Category: Estate Planning

Dec 10 2013

It’s Important that You Make Your Wishes Known

Scott Adams, the creator of the Dilbert comic has a controversial blog. One of his recent posts talked about the pain that he saw his father going through. It is a conversation that we have with our clients quite often. A document appointing a health care proxy is not enough, nor is a living will. It is important to have both documents – it is also possible to have one document, an usually called an Advance Medical Directive, which incorporates both.

When choosing someone to make decisions on your behalf, a person called a health care proxy, like the form, it is important that your chosen proxy can follow your wishes. Will the proxy be able to tell the doctor not to put you on life support, or not to attempt to bring you back, if there is a problem? Not all family members can make those decisions. It is a difficult thing to do. It’s important that before you choose your health care proxy, you have a discussion with him or her.

It’s also important that you know exactly what you want and how you want your care to be handled. A good health care proxy will leave instructions with details about what you do, or do not, want. You should communicate your wishes to your attorney.

New York State’s Department of Health has a page of information about health care proxies, as well as a form that you can download and complete. If you do not have a health care proxy, you should take the time to complete one soon.

Dec 04 2013

What We Learned from the Adobe Password Breach

It’s now been pretty-well dissected that Adobe’s security breach has resulted in some 50 million accounts being exposed. A list of the top fifty passwords by use has been posted by security experts as well. (You can also attempt to complete crosswords based upon the 1,000 most common passwords). The fallout is proving to be massive, and the results of the breach will likely continue to be felt for some time.

To date, some other companies (such as Facebook) have required users who may be affected to change their passwords, in order to minimize the damage and expose users’ other accounts. It is still unclear how many other accounts the hackers were able to access but there is a high risk. Because people use the same password for many sites, getting access to one sites’s passwords means that you will be able to get access to multiple sites for that person.

If you were affected, then we recommend changing your password for any site that shared your Adobe password. However, it is important that you make a note of your password changes somewhere as well. As we have said before, if you don’t leave your passwords somewhere, then it will make it harder for people who are taking care of your affairs. Saving your passwords is actually a relatively easy task.

The first way is to simply write all of your passwords down on a piece of paper. As part of our estate planning package, we provide clients with a Document Location and Information Packet; one of the pages of this packet is a page that can be photocopied as many times as is necessary and simply lists account information (site, username, password). For some sites, such as banking sites, you should also list your security questions – if the bank does not recognize the computer or the IP address that is attempting to log in, then it will ask for this information.

Another way is to use password software. KeePass and PasswordSafe are two of the biggest ones. These programs let you keep all of your passwords on your computer (or in the cloud, depending on whether you pay for the service, or the options enabled), or on your phone, and secured by a master password. The programs will also generate theoretically secure passwords as well. These programs will also run off of a flash drive.

You should be careful about where you use your passwords. If you aren’t sure that you can trust the site, then do not use a common password for it. Some security experts recommend using base passwords but modifying the end (so if your base password is “Timmy1″ then for LinkedIn it might be “Timmy1In” or for e-mail it might be “Timmy1Ma”) but that system has risks as well. For an interesting perspective on better passwords, this XKCD comic is worth a read.

Oct 28 2013

Drafting Documents Saves Money – A Guardianship Story

Back in August, I was appointed to represent an “Alleged Incapacitated Person” by a judge of the State Supreme Court in Suffolk County. This is a guardianship proceeding; an Alleged Incapacitated Person, or AIP, is what they call the person that the petitioner feels is in need of a guardian. In this case, the petitioner was the hospital to which the AIP was admitted after her massive stroke.

A guardianship petition is necessary when an adult can no longer care for themselves, or take care of their own financial situation. It involves hiring an attorney and is handled as if the AIP is being sued. Both the AIP and the petitioner will incur legal expenses. The total bill could end up in the thousands of dollars. It also takes time – our first hearing has been delayed twice so far, and the judge may not rule at that hearing. If a guardian is to be appointed, then it may not happen until some time AFTER the hearing. Until then, there is nobody who can act for the AIP. In this case, that means that there is no one who can make medical decisions for her, and there is no one who can fill out her Medicaid application. There isn’t even anyone who can cash her pension checks.

Drafting a few documents – a Power of Attorney and an Advance Directive – can save a lot of time and energy later on, because in many cases, those documents can prevent the situation here. It is also important, however, to make sure that people know where to find those documents in an emergency. The AIP in my case did in fact have an Advance Directive. However, the hospital did not know of its existence and nobody was listed as an emergency contact in order to get the paperwork to the hospital. Had it been found, this story might be different.

It’s also worth noting that there was no phone number on the Advance Directive. It is important that you make sure that your health care proxy list some way to reach the person that you are appointing, so they can get to the hospital in case there is an emergency.

Oct 28 2013

Digital Assets Presentation

After feedback from listeners to our first two conference calls, we have changed our format – instead of a scheduled time, we are now putting our presentations up on YouTube. Our first Protecting your Family Update is posted – Digital Assets.

To watch it, please click here.

Oct 21 2013

New Baby means New Discussions

A long-time client of mine(we’ll call her Janet) recently told me that she was pregnant with her first child. She was very excited, and I was excited for her as well. We were talking about everything that she’d now need to prepare in order to protect her new baby. Janet already had a will, Power of Attorney and health care proxy, but that wasn’t going to be enough. Halfway through, she realized it was a more detailed list than she had thought about.

  • Standby (or Pre-Need) Guardian Appointment – Janet’s Power of Attorney appointed someone to take care of her financial needs, and her health care proxy appointed someone to take care of her medical needs. There was nothing, however, that said who would take care of her new child. Should something happen to her and her husband, what happened next? This is a document that will appoint someone to step in as guardian of a child if the parents are unable to take care of the child for any reason. Unlike a Power of Attorney or health care proxy, this document can survive the death of the signer.
  • 529 Plan – 529 plans are plans that allow you to save money for your child’s education. These plans, which can include tax savings, are extremely beneficial when started early. The plans vary by state, and generally only a plan in your state will work as a tax planning vehicle, but you are not limited to using your own state’s plan. These plans can be set up online, or through an investment manager.
  • Life Insurance – This was something that Janet and her husband had considered off and on for a little while – because they both worked, they were evaluating how reliant they were on each other’s salaries. The most recent decision had been that either one of their salaries was enough to cover the bills and that the first death might just mean eating out a little less, and a little less in savings. With the new baby, however, that paradigm changed. Now, the first death might mean that a nanny was needed, or that the surviving spouse had to work fewer hours or take a pay cut. This became much more of a necessity.
  • Last Will and Testament – Janet’s will left everything to her husband. If he died before her, then it all went to several charities that she supported. That was no longer how she wanted to distribute her assets. It also failed to appoint a permanent guardian for her child. Janet needed a new will that contained a trust for any children she had, and ensured that her wishes for who should take care of the children in the event of her death was known.


Aug 08 2013

How Can I Use a Child’s 529 Plan

You did everything that you were supposed to do to help pay for your child’s college education. This included setting up a Section 529 Plan, either through a State plan or through a brokerage house. Now your little one that only yesterday (it seems) was just starting kindergarten, is heading off to college. And with college comes the expenses, so the question arises as to what college costs can the 529 Plan be used for.

The Section 529 Plan is a wonderful thing. It permits you to put money into an account that grows tax free if it is used for qualified purposes. If you use a State sponsored Yplan, many States (including New York) let you take a tax deduction for the contribution (in New York, up to $5,000 per person or $10,000 for a married couple). You have more control over the account than if were put into an Uniform Gifts to Minors Act account in the child’s name and you can change the beneficiary if the child gets a full scholarship.

But the money must be used for Qualified Higher Education Expenses. This includes tuition, fees, books, supplies and equipment required by an education institution for enrollment or attendance. It can also be used for the reasonable cost of room and board if the student is enrolled in the institution at least halftime. So what about purchasing a laptop computer for the student? This is not a qualified expense unless the school requires the student to have a computer. I know you can’t write a paper or do research without the computer, but that is a “logical” argument and this is the tax law. No one has ever accused Congress or the Tax Law of being logical.

So be careful when making disbursements from a Section 529 Plan and remember that it sends out tax forms at the end of each year showing the amount of disbursements. It is safest to make the payments directly to the college for tuition, books, room and board from the plan, and use other funds to purchase questionable items such as computers and software.

Aug 06 2013

Estate Planning for College Kids

When your child goes off to college, at 18, a lot changes. That child is now an adult, at least in the eyes of the law, even if he’ll always be your son. And while estate planning for a college student might seem odd (most of what they have is going to be bank or brokerage accounts that are not under their own total control – see our recent post on avoiding probate for ways to handle these assets), there are some very real concerns.

  • Health care decisions – because the child is now a legal adult, there should be a health care proxy in place to ensure that someone can step in and make medical decisions. Without this, the process can be complicated, costly and, most importantly, time-consuming. It is better to have the child execute a health care proxy instead. A HIPAA Release, which allows the parent to get information on the child’s health, may also be warranted.
  • Financial issues – most college kids have their mail sent to their parents house because they don’t have a permanent address at school. Most things can be handled by the child but a Power of Attorney is useful because it allows for a parent or someone else to handle financial matters that may come up. More importantly, a Power of Attorney will allow someone to handle tax issues for the college student.
  • School information – Colleges will not release student information anymore – it’s not something that’s even negotiable. Parents will need a release, called a FERPA Waiver or FERPA Release in order to learn about their child’s grades and other education information. While an attorney can draft this form, each college most likely has their own and you are better using the one provided by the school.
Jul 26 2013

Avoiding Probate Doesn’t Always Require a Trust

I hear a lot of people talk about wanting to avoid probate, and they generally have different reasons for wanting to do so. Some of the reasons that I hear are:

  • Concerns about the cost of probate, both filing fees and attorney’s fees
  • Concerns about the time that it will take to distribute the assets
  • Concerns about the public nature of probate
  • Leaving different amounts to different beneficiaries

The most common way to avoid probate is through a trust. That is something that we can, and have prepared. And trusts serve many valuable purposes. However, there are other ways to avoid probate, at least for many assets.

  • Transfer on Death provisions – Most brokerage houses and banks will allow you to designate a beneficiary to take over the account on your death. I sat down with a financial planner today who told me that this is probate-avoidance method is underused, and misunderstood.
  • Joint accounts – While there are some risks to this (such as potential attachment from creditors of either account holder), if you want the beneficiary to enjoy the benefits of the money before death as well as after, you can name a joint account holder. As long as the account is created as joint, “with right of survivorship,” then on death, the beneficiary will get it.
  • Named Beneficiaries – Some accounts, and most insurance policies, will allow you to name a beneficiary of the account. This works almost identically to a transfer on death designation, but will sometimes be used instead.

Both Transfer on Death and Named Beneficiary accounts can be changed at any time, joint accounts are permanent.

One other way that people ask us about is transferring the house as a gift while the resident is still alive. While there may be reasons to do it, in general, transferring property as a gift during life can be a bad idea for tax reasons. When you give a house (or anything else) as a gift, the recipient is credited with the house being worth the amount at the time that you bought it – just like you are. So when he tries to sell it, he will pay income tax on more profits. On the other hand, if he receives it at or after death, then the tax value of the house is increased to the value on the date of death.

While probate is not as difficult as it once was, and avoidance is not necessary in nearly as many cases now as it once was, when that is a goal, there are a few ways to do so. A trusted adviser can help you figure out what is best for you.

Jul 16 2013

The Importance of The Right Trustee

I read an article from the Village Voice yesterday, that talked about a judge taking a stand against two trustees, an attorney and a bank, who were supposed to be serving the needs of an autistic child. Instead, they were allowing the trust to sit dormant, all the while, collecting fees. In fact, the attorney who had been hired as trustee by the child’s now-dead mother admitted that he had not even visited the child since the mother’s death, and only rarely before.

While some trusts are subject to judicial oversight, others are not. Those trusts can allow unscrupulous trustees to make money off of the investments and the size of the trust, without doing any work or ensuring that the money set aside is actually used for its intended purpose. It is important, therefore, to make sure that you are hiring the right trustee to handle things.

People creating trusts actually can appoint multiple trustees: one, such as a bank, might handle the money-management while an individual handles the personal care aspects of the trust, and makes sure that the small amounts of money that pay for quality-of-life purchases (new clothes, or a pizza) are taken care of. Interviewing potential trustees is also an important part of the process. Because these are people who will have control of your money and will be responsible for making sure that it goes to any beneficiaries that you name, you want to get to know them and make sure that they will follow your wishes and not just line their own pockets.

I have worked with trustees before and most are good people with good intentions. But a few bad apples can spoil the bunch and you want to work now to keep from finding those few bad apples. Once the trust is in full effect, it may be too late to do anything.

Jul 09 2013

Stopping to Consider

I hope that everyone had a safe and enjoyable holiday weekend, with a safe amount of eating and drinking and physical activity (or lack thereof) in the hot weather. It was also a time to look at the events of the day and realize how short life can be, no matter what age or physical condition we are in. The deaths of 19 firefighters in Arizona, all young, in excellent physical condition and many with young families, and the plane crash in San Francisco, which could have had a much worse outcome, make us realize that even though the world (and U.S. in particular) is a very safe place, situations beyond our control can take us away from our loved ones in a blink of an eye.

For years I have been standing on my “soap box” preaching the need for everyone to have a Last Will and Testament and related documents. It is not a question of wealth or assets, for parents with minor children need these documents every bit as much (if not more) as a 90 year old in frail health. The Last Will and Testament for parents with minor children should include provisions for Guardians to take care of the children and Trustees to handle their finances, if both parents pass away. The Last Will and Testament for the 90 year old is more concerned with making sure his or her assets are distributed as they want.

Properly prepared documents will also provide the documentation needed if you are injured and unable to make your own decisions (medical and/or financial). An Advanced Medical Directive will appoint someone to make medical decisions is you are incapable and advise that individual your wishes as to being kept alive or dying with dignity. The Power of Attorney provides a means for your financial affairs to be carried out, even if you are not able to act. Even married couples need this, as a spouse has no automatic right to sign documents for the other spouse. The documents should also include information to assist your loved ones in locating your assets and who to contact for information and assistance. All of these documents are important and should be reviewed on a regular basis.

I know that summertime is not the time when you want to think about this and to review what documents you currently have (or don’t have); but let’s face it, there is no time when you will want to think about this. But expending a small amount of effort now you can alleviate a large amount of stress and anxiety at a time when there will be enough stress and anxiety in your loved ones lives.

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