huddled only after a medical crisis. But even families who have their caregiving strategy mapped out are gathering to work through complicated financial issues and legal planning for frail, elderly relatives.

Bad communication leads to bad relationships. No truer words have been spoken, especially when it comes to families caring for elderly parents.

For many families, communication has never been easy. For other families, it has never been an issue. What about your family?

Is it time for a family meeting, or a family huddle, or one serious conversation – whatever you choose to call it – about your elderly parents, their finances and their estate planning? If yes, how do you go about having “the talk” successfully?

How to first assemble and then discuss productively is an age-old problem for families with elder parents. In the end, there is no real one-size-fits-all solution, as people are different and families are complex. Fortunately, there are some basic principles worth noting as reviewed in a recent article in The Wall Street Journal titled “When It's Time to Huddle.”

If you do not have time to read the original article, here are the bullet points to ponder:

• Be Inclusive,
• Don’t Delay,
• Hire a Professional Referee,
• Set an Agenda in Advance, and
• Tap Long-Distance Relatives.

Think your family does, in fact, communicate well? That may be so, but there are still all the reasons in the world to get this conversation right.

Reference: The Wall Street Journal (May 10, 2013) “When It's Time to Huddle”

When Having “The Talk,” Experts Advise Going to Mom First

Trying to find a way to ask your parents about the potentially sensitive topic of their finances? You might have better odds of getting the conversation going if you start with mom instead of dad.

Have you had “the talk” with your senior parents? You know, the one about their finances? According to experts, ask Mom first.

Fidelity Investments specifically suggests that moms are the best source of open dialogue, even when it comes to the “money talk.” In fact, MarketWatch recently considered this in an article titled “In family-money talks, start with mom.”

A summary of the numbers from that article:

In the survey of 975 parents and 152 adult children, 64% of mothers said it was “not at all difficult” to start a conversation with an adult child about their finances; only 54% of fathers felt the same way. In addition, 79% of women, versus 69% of men, reported having had “comprehensive discussions” with their adult children about estate planning or wills.  The same was true of 66% of women vs. 56% of men about health and elder-care topics and 70% of women vs. 55% of men about running out of money in retirement.

Although there are many reasons why moms might be the best to approach, most of them are mere conjecture. More important, however, is the reality that senior parents really do not enjoy talking about their finances. That is understandable.

All that noted, “the talk” needs to be had, sooner rather than later.

Reference: MarketWatch (May 7, 2013) “In family-money talks, start with mom”

Recordkeeping Key When Caring for Senior Parents

The biggest lesson? Contracts, invoices, and good record-keeping are as important with family or related parties as anywhere else. In fact, perhaps there’s a bigger reason for being scrupulous with family and related parties: to save yourself headaches with the IRS.

Are you spending any time and money taking care of your parents? Do you intend to take any tax deductions for your assistance? If yes, then mind your recordkeeping or you may forego the deductions.

The case of Estate of Olivo v. Commissioner is most instructive.

Forbes examined the Olivo case in an article titled “Mother's Day? Son Claims $1.2M Tax Write-Off For Helping Mom.” From the title of the article, it is clear that the son may have been a bit generous in his claim. To make matters even more interesting, the son was a tax attorney.

Background: Anthony Olivo was the son/tax attorney. He took nearly ten years away from his law practice to care for his parents. Accordingly, Anthony lost his law practice income. However, he did collect fees from his parents for managing their estates. When Anthony’s mother died, he sought to deduct $44,200 in administrator’s fees, $55,000 in accountant’s and attorney’s fees, and a whopping $1,240,000 for a near-decade’s worth of lost wages (he did manage his own firm, after all).

The IRS raised an eyebrow, and then raised it further when they took a look at his documentation of all of these fees and amounts. Problem: there was no contract, no invoice, and no evidence. Not good.

Even when Anthony was handling the estate and filing the tax return he didn’t keep track of his time and just estimated. Also, not good.

In reality, not everything claimed may have been deductible. Nevertheless, the lack of recordkeeping killed any chance for success.

If you and your loved ones are entering a period of caregiving, then a little forethought and planning can go a long way. In the end, a little recordkeeping can be the deciding factor in making your claim.

Reference: Forbes (May 8, 2013) “Mother's Day? Son Claims $1.2M Tax Write-Off For Helping Mom”