This Thanksgiving, Dish Up Some Estate Planning!

Thanksgiving can be a good time to talk to parents or other older loved ones about the plans they have in place, whether to understand more about what those plans are or to encourage them to make appropriate plans. It's also a great time to share with others what you've done on that front, to make sure that your own plans are in place.

As you sit with your parents or grandparents around the Thanksgiving table, consider using the occasion to discuss important planning associated with having a will or other advanced directives, like a power of attorney. (And if the Thanksgiving meal itself is too public (grandchildren!), consider the prep time in the kitchen beforehand or the leftover lunch table on Black Friday before heading to the mall.)

I'll leave it to others to describe in greater detail the different “conversational strategies” of the appeal to duty, the appeal to love, the appeal to loyalty, or the fear of bad outcomes. Indeed, your parents’ personality or objectives bears a lot on which strategy to use. So, regardless of how you approach the conversation, be sure to start the conversation. Then, once you’ve set the hook, you can make arrangements to speak with an estate planner about the topic.

Remember to use the “two ears, one mouth” rule. Simply hectoring a parent about getting their will done, at least what I've heard from my clients, may be no more effective than hectoring your child to do his/her homework.

Once you've broached the subject, shed some light, and ideally, lead by example: explain how you've done the important planning of preparing a will and related documents. Even if you're not going to bring a copy of your estate planning documents to the Thanksgiving table, it might be an appropriate time to share that should “anything” happen - Heaven forbid - there are plans in place. Share that the documents are on file in your home or in the office of your estate planning attorney, and that the documents that you created represent your true wishes and that family members should not second-guess the plans you've put together.

Beyond that, enjoy the holiday shopping! Enjoy the football! Enjoy the turkey! But don't miss an opportunity to sit down with a loved one when you have their full attention and share your concern and your desire to make sure their plans are carried out when the time comes. As always, if you have any questions about this topic, feel free to give me a call.

Contact me today with questions or comments.

Estate Planning for Beneficiaries with “Special Needs”

Families of children with special needs often consult an estate planner like myself after larger questions have been resolved. If the disability results from some kind of accident, where a trust may be needed to administer the proceeds of a settlement, it is not unusual for the settlement lawyers to prepare a suitable trust during the litigation to obtain the settlement. That presents its own set of challenges and is more typically the province of a good special needs litigator.

More commonplace are situations in which beneficiaries have special needs relating to disabilities occurring in the natural course. The concern is not so much any settlement of proceeds or “self-settled funds,” but rather how to ensure care for these individuals after their natural caregivers, typically the parents, are no longer able to provide direct care.

Setting aside the question of how they get funds, which is typically the province of a financial planner and possibly an insurance advisor, whatever funds the parents may have for the ongoing care needs to be addressed in such a way as to provide maximum benefit to the beneficiary. This is where an estate planner, who has knowledge of special needs drafting, can be most effective.

In a typical case, parents of a child with special needs will have become experts of advocacy for their child. However, once the child reaches majority (typically, age 18 or 21), the need for advocacy doesn’t end. There are a variety of different kinds of programs that are available for people with special needs; the chief feature of which is that they tend to be means-tested, meaning that a recipient of these programs need not only qualify in terms of their disability with special needs, but must also be below particular income/wealth thresholds.

Why is this relevant to estate planning? Because one unfortunate outcome from lack of planning may be that the special needs person who inherits from a parent or other relative can see those funds reclaimed or “clawed back” by whatever programs/services have been providing the benefits. This, in most cases, would be an avoidable disaster.

The good news is that with proper planning, an inheritance can be sheltered from the reach of these benefits programs. In the best case, government programs will continue to provide funds for direct care for basic needs while the inherited legacy can continue to provide for additional or “supplemental” needs. This is why a “special needs” trust is sometimes called a “supplemental needs” trust.

Every person with special needs is unique (as is his/her financial situation). Accordingly, it is critical to consult with a financial planner and an estate planning attorney who are versed in this area of planning. Contact us today with questions or comments.

Bittersweet Lessons from Arnold Palmer’s Legacy

In a year that is saddened by many celebrity deaths, including some recent deaths in the sporting world, one that's notable from an estate planning perspective is that of Arnold Palmer—but not in the way that you might expect.

As of the time of this writing, there's been no news about his estate. We are hopeful that he had a well drafted will that set forth his plans for his estate and his family.

When I think of Arnold Palmer, I think of the great summer drink that bears his name: The Arnold Palmer. As most people know, the drink is half lemonade and half iced tea (vary the sweetness of the lemonade or the tea as much as you like). How does this bear on estate planning?

I make this metaphor: a will is really just a recipe. And often, like an Arnold Palmer, it’s a very simple recipe. A well drafted will can be as simple as:

-- "All to spouse, otherwise in trust for children."

-- "Equally to my 3 sons, with my brother, their uncle, to be the executor."

-- "Half to the Metropolitan Museum of Art and half to Save the Whales."

Is your will likely to be as simple as this? Maybe not, but an initial conversation could be that simple.

Mistakenly, any people think that drafting a will involves very difficult decisions about where money should go; requiring a detailed survey of all of their holdings, including dormant savings accounts and dry cleaning receipts. Sometimes, yeah, but usually not.

If you require more detailed planning, then of course, you should discuss that with a good estate planning attorney. If it does turn out to be simple, won't you be happy that you've taken care of this important work in a way that leaves a clear plan for those who come after you?

To celebrate, perhaps a delicious Arnold Palmer when you're out on your porch would be in order.

Contact me today with questions or comments.

Power of Attorney: An Invaluable Back-to-School Tool for Parents of Adult Children

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In this back-to-school season, parents are about to find—whether their children are 18-year-olds who are still in high school or children going off to college—that when a young person turns 18 and reaches the age of majority, the parents’ ability to deal with the child's private data is severely curtailed.

In a variety of different areas, but most significantly the areas of health information and financial aid information, the right to that data rests almost entirely with the child upon turning 18. Regardless of whether the parent is paying the health insurance, is on the hook for medical bills, is paying tuition, or is guaranteeing loans for financial aid, co-signing on a loan or co-signing on a lease for college housing, the parents' rights to information relating to the situation may be exceptionally limited. Most authorities in these areas are quite strict about observing confidentiality and privacy of their newly adult clients.

However, there is a simple work-around to these rules (well, it’s simple if you are getting the right advice), which is to have a power of attorney in place. This may not be an appropriate occasion to have a general power of attorney, which would give the parents control over everything, such as access to checking accounts and the ability to make general legal and financial decisions. The narrowly tailored solution, and one which should be acceptable to all parties, is to do a narrow power of attorney—one that, for instance, addresses only health insurance information or financial aid information, or both.

With a suitably drafted power of attorney in place, both the student and his or her parents could interact with the financial aid companies to discuss sensitive financial data and be entitled to participate in the decision-making process. The same could be said for medical information, whether related to health insurance or the direct provision of medical services. If parents are on the hook for medical bills, they may want to know the underlying care delivered.

Take care, though: a power of attorney is relatively easy to draft, based on a standard template, but it shouldn’t be left to amateurs. A call to your friendly estate planner can help lay the foundation for smooth communication on these important matters while your young adult is making her/his way forward, whether  at college or out in the wider world.

Contact me today with questions or comments.

New Section 2704 Regulations

As those of you who follow the inside baseball of estate planning surely know, the Treasury Department recently promulgated regulations under Internal Revenue Code Section 2704. The detailed discussion of these regulations is obviously beyond the scope of a blog post, but it is worth noting their effect in broad brushstrokes.

Section 2704 relates to discounts that may be applied to gifts. What “discounts”? For instance, if you give a gift within a family, you may apply a “discount” to it - either because it’s not marketable or because it’s a minority interest - thereby lowering the amount of the gift for purposes of computing the gift tax.


Here’s a simple example:

Imagine that your generous uncle gives your sister $100,000 and gives you one-third of a $300,000 ski condo; and imagine that you don’t ski, you live in Miami, and the ski condo is in Utah.

You don’t really feel like you got an equal gift, do you? That’s because you are mentally applying a discount to the one-third interest in the $300,000 condo. You’d really rather have the $100,000 cash, even though technically they have the same value. To the IRS, the fact that the condo isn’t far away isn’t relevant, nor is the fact that you don’t ski! However, relevant factors that would support discounting the value of the gift are (i) the fact that a one-third interest is a heck of a lot harder to sell than a whole ski condo (a “marketability discount”) and (ii) the fact that as one-third owner, you have no control over when to make major repairs, whom to rent it out to, when to sell it, when to take a mortgage, even when you can use it (a “minority discount”), because you own a minority of the interest in the condo. So, with an appropriate third-party appraisal, your uncle might file a gift tax return showing a $100,000 gift to your sister and a gift of a one-third interest valued at $75,000 to you.

As our example illustrates, with a little planning, once can save substantial gift taxes and estate taxes using discounting principles. Sounds good, doesn’t it? (Consult your estate planner for opportunities in this area, especially if you own $300,000 ski condos.)

Back to our topic: The new regulations under Section 2704 substantially limit the abilities of families to obtain valuation discounts for gifts between family members. This is something that might affect you either as a person who considering making such a gift, or as a beneficiary of someone who has made such a gift in your family, either in trust or to you directly. Be sure to consult your estate planner.