A Tale of Two Children: Differences in Parents’ Approach to Long Term Care Planning

Four Pillars Law Firm Happy Sad EggsCharles Dickens’ classic novel opens with:  “It was the best of times, it was the worst of times….”  Although he wasn’t talking about long term care planning, Dickens’ gripping first sentence could very well apply to the different experiences adult children have based on their parents planning, or lack thereof.

Four Pillars Law Firm can help both those who prepare well in advance of any actual needs, as well as those who do not plan but suddenly find themselves in crisis.  And although we pride ourselves on making sure that every client’s story has the happiest ending possible, a few of them will tell you that when they first came to us, their family situations made for a daunting beginning.

Read the tales of these two adult children and their two very different situations that led to working with us:

Fortunately, My Parent Planned Ahead:  As someone who has spent 32 years working in the medical field, I’ve seen time and again how life can change in an instant and how an ounce of prevention is worth a pound of cure…. (click here to read more)

My Parents Were Unprepared for a Health Crisis (But Fortunately, Four Pillars Was There to Help):  In September of 2011, I dropped by my parents’ house for quick overnight visit to discover a terrifying situation…. (click here to read more)

To paraphrase the last line of A Tale of Two Cities:  “Advanced planning is a far, far better thing….”

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Selecting Trustworthy Lifetime Agents

Selecting Trustworthy Lifetime AgentsLast week’s blog discussed Mickey Rooney’s legal and financial struggles in later years as a victim of elder abuse.  Victims of elder abuse are almost always isolated in their surroundings, otherwise they would have the chance to reach out to others in the community when they needed help and protection from abuse.  Therefore, one way to protect our loved ones from abuse is to keep them actively involved in the community and being vigilant in protecting them from any abuse they may encounter (whether financial exploitation, mental abuse or physical abuse).  That is one way we may proactively combat potential abuse against our loved ones.

Our loved ones may still put measures in place to proactively combat such financial and emotional abuse as well.  Normally, this is done by establishing a comprehensive estate plan which not only includes a Will (which only becomes active upon death), but also includes a General Durable Power of Attorney and Healthcare Power of Attorney (for financial and medical decisions during life).

When I speak to clients about implementing these documents into their estate plan, at first some may be taken aback.  They ask why they need to appoint anyone to handle their financial and medical affairs right now when they are able to handle everything fine on their own.  The truth of the matter is that anyone can get in a car accident on the way home or suffer a debilitating stroke.  It happens every day.  If you postpone putting these documents in place while you are able, you very well may not be able to establish them when they are needed due to issues of capacity.

The additional benefit of establishing these documents during your capacity is that you can choose who you want to make these decisions for you.  If you are married, perhaps you appoint your spouse as the primary person to make financial and/or healthcare decisions, should you become unable to do so.  If you are not married, or are widowed, perhaps you have a trusted child or children that you would appoint.  Regardless of who you appoint, the benefit of establishing these documents is that you are making the decision(s) of who you trust most to take care of you during your life if you become unable to do so.  If your selections change over your lifetime, because you see an agent taking advantage of the trust and authority you have provided them, you can revoke the authority granted and entrust it to another.  You retain that flexibility so long as you have mental competency and capacity.

If, instead, you fail to implement these documents as part of your estate plan and need someone to manage your financial and/or medical affairs during life, there is no other option than to have a public guardianship before the courts during which time you are adjudicated legally incompetent to make any decisions moving forward.  Not only does the court effectively strip you of your rights and autonomy, but it also appoints who will serve as your guardian.  This guardian may not be the person you otherwise trusted most to make decisions in your best interest.  In fact, this guardian could be someone you have never met, such as a local attorney.  Not only is this guardianship public and costly, but it is also impersonal and your guardian will have to account to the courts for any financial decisions made during your incapacity, which ultimately leads to a very costly practice.

All of this difficulty can be overcome, should you elect to sign a General Durable Power of Attorney and Healthcare Power of Attorney into effect, appointing those you entrust to best care for you should you need someone to look over you.  Proactively granting those you entrust with your financial and healthcare decision-making authority, should you need such assistance later in life, enables you to appoint who you trust most to care for you during your time of need.  Giving power and authority to those you love and entrust, and who hopefully love and respect you in return, should greatly curb your susceptibility to elder abuse later in life.

Click here for more information regarding a General Durable Power of Attorney and Healthcare Power of Attorney, as well as the other recommended core estate planning documents to care for you during your life.

 

 

 

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A Tale of Two Children: Fortunately My Parent Planned Ahead

Four Pillars Nurse Edit copyI was blessed with wonderful parents who were married for 63 years.  Years ago, they wrote a standard will.  After my Mom passed away in 2011, my Dad, an active, independent 80-year-old in relatively good physical and mental health, decided he wanted to revisit his own documents.  He knew that with a standard will, all of his assets could go into probate in the courts.  It was important to him to keep our family’s asset distribution private and fair for all remaining family members if something should happen to him.

Dad’s financial planner recommended Kelly Shovelin and Matthew Schrum of Four Pillars Law Firm.  Working with both my father and me, they offered solutions like an irrevocable trust to help protect Dad’s assets if he ever needs a nursing home and ensure our family avoids probate court during the eventual execution of his will.  Like many modern families, ours is a bit complicated due to divorces and other issues.  The trust dictates the exact terms of asset distribution and precisely for whom said assets are intended.

As the adult child residing nearest my father and the person named as his executor, this lifts a tremendous burden from me.  The documents that are now in place clearly state my father’s wishes and exactly how his estate should be distributed, meaning no bias on behalf of the executor and leaving less room for debate.   Everything is clear, transparent and final.   In other words, by planning in advance, Dad isn’t just protecting “the money,” he’s also protecting the relationships between his children.  We will be able to avoid the hurt feelings and family bickering I’ve seen all too often when loved ones pass away.

Did it cost a little bit more for Dad to revisit all of this paperwork and make changes?  Yes, but now he feels more settled and he can sleep at night.   I’m also relieved knowing all bases are covered, and if something does go wrong, I know exactly what to do.  I won’t have the headaches and the heartbreak of having to sort out such important matters during times of stress or grief.

As someone who has spent 32 years working in the medical field, I’ve seen time and again how life can change in an instant and how an ounce of prevention is worth a pound of cure.  I am grateful to my father for his foresight, and grateful to Four Pillars Law Firm for creating a thoughtful, solid plan that will protect him and all of us for years to come.

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A Tale of Two Children: My Parents Were Unprepared for a Health Crisis

Four Pillars Law Firm Pie Edit(But Fortunately, Four Pillars Was There to Help)

In September of 2011, I dropped by my parents’ house for a quick overnight visit to discover a scary situation which lead to a year of realization and reckoning for my family.  I had been there less than a month earlier, and at that time, our Dad exhibited some of the forgetfulness one expects with an aging parent.  This time, however, there was a noticeable shift for the worse that was not normal and very concerning.  It was as if he had lost the ability to generate new memories; he repeated every question he had over and over again as if he never retained the answers.  Indeed, soon after that visit, he was diagnosed with vascular dementia.

My brother and I began making the respective two-hour trips to my parents’ home on a weekly basis to try and give some support to our Mom in her sudden new role as Dad’s caregiver and as the head of household.  But how much help can one really be during a once-a-week visit in a situation that requires continual ‘round-the-clock attention seven days a week?  My father had managed the family finances, so my brother and I focused on assuming this duty, locating and scheduling additional outside help, and trying to offer emotional support.

Over the course of a few months, Dad’s condition continued to decline and so did Mom’s.  The increasingly challenging physical and mental stresses left her exhausted.  We continued to seek out additional methods of assistance but found few options, other than paying for in-home help out of pocket.  Medicaid sent a nurse weekly, but their visits only offered a few hours of support per week.  We were maxed out financially, paying people to assist in the home five days a week, but it still wasn’t enough support for Dad’s situation.   Aside from abandoning our own jobs and lives and moving back home, we were unable to do more.   It was very painful to watch our mother’s own decline as she attempted to provide a level of care for our father that wasn’t sustainable for one person.

About a year after that fateful September visit, we planned a big family Thanksgiving that we hoped would cheer our Mom up.  We had adjusted to the impending feeling of doom and were probably in some level of denial about where we were in the larger scheme of things.  We rented a beach house near my parents’ home thinking it was close enough for Mom to spend time at home, and that the beach house would serve as a refuge and an escape for her, even if for just a few hours each day.  Although we intended for this time to be a refuge for Mom, it was a time of realization and reckoning for the family.  Mom was so beaten down, she was one step away from a nursing home herself.

On the Monday morning after Thanksgiving weekend, my brother and I made the decision that Mom would not have let herself make.  We found a skilled nursing facility with an open bed, paid the required $5000 advance for a month of care, and checked him into the facility.

At this point, we only had enough money for a month or two of care.  Other than securing supplemental health insurance, our parents had not done much planning for a situation like ours. We had already exhausted the other limited funding in the family’s budget, and our application for government assistance from Medicaid had been denied because my parents owned property.  We were out of options, up against a ticking clock, and very afraid of what the future held for our family.  We had tried, but the truth was we knew nothing about how to navigate the sea of healthcare regulations to find the help we needed.

In a desperate search, we made contact with a friend of a friend who works as a financial planner in Greensboro.  He did some online research for attorneys in the Wilmington area, and based on his experience and knowledge, he recommended that we go to Four Pillars Law Firm first.  It was the best advice we could have received.  Personally, I didn’t even know that this type of help or planning existed.  But it did, and finding Four Pillars Law Firm changed everything for us.

Matt Schrum and Kelly Shovelin literally rescued our family; I do not know of a better way to put it.  They are highly skilled and a pleasure to work with, and I am not overstating my feelings when I say that I firmly believe they are the reason our Mom still has quality time left to spend with us.

There is no cure for my father’s condition, but at least now he has the right help in the right place; we’ve been able to make the best of a bad situation.  My brother and I can rest easy knowing that both of our parents’ needs will be met.

I am not sure that there is any way for people to emotionally prepare for a situation like this, but the right health care and financial planning make a tremendous difference in one’s ability to endure the experience.  If this type of planning had already been in place for our parents, it would have helped immensely.   My wife and I will be doing this same planning with Four Pillars Law Firm for ourselves in the near future.

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Mickey Rooney: His Life, Death, and Legacy

Mickey RooneyMickey Rooney died over the weekend at age 93, but his legacy will live on.  Many Americans probably reflect fondly on his nine-decade-long career in show business. However, his real legacy may prove to be his personal battle as a victim of elder abuse in his later years and his public battle to fight back for control over his life. 

Thankfully, Rooney was able to regain control after being subjected to elder abuse by his stepson and stepdaughter for years.  Ultimately he filed restraining orders against both.  Over the last two years of his life, he lived with his son and finally found happiness after years of distress.  In a statement to CNN, Rooney’s son, Mark, recounted that his father “led a full life but did not have enough time to finish all he had planned to do.”

Nothing could be so true.  Mickey may have been reinvigorating his acting career, but the spotlight he shed on the dangers of elder abuse and the need for better safeguards against it remains an issue for the aging American population.  Mickey originally testified to the U.S. Senate in 2011 about his experience as a victim of elder abuse and how he suffered silently for years.  According to a report by the Government Accountability Office around the same time, Rooney was not suffering alone.  In fact, the report stated that more than 14% of non-institutionalized seniors experienced some form of elder abuse in 2009.

With advances in modern medicine and Americans’ correlating longer life expectancies, greater attention needs to be placed upon elder abuse and exploitation which can take on many forms, including financial, emotional and physical.

To learn more about the cautionary tales of elder abuse and exploitation, as well as to hear some of Mickey Rooney’s testimony, click here.

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Nightmares of Joint Ownership

Nightmares of Joint OwnershipI cannot begin to fathom how many times I have discussed the issues surrounding jointly held property (both real and investment/bank account properties) with clients who are not husband and wife.  In reality, it seems as though people add family members and other trusted loved ones as joint account owners on a regular basis.  The overwhelming reason?  To “keep things easy”; that way, if something happens to me, my joint account holder can take care of me and my bills.  The second reason?  To avoid “dealing with the courts” when my loved one dies.

Unfortunately, this strategy can prove to be a nightmare in reality.  What most people do not realize is that by adding another person to their account as a joint account owner, that persona actually becomes an “owner” of the account.  Should they choose, that person could remove all of the money from your account without your approval or knowing until it is too late.  Perhaps that argument alone isn’t sufficient to change your mind.  So, consider instead that your joint account owner executes a General Power of Attorney and appoints someone to handle their legal and financial matters for them.  There is little chance you will even know about the existence of this document, let alone who is appointed.  However, the person appointed could just as easily, in your joint account holder’s stead, wipe out your bank/investment account on their own, without you and/or your joint account holder being aware until it is also too late.

Still not convinced?  Consider the possibility that your joint account holder comes upon misfortune and has creditors looming over him/her.  These creditors could come in the form of financial creditors due to unpaid bills, accidents in which your joint account holder is found liable, as well as soon-to-be ex-spouses.  Considering 1 in 2 American marriages ends in divorce, even happy marriages can dissolve.  If your joint account holder is going through a divorce, your assets will be pulled into their division of marital assets (due to their joint ownership of your account).

Is expediency really a reason to bring all of these harsh realities upon you and your financial well-being?  Of course not!  There are legal solutions to all of your concerns that alleviate the issues which may have you concerned while also protecting you and your financial/legal future.  Consider checking out these links to learn more about some of the legal opportunities that can accomplish all your goals while safeguarding you and your future:

General Durable Power of Attorney

Revocable Living Trust

Asset Protection Trust

Long Term Care Planning

If, after reviewing this information, you are reconsidering decisions you may have made in the past, please take the time to consult with an experienced estate planning attorney regarding how you may best be able to achieve your goals while also protecting yourself.

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Introducing the IRA Inheritance Trust! (Part 2)

IRA Inheritance Trust Stretch OutIn my last blog, I discussed the beneficial use of an IRA Inheritance Trust to ensure your beneficiaries maximize the power of inherited retirement accounts through compounded tax-free growth and less income taxes being due each year distributions are taken by taking advantage of distribution “stretch-out” over their life expectancies.  Today I will discuss the additional benefit of the IRA Inheritance Trust: Asset Protection!

Most people are familiar with the fact that retirement accounts are generally protected from creditors during their lifetimes. . . but the same does not hold true for inherited retirement accounts.  Inherited retirement accounts are not creditor-protected when it comes to your beneficiaries.  If one of your beneficiaries were to get into financial strife or be receiving financial-based government benefits, your beneficiary may lose the full value of their inherited retirement account value!  An inherited retirement account does not provide any of the following:

1)      Beneficiary deciding to cash out the account earlier than required and blowing income tax “stretch-out” (which was discussed in my prior blog);

2)      Wrong people eventually inheriting your retirement account assets (e.g. a spouse’s own children from a prior marriage or a second spouse upon your in-law’s remarriage);

3)      Poor spending habits of beneficiaries, their spouses and children;

4)      Poor money management/investment skills of beneficiaries;

5)      Your beneficiary’s spouse taking some of the retirement account in a divorce;

6)      Young, elderly or disabled beneficiaries who are unable to properly manage their affairs;

7)      A beneficiary losing financial needs-based government benefits; and

8)      A beneficiary’s lawsuits, creditors and even bankruptcy grabbing your retirement account inheritance.

The solution to all of these potential devastating consequences of an outright inherited retirement account is the IRA Inheritance Trust!  The IRA Inheritance Trust not only maximizes income tax deferral and wealth calculation, it also provides enhanced protection of any undistributed monies being held in the inherited retirement account, thereby ensuring:

1)      Proper distribution to your intended beneficiaries;

2)      Spendthrift protection;

3)      Professional money management;

4)      Divorce protection;

5)      Minor and disability protection;

6)      Government benefits protection;

7)      Lawsuits and creditor protection;

8)      Minimized income/estate taxation; and

9)      A legacy in your name for your loved ones.

As discussed in my prior blog, incorporating an IRA Inheritance Trust into your estate plan is a difference that could mean MILLIONS!

If you’d like to learn more about the IRA Inheritance Trust and whether it is appropriate for your family’s needs, please contact our office and we’d be delighted to meet with you and discuss the opportunity!

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Introducing the IRA Inheritance Trust! (Part 1)

IRA Inheritance Trust Stretch OutYou may know the difference between a Last Will & Testament and a Revocable Living Trust, but did you know there is a special trust specifically for retirement accounts?

Don’t make the faulty assumption that your Revocable Living Trust will work just as well for your retirement accounts as it does for your non-retirement accounts.  Due to the special rules and regulations governing retirement accounts, the IRA Inheritance Trust is a must-have for individuals or spouses with a combined value of $200,000.00 or more in retirement assets.  Why is this?

Well, an IRA Inheritance Trust can take a $200,000.00 retirement account and turn it into $1,000,000.00 for your beneficiaries!  Unfortunately, most beneficiaries simply cash out your retirement accounts once you have passed, unwittingly facing huge income tax penalties that may cause them to lose up to half of the retirement account’s value.  However, with an IRA Inheritance Trust, you can (1) require that your beneficiaries take advantage of a “stretch-out” over their life expectancy of the retirement account’s value and (2) provide asset protection for that inheritance.  Today’s blog will focus on the first issue and my blog later this week will address the second issue.

As stated previously, many beneficiaries, upon inheriting a retirement account, will simply contact the institution and request that the retirement account be liquidated and the money distributed to them.  This is a big mistake.  The value of the retirement account that they receive is taxable income to them in full.  Moreover, this taxable income very likely will jump the beneficiary into a higher tax bracket for that year, if not the highest tax bracket altogether.  This could result in almost half the value of the retirement account inheritance being payable to Uncle Sam for income taxes, which is disastrous in and of itself, but especially if the beneficiary has already spent their inheritance and doesn’t have the money to pay the taxes (which is altogether likely, based upon numerous studies).

If a beneficiary asks the right questions, they may be able to spread the retirement account inheritance over a five-year period so as to lessen the tax consequences.  However, very few beneficiaries will be aware of the fact that if properly done, they have the opportunity to “stretch-out” their retirement account inheritance over their own life expectancy.  By taking advantage of this opportunity, the retirement account can continue to be invested and compound tax-deferred with only required minimum distributions being taken out over your beneficiary’s life expectancy, resulting in compounded tax-free growth and less income taxes being due each year distributions are taken.

The result?  A legacy that you can provide to your children and/or grandchildren that could be worth a million dollars or more in the end!  By establishing an IRA Inheritance Trust, you can ensure this result for your family and make them IRA Millionaires!

If you’d like to learn more about the IRA Inheritance Trust and whether it is appropriate for your family’s needs, please contact our office and we’d be delighted to meet with you and discuss the opportunity!

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Commonly Overlooked Tax Deductions

Commonly Overlooked Tax DeductionsIf you’ve been watching television lately, chances are you’ve seen the commercial with the concessions salesperson leaving a stack of money on every seat in the stadium… H&R Block’s assertion that self-filing taxpayers last year paid more than a billion dollars in taxes that could have been saved by paying a professional.

In line with this same analogy, years ago, the gentleman who was running the IRS at the time told Kiplinger’s Personal Finance magazine that he figured millions of taxpayers overpaid their taxes every year by overlooking some common tax deductions.  With that said, wouldn’t you like to know if you’re one of the taxpayers these guys are trying to help?

Some of the tax breaks you may often overlook, or not even know about at all, include:

  • State Sales Taxes (which is even more important in states that don’t impose a state income tax);
  • Forgetting to include reinvestment dividends (which often occur automatically with mutual funds and other investments) in your tax basis may result in double taxation of those dividends;
  • Out-of-Pocket Charitable Deductions;
  • Student-Loan Interest Paid by Mom and Dad (a non-dependent child may qualify to deduct up to $2,500); and
  • Job-hunting Costs and Expenses (to the extent that your total miscellaneous expenses exceed 2% of your AGI).

Of course, these are just a few of the commonly overlooked deductions for self-filing taxpayers… there are many more to consider.  If you’d like to learn more, click here.

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2014 Tax Filing Requirements for Seniors

2014 Tax Filing Requirements for SeniorsChances are, if you recently retired, your correlating decrease in income may alleviate you from having to file taxes in future years.  For this tax season, if your gross income from 2013 is less than the following amounts (depending upon your filing status), you may very well not have to file:

  • Single: $10,000 ($11,500 if you’re age 65 or older by January 1, 2014);
  • Married filing jointly: $20,000 ($21,200 if you or your spouse is age 65 or older, or $22,400 if you’re both over age 65);
  • Married filing separately: $3,900 at any age; and
  • Head of Household: $12,850 ($14,350 if age 65 or older).

Of course, this is not an exhaustive list of information.  You must do a proper inquiry to ensure you meet your particular tax filing requirements.  To obtain a detailed breakdown of the federal filing requirements, contact the IRS at 800-829-3673 and request that a free copy of the “Tax Guide for Seniors” (publication 554) be mailed to you, or access it online by clicking here.

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