King & Wood, P.A.

Financial Abuse of the Elderly Can Frequently Come from Family Members

“Most financial abuse of the elderly is committed by people close to the person, typically family, friends or caregivers.”

The Los Angeles Times’ recent article, “To help elderly dad hold off mooching adult kids, call in the experts,” describes a common situation where an adult child is trying to protect the interests of his elderly father, by protecting him from other family members.

The son is trying to get his father to move out of his house to a senior care facility. The father has adequate financial assets to cover these costs. But the son’s two sisters' husbands overspend and are in debt. They pressure his sisters to ask their dad for money for their mortgages, children, and credit card debt.

The sisters, in their 50s, are unwilling financially or otherwise to assist with their dad’s care. The son told them that the financial assistance can’t continue, because their dad will need his money to pay for his own care.

The family pressure on the dad is really elder financial abuse. It involves milking an elderly, sympathetic parent to the point of evaporating his own accounts. In this case, both sisters have children, so the dad feels for them and helps them out. The son, who is his primary caregiver, is single with no children and is treated differently, struggling to make ends meet. This type of inequity and stress can split families apart. These family members may not see what they’re doing as abuse.

An Allianz Life Insurance Company survey found that the average victim lost $30,000 and one in 10 lost more than $100,000. Some family members believe they’re entitled to the money as an advance on a future inheritance. They also know that Dad won’t say no.  Therefore, they keep pushing him for money, until it’s gone.

In this type of situation, the son and dad should visit with an elder law attorney to discuss ways the dad can be protected against predators. One option is for the dad to give his checkbook to the son.  However, the son would then have to confront the brothers-in-law. The dad may also not be willing to give up control.

They could also hire a daily money manager to provide personal finance and bookkeeping services. These professionals monitor the senior’s financial transactions for signs of abuse and fraud. They also could hire a geriatric care professional to assess the dad’s health, his living and financial situations, and help him to design a plan that will help him to move forward.

Reference: Los Angeles Times (July 2, 2017) “To help elderly dad hold off mooching adult kids, call in the experts”

Famous or Not, Write Your Will

“It’s always a big story when top celebrities die. When they leave the scene without preparing for the proper distribution of their assets, they continue to generate embarrassing headlines as their heirs fight over money and property.”

The New Haven (CT) Register’s recent article, “Even celebrities fail at estate planning,” acknowledges that while your passing might not be front page news, if you have significant wealth or several heirs, you should try to leave an orderly estate. This is especially important in states like Connecticut, where residents must be certain that their financial planning includes estate planning. This is because it’s one of the states with a state estate tax that has a lower exemption than the federal rate.

There are 14 states and Washington, D.C. that impose an estate tax that’s separate from the federal estate tax. The federal “death tax” is an astronomical 40%, but applies only to assets above the federal exemption of $5.49 million (2017). For example, in Connecticut, the state starts imposing its estate tax on assets exceeding $2 million.

You’d think that celebrities who have considerable wealth would make certain to include estate planning in their personal finance plan. They can easily afford to engage a team of attorneys and advisers. But many fail to do so. This only shows how common it is for high net worth individuals to neglect estate planning.

Prince: The musician died in April 2016 at the age of 57, but he didn’t prepare a will. A judge will decide how to distribute the $300 million estate.

Heath Ledger: The actor who died unexpectedly in 2008 at age 28 left a will—but he didn’t update it when his daughter was born in 2005. This caused confusion over heirs and possible legal battles, but Ledger’s family did gift the entire estate to his daughter.

Warren Burger: You would think the former chief justice of the U.S. Supreme Court would know how to take care of his legal obligations. But when he died in 1995, he left behind a one-page will that he typed himself. That document was poorly worded and left his family susceptible to a $450,000 estate tax bill and court fees that wouldn’t have been imposed, if he had hired an estate planning attorney to create a trust.

Estate planning is a complex area of law. If you have a high net worth, you should hire a qualified attorney, along with a Certified Financial Planner® practitioner and a CPA. It’s good to gain the perspective of all of your professional team members to produce better outcomes for you and your family. Trying to do it alone may not get you in the newspapers, but it could make for unnecessary stress and expenses for your heirs.

Reference: New Haven (CT) Register (June 24, 2017) “Even celebrities fail at estate planning”

Ladies, Watch Out!

“In the past, women tended to rely on their husbands for financial stability. These days, though, a woman has to look out for herself.”

No woman wants to imagine how her life might change in the event of death or divorce.  However, a third of widows lose their spouses before age 60, and half before age 65, according to a study by the Women’s Institute for a Secure Retirement.

New Hampshire Business Review’s recent article, “Why retirement planning is so important for women,” details two of the reasons that retirement planning is so critical for women:

Women Still Have a Late Start. Despite more gender equality, women still do the majority of childcare. Some women can balance home and work life, but many mothers leave jobs or reduce their hours to care for their children. That means a reduced or no income, making saving for the future difficult. A Society of Actuaries study found that caregivers who leave the workforce lose an average of $303,800 in lifetime earnings.

They live longer. Women outlive men by an average of five to six years, so their financial requirements exceed those of men (they tend to spend more years in retirement). As the Society of Actuaries noted, the average woman spends more years experiencing some form of disability. With healthcare costs rising, planning for disability care is critical to women.

Here are some retirement planning tips:

Organization: Keep a list of account numbers, logins, balances, and other important records, in case of a life-altering event.  It will allow you to easily determine where you stand. Consider how your income might change due to the loss of your spouse. If you have a pension, look at the survivorship payout, so you’ll know what to anticipate for added income.

Control: If you’re single or preparing for that possibility, take responsibility for your finances. Start financial planning and save for retirement now. Start regular 401(k) or IRA contributions or increase contributions to receive your employer’s match. You should also start saving funds for emergencies. As a woman, you can’t save too much.

Estate Planning: A widow can suffer the pain of losing her spouse, and then get another shock when she sees she doesn’t have an estate plan in place.  In addition to an estate plan, draft medical and financial powers of attorney, so a trusted person can make decisions for you, if you’re incapacitated.  It is also recommended that you add designated beneficiaries to your accounts and correctly title your property.

Women have a much tougher time with retirement than men.  However, with some effort and planning, you can be sure that your senior years are happy.

Reference: New Hampshire Business Review (June 23, 2017) “Why retirement planning is so important for women”

Baby Boomer Inheritance Means a New Class of Millionaires

“More than $30 trillion in wealth will be passed on from one generation to the next over the 10 years.”

The biggest wealth transfer in the history of the U.S. has started, says Delaware Online in “You've just inherited a million dollars. Now what?”

Baby Boomers, who are the biggest and wealthiest generation ever, will pass on almost $30 trillion in assets to their Generation X and millennial children in the next few decades, with just over 10% of that changing hands over the next decade. That will create a whole new class of millionaires.

Many are saying that the situation is tougher on the person receiving the money, than the one giving it away.

It is hard to tell a younger person to think long-term today.  However, the best thing a “suddenly rich” person can do is to hire a financial advisor, trust and estates attorney and a CPA.

It’s best for children look around, until they find a financial advisor who matches their needs. Studies show that about 66% of children fire their parents' financial advisor when they inherit their wealth. Millennials and Gen Xers may feel more comfortable with a person closer to their own age with contemporary ideas.

Get comfortable with that person and their compensation. Make sure that you select a financial advisor who has your best interests at heart.

Children who inherit a large amount of money should pause and consider their short- and long-term goals. When you understand your goals, it’s easier to find an advisor who can execute that vision.

A financial advisor will monitor the inheritors’ financial goals and keep them on course. Sometimes those who receive a sudden windfall, don’t truly comprehend how much money they have. As a result, they burn through it like it was going out of style.

Inheritors shouldn’t run out and make major lifestyle changes right away. Flaunting new found wealth, like buying a Porsche or adding a swimming pool to your house, could make you a target for scammers.

Prepare for the cash influx by talking to your parents about the amount you will receive and how  it will be handled. Parents may want to consider creating revocable trusts to protect kids who haven’t had any experience with significant assets to date. An estate planning attorney can help.

Reference: Delaware Online (June 23, 2017) “You've just inherited a million dollars. Now what?”

It’s the Executor’s Job to Get Your Home into Your Heir’s Hands

“What must my children do to prove the houses are theirs, in order to sell them?”

A widow’s will leaves everything equally to her four children. She has two homes in two different states. How will those homes get transferred legally to her children?

Newsday explains this in its recent article, “How can my children prove they own my houses after I die?”

The executor will engage an attorney to file the decedent’s will in probate court. In many instances, it’s the same attorney who initially drafted the will.

After the probate judge reviews the document, he or she, more often than not, validates the will and issues “letters testamentary.” These letters authorize the executor to carry out the instructions in the will.

Children won’t be required to do anything to prove ownership of the houses. After the decedent’s will is probated, it’s a public document, and a buyer’s title insurer will verify that the sellers—in this case the four children—do indeed own the house.

A certificate of the court’s “letters testamentary” is the only document the executor is required to have, in order to legally sell your house and to distribute the proceeds in equal shares to the children.  However, it’s not uncommon for a buyer to request a copy of the death certificate, although it’s really unnecessary, since it’s been filed with the court in the probate proceeding.

 For the house in the second state, the executor will need to retain an attorney admitted to the bar in that state to file for ancillary probate there, before he or she can sell that house. The court in that state will then ask the court in the first for official or “exemplified” copies of all the needed documents. This will include the death certificate, the will and the letters testamentary, along with the signatures of the probate judge and the county clerk where the will was initially probated.

In simple terms, your will is the document that proves your heirs own the houses you will have left for them.

Reference: Newsday (June 28, 2017) “How can my children prove they own my houses after I die?”

Let’s Review Revocable Trusts and How They Can Help You

“What's a revocable trust, and how does it work?”

A revocable trust or living trust can be a wonderful way to create an estate plan for you and your family. These trusts are flexible legal documents that can be modified during your lifetime. When they become irrevocable, they will protect your assets for your family.

Motley Fool’s recent article, “Revocable Trusts: What You Need to Know,” explains that a revocable trust is a trust you create to hold whatever property you want to be subject to its provisions. What makes a trust “revocable”, is that even after you create it, you can change it or cancel it and distribute its assets back to yourself. When you create a revocable trust, you act as its trustee during your lifetime.

A revocable trust is worthwhile, if you become ill or an injury incapacitates you to such a degree you can’t handle your financial matters. Successor trustee provisions of your revocable trust let the individual you name take care of those matters on your behalf. The successor trustee becomes responsible for paying your regular bills and handling ordinary financial needs that arise. When you're able to manage your own affairs again, you can take back the trustee role.

The revocable trust includes your wishes for what should happen to trust assets after your death. For example, a revocable trust can be useful for those with minor children. You can provide for the trust to continue and for trust distributions for the benefit of those children to be made by the successor trustee, until they’re old enough to handle their own financial affairs.

Another benefit of revocable trusts is that your family can usually avoid probate. Revocable trusts are private documents that typically aren't subject to probate proceedings. A successor trustee can manage your affairs without court intervention or public scrutiny.

Remember: in order to implement the revocable trust, you'll need to formally transfer the title of your property from your name to the name of the trust. If you forget, the trust’s provisions won't apply, and your heirs might have to go to court after your death to address those assets.

Speak with an experienced trust attorney to learn how a revocable trust may fit with your estate planning.

Reference: Motley Fool (June 23, 2017) “Revocable Trusts: What You Need to Know”

The Benefits of Gifting Assets to Heirs Now

“Before death, here's how you can gift assets to your heirs.”

There are accidents leading to injuries that can leave a loved one on life support for an extended period. There may come a day when removing life support is discussed. Aside from having a living will and healthcare directive in place, family members may need to know about any large settlement from the accident or substantial assets in a checking account and the tax implications for the estate and the heirs.

There are actions that families can take while a person is incapacitated but still living, if the right planning has been done, which can minimize taxes after an individual dies, says NJ.com in the recent article, “Lowering an estate's value before death.”

This is a heart-breaking situation that no one wants to think about.  However, it does provide the opportunity to engage in "death bed" planning that could help minimize estate taxes.

Estates larger than $5.49 million are subject to federal estate taxes of 40% in 2017. However, gifting can be used to lower the value of the estate. Individuals can make annual gifts of $14,000 per person, and a couple can make $28,000 to any person. If assets exceed $5.49 million, the estate can be reduced by making $14,000 gifts to as many family members as possible, prior to death. Gifts can be made in excess of $14,000, but that will be applied against and reduce the $5.49 million exemption amount.

Some states, like New Jersey, have taxes on estates more than $2 million. (The New Jersey estate tax is scheduled to be eliminated in 2018.) Check with a qualified estate planning attorney for state-specific rules. In New Jersey, there’s no limitation on annual gifts. Therefore, an individual can transfer an unlimited amount of assets immediately before death to reduce the estate tax.

Gifts can be executed by a power of attorney or guardian, if the loved one is unable to make the gifts him or herself. That power of attorney document must specifically authorize the agent to make gifts, and court approval is required to authorize a guardian to make gifts.

There are states that also impose an inheritance tax. This tax is not based on the size of the estate, but on who receives the estate. In New Jersey, there’s no inheritance tax imposed on transfers to a parent, grandparent, spouse, domestic partner, child or step-child (Class "A" beneficiaries).

Work through all of this with an experienced estate planning attorney.

Reference: NJ.com (June 23, 2017) “Lowering an estate's value before death”

Don’t Stop Planning Once You Reach Retirement

“You're now responsible for generating your own retirement paycheck by drawing on Social Security, a pension (if you're fortunate enough to still have one) and your savings and investments.”

Although it’s critical to plan in the years leading up to retirement, it doesn't mean you’re through planning once you retire. Financial planning becomes even more important, because there won’t be a steady paycheck on which to rely.

With that in mind, The Brainerd (MN) Dispatch offers a few ideas to consider early in retirement, in its article, “3 Moves you should make in the first 3 years of retirement.”

Understand that retirement can be a long time. Compared to 60 years ago, we're seeing seniors who are retired for nearly 40 years! That means today's retirees must be prepared for a significantly longer retirement than their parents. Nothing is a certainty, but you should plan for a retirement that could last several decades. A percentage of your portfolio should be allocated in stocks and other growth-oriented investments that have historically provided the returns needed to preserve your portfolio for extended periods of time.

Roth Conversions. Diversification means having diversified tax treatments of your savings. If you have most of your savings in a 401(k), nearly every dollar you withdraw in retirement will be taxed. If your savings are only tax-deferred, you'll be hit with required minimum distributions (RMDs) when you reach age 70½. RMDs are a required percentage of your tax-deferred savings that you must withdraw each year—regardless of whether you need the money or not, resulting in a potential jump in your taxable income later in retirement. The solution is to proactively make Roth conversions, so the money will potentially grow tax-free, and you won't have to pay taxes on qualified distributions. You're also decreasing the amount of your savings that’ll be subject to RMDs in the future.  However, you will pay taxes on the amount you convert, so consider the tax ramifications before doing a conversion.

Estate Planning. Think of estate planning as your "legacy planning." When you die, where do you want your assets going? Have a legal will in place and if it suits your situation, a trust. Talk to an estate planning attorney about whether a trust is appropriate for you.  You should also ask your attorney about a power of attorney and a living will to protect you, in the event that you become incapacitated.

Fix your financial and estate plan on a course that's primed for long-term success. Actions that allow your retirement to succeed for both the next three years and the next 30 years, can help you feel more secure about your future.

Reference: Brainerd (MN) Dispatch (June 16, 2017) “3 Moves you should make in the first 3 years of retirement”

Arizona Supreme Court Loosens Standards for Nursing Home Abuse Claims

“The Arizona Supreme Court ruled Tuesday that a standard governing nursing home abuse suits was too restrictive and runs contrary to the aims of state law, reviving a suit that alleges nursing home neglect caused a patient’s death from sepsis.”

The Arizona Supreme Court reversed and remanded a Pima County court’s grant of summary judgment to Manor Care of Tucson and Dr. Gordon J. Cuzner, who were sued by Marika Delgado on behalf of Sandra Shaw. The allegations cited abuse and neglect of a vulnerable adult under Arizona’s Adult Protective Services Act. The recent decision dismantles a four-part test established in a 2002 precedent, reports Law360 in “Arizona Supreme Court Clarifies State’s Elder Abuse Law.”

Ms. Shaw went to Manor Care’s Tucson facility, after treatment at several hospitals in 2011 and 2012. At the time, she’d already suffered from kidney and heart disease and had a prior operation to remove a brain tumor. After some improvement, her condition worsened in April 2012.

Dr. Cuzner ordered a lab test and urinalysis which showed evidence of an “early” septic infection. However, no additional care was given. After two days of not eating or taking fluids, Shaw’s condition was reported to the assistant director of nursing. But again, no action was taken, and she died the same day.

The lawsuit alleged abuse and neglect under the APSA and other claims. The trial court granted a motion from the facility and doctor for summary judgment, holding that the claims failed a four-part test derived from the 2002 Arizona Supreme Court case, Estate of McGill ex rel. McGill v. Albrecht. That test says that a proper claim under the Act must arise from a caregiver-recipient relationship, be closely connected to the relationship, be connected to service given “because of the recipient's incapacity” and be related to the problems causing the incapacity.

The trial court ruled that the death from sepsis was “not related [to the condition(s)] that [] caused [her] incapacity.”  However, the Supreme Court held that the McGill test was difficult to apply in cases like Shaw’s, where patients had multiple medical conditions throughout their nursing home stay. In such cases, the Supreme Court found that “courts navigating their way through the McGill test have made fine distinctions which, at times, seem to be at odds with the broad protective provisions of APSA.”

The Court referred to the law itself, finding that it provides four elements: the individual is a vulnerable adult who has suffered an injury caused by abuse from a caregiver.

“The fact that APSA identifies the requirements for an abuse claim, combined with the difficulties accompanying the four-part McGill test, prompts us to reconsider the McGill test. In particular, the third and fourth prongs of the McGill test are not found in the statute, and, when applied, have produced a great deal of confusion,” the Court said.

As a result, the Supreme Court said the McGill test should be abandoned in favor of using the four elements of the APSA. With that analysis, the Court ruled that Delgado’s suit on behalf of Shaw was valid and reversed the trial court’s order.

James W. Kaucher, who represents Manor Care, said in a statement, that “the Arizona Vulnerable Adult Abuse statute has been the source of considerable litigation. As the court said in this case, fixing the problems with the statute—and there are some significant problems—is something that the Arizona Legislature ought to take up during its next session.”

Reference: Law360 (June 20, 2017) “Arizona Supreme Court Clarifies State’s Elder Abuse Law”

Playwright’s Estate to Sell Valuable Artwork

“Edward Albee is, of course, best known for his plays (the most famous is: “Who’s Afraid of Virginia Woolf?”).  However, he was also a collector, and visitors to his Tribeca loft were often struck by the museum-like array of tribal sculptures and contemporary paintings.”

Edward Albee died in his sleep on September 16, 2016, at the age of 88. The New York Times is reporting on the revered playwright's $9 million museum-worthy collection of fine art. The proceeds from the sale will go to The Edward Albee Foundation, an institution that provides residency to emerging artists in New York.

Broadway World says in its recent article, “Sale of Edward Albee's Estate Will Benefit His Foundation,” that the Chairman of Sotheby's fine arts division, Amy Cappellazzo, said:"Edward lived with the collection in a very special way. He lived with it deeply. Everything was placed in an open loft environment, and how they were hung was interesting and specific to him, so we're going to try to do justice to those ideas."

Albee’s estate will sell his art collection to raise money for his foundation in Montauk, N.Y. Sotheby’s is planning to auction more than 100 works from the playwright’s collection, which it anticipates will sell for more than $9 million. The work is mostly 20th Century fine art, such as Jean Arp, Milton Avery, Wassily Kandinsky and Lee Krasner, but it also includes some African and pre-Columbian pieces.

“He really loved objects, and he really loved painting,” said Cappellazzo. She noted that Albee amassed the collection over many years and across many genres. Some works were acquired based on his relationships with the artists, some were connected to devotional practices that interested him and some simply caught his eye.

“That eclectic taste is a mark of his curiosity,” she said. “He had tremendous reverence for the process of artmaking of all kinds, and the collection is definitely that of a collector who was interested in the minds of artists.”

Cappellazzo said Albee’s popularity is expected to increase sales.

Edward Albee was the recipient of three Pulitzer Prizes for “A Delicate Balance,” “Seascape” and “Three Tall Women.” In 1996, Albee received the Kennedy Center Honors and the National Medal of Arts and in 2005, he was awarded a Lifetime Achievement Tony Award.

Reference: Broadway World (June 25, 2017) “Sale of Edward Albee's Estate Will Benefit His Foundation”