King & Wood, P.A.

How Do I Have the Financial Talk with My Parents?

“It’s one thing to assume that these conversations can wait until a health or financial emergency makes them necessary. However, avoiding money talks with your parents altogether can be a mistake.”

GOBankingRates recently released a survey that found that 73% of Americans haven’t had conversations with aging parents about their finances. However, 22% of the survey’s respondents said they never plan to have this talk with their parents, because they believe their finances are none of their business.

That’s a really big mistake.

Forbes’ recent article, “What You Don’t Know About Your Parents’ Finances Could Ruin Yours” says that if you don’t take the time to chat to your parents about their finances, your own finances could be affected. This is because there’s a good chance you’ll have to get involved with your parents’ financial lives, as they age. This can impact your own financial well-being, if you aren’t ready for that task.

As Americans are living longer, there’s an increased risk of health issues. About 80% of older adults have at least one chronic condition like heart disease, diabetes, dementia or Alzheimer’s disease. Alzheimer’s disease is becoming increasingly prevalent as people live longer. The number of Americans living with Alzheimer’s disease is expected to more than double to 14 million by 2050, according to the Alzheimer’s Association.

However, just 5% of adults ages 55 to 60 have long-term care insurance, and only 11% of adults 65 and older have it. Long-term care insurance helps cover the cost of care in an assisted-living facility, nursing home or even at home. Medicare doesn’t pay for this sort of care–which easily runs well over $8,000 a month.

If you and your parents don’t talk about how to pay for any care they might need, you could become your parents’ long-term care plan. That could mean you pay these expenses or stop working to help care for a parent.

Those who haven’t had detailed discussions with their parents about their finances, can anticipate facing a larger burden than those who’ve been able to help their parents start managing their money better, by having discussions with them.

 If you have siblings, it is important for all the children to be on the same page regarding the parents’ finances. This will help everyone involved be better prepared.

The most important reason to talk to your parents about their finances sooner rather than later, is to see if they have a will, power of attorney and living will or advance health care directive.

If they don’t, consult with an experienced estate planning attorney. The sooner you address these issues, the better.

Reference: Forbes (July 17, 2019) “What You Don’t Know About Your Parents’ Finances Could Ruin Yours”

Should I Get Attorney to Write My Will?

“Estate planning can be tricky, which is why many people turn to attorneys to get the job done right.”

Drafting a will is an essential part of estate planning. Even though it’s vitally important, a recent survey from AARP revealed that two out of five Americans over the age of 45 don’t have one.

The Reflector’s recent article, “Things people should know about creating wills,” says that writing your wishes down on paper helps avoid unnecessary work and stress when you die. Signing a will allows heirs to act with the decedent’s wishes in mind and also will make certain that assets and possessions go to the right people.

Estate planning can be complicated. That is the reason why many people turn to estate planning attorneys to make sure this important task is done correctly and legally. Here are some of the estate planning topics to discuss with your lawyer:

List of Your Assets. Create a list of your assets and determine the ones covered by the will and those that will have to be passed through joint tenancy on a deed or a living trust. For instance, life insurance policies or retirement plan proceeds will be distributed by the beneficiaries you named in each account. Remember that your will can list other assets, like memorabilia, antiques, cars and jewelry.

Naming a Guardian. Parents with minor children should definitely designate the person or persons whom they want to become guardians, if they were to die unexpectantly. They can also use their will to name a person who will be in charge of the finances for the children.

Remembering Your Pets. It’s common for pet owners to use their will to detail guardianship for their pets and to leave money or property to defray the cost of their care. However, remember that pets don’t have the legal capacity to own property, so don’t leave money directly to pets in a will. A pet trust is legal in most states and is the best way to leave money and name a caretaker for your pets.

Stating Your Funeral Instructions. Settling probate won’t occur until after the funeral. As a result, any funeral wishes in a will frequently aren’t read until after the fact.

Designate an Executor. This is a trusted individual who will execute the terms of the will. He or she should be willing to serve and be capable of executing the will.

Those who die without a valid will become intestate. This will result in their estate being settled, based on the laws of where that person lived. A court-appointed administrator will have the authority to transfer the assets and property. This administrator is bound by the state’s intestacy laws and may make decisions that go against the decedent’s wishes. To avoid this, work with an experienced estate planning attorney to draft a will and other estate planning documents.

Do My Credit Card Debts End When I Do?

“Some things don’t disappear even when you die, including credit card debt.”

Although you can’t take your gold MasterCard and black American Express cards with you, the remaining balance you owe can be collected from your estate.

The good news is that your heirs are not responsible for paying the bill. It just means that these types of liabilities come off the top—or are satisfied first—before any bequests or remaining assets are distributed to heirs.

In other words, Newsday’s recent article “Help your heirs avoid having to pay your credit card debt” says, your heirs will pay those cards off indirectly, because money that comes out of the estate means less for them.

In a time of sadness and stress, no family wants to talk to creditors looking to get paid for delinquent balances.

There are a few ways to avoid this situation and to lessen the burden on your family. Let’s look at ways to skip the situation altogether.

Pay off the debt. Of course, since you never know when you might die, keep on top of your expenses. It’s always a best practice. Remember, less or no debt means less or no headaches and frustration for your heirs.

If you do have unpaid debt, be sure your family is familiar with the laws, so they won’t fall victim to dishonest collections agencies and harassing bill collectors.

Make it easy on your heirs. Begin the process with a legally valid will that designates an executor of your estate. That way, there won’t be any arguments or questions about who will be in charge of handling the estate. This way no one has to jump through extra hoops and waste their time and energy to gain access to the estate.

Talk to an estate planning attorney and get some advice. When you visit with an experienced estate planning attorney, make sure that you have a record of all of your up-to-date financial records with all your accounts, assets and liabilities. Make sure the executor of the estate knows where these materials are and how to locate them.

Reference: Newsday (July 14, 2019) “Help your heirs avoid having to pay your credit card debt”

How Does a Life Estate Work?

“When you use a life estate, how does it work? What are the restrictions and who pays the property taxes and other expenses for the home?”

Life estates are used for a number of estate planning purposes. However, the most frequent strategy is to use a life estate where a parent transfers a home to a child and retains a life estate for themselves.

nj.com’s recent article, “How does a life estate work to transfer a home to a child?” explains that as a result of the transfer, the child becomes the owner of the home but the parent has certain rights and responsibilities.

The most critical right retained with a life estate, is the exclusive right to reside in the property. A child cannot force the parent to move out, and likewise, the child doesn’t have any right to live there. The child can live with their parent, but the deed doesn’t give the child the legal right to live there.

With a life estate, the parent must pay the property taxes and all the regular maintenance connected to the property. In addition, the life tenant is responsible for repairs—but not improvements.

This can be hard to determine, but typically the life tenant must maintain the property in the same condition, as when the life estate deed was signed. Therefore, if the parent moves out, and the property is rented, the parent has the right to receive all of the rents.

When the parent passes away, the life estate automatically ceases and the child now has all of the rights associated with the property.

As far as income tax, when the parent dies, the property receives a “step up” in basis to the date of death value. If the property is sold after the parent dies, the capital gain or loss is calculated by deducting the date of death value from the sales price. It’s a very important tax advantage, if the parent has owned the home for a long time and the property has a low basis.

Retaining the life estate can help the child avoid the capital gains tax more effectively than just transferring the property outright to the child.

However, in contrast, if the property is sold while the parent is still alive, part of the proceeds will be allocated to the parent and part will be allocated to the child.

Only the percentage that’s allocated to the parent will be excluded from income under the federal tax laws. The part that’s allocated to the child may be subject to capital gains taxation.

Every family’s situation is different, so it would be wise to speak with an estate planning attorney to explore whether or not a life estate would be the best situation for you and your family.

Reference: nj.com (July 12, 2019) “How does a life estate work to transfer a home to a child?”

What Do I Need to Know About My Own Funeral Arrangements?

“The National Funeral Directors Association says 62.5% of people believe that it's important to talk about funeral preparations. However, only around 21.4 % have made arrangements for themselves.”

You’ve heard about death and taxes. While having a plan for your death may not be a big priority, creating a plan for your family when you pass is something everyone should do.

WHNT’s recent article, “How to plan for life after death,” says the first step is having that conversation with someone you trust. It may be a close friend, a family member or an attorney.

Next, think about some important considerations like what you want in terms of a funeral service, burial or cremation, if you want life insurance to pay your last expenses and how your estate should be handled.

The National Institute on Aging has created a comprehensive list of considerations for those who are facing end of life decisions. It’s also a great resource for caretakers.

This planning will may make the process easier for those you leave behind, especially if you work with an experienced estate planning attorney.

There are also some fundamental decisions that can also ease the financial burden on your loved ones.

The average North American traditional funeral costs between $7,000 and $10,000. This price range includes the services at the funeral home, burial in a cemetery and the installation of a headstone at the cemetery.

The National Funeral Directors Association reports that the median cost to move the remains of a loved one to a funeral home in the U.S. is $325. Embalming can run about $725, and the average cost of a vault in the United States is $1,395, as of 2017.

According to the 2018 NFDA Cremation & Burial Report, the 2018 cremation rate is estimated to be 53.5%, and the burial rate is projected to be 40.5%.

Forbes says that roughly 42% of people opt to be cremated because of the costs involved with a standard funeral in the United States.

Reference: WHNT (June 30, 2019) “How to plan for life after death”

What’s the Latest News on Gloria Vanderbilt's Estate?

“It's just been revealed that Gloria Vanderbilt's estate is surprisingly small and that the heiress and designer left her New York City apartment to her eldest son, Leopold ‘Stan’ Stokowski, and her remaining money to her youngest son, CNN anchor Anderson Cooper.”

There are some new details about the estate of Gloria Vanderbilt, who died recently of stomach cancer. The heiress decided to divide her remaining assets among her children. Her estate planning is a reminder of the issues that many families must address and the importance of having your affairs in order, when you receive a difficult diagnosis.

Survivor Net reports in its article “Gloria Vanderbilt’s Estate and Anderson Cooper: Surprising New Details That Show How Important Estate Planning is on a Cancer Journey” that $1.5 million was left to Vanderbilt’s youngest son, CNN anchor Anderson Cooper. Her oldest son Leopold was given his late mother’s New York City co-op. Vanderbilt didn’t leave anything to her estranged middle son, Chris Stokowski.

When people hear that her estate was only $1.5 million, they’re surprised, since many believed the number was well over 200 times that amount. However, it really isn’t a surprise to Cooper, who said in a 2014 radio interview, “I don’t believe in inheriting money…I think it’s an initiative sucker. I think it’s a curse. Who’s inherited a lot of money that has gone on to do things in their life? From the time I was growing up, if I felt like there was some pot of gold waiting for me, I don’t know if I would have been so motivated.”

Vanderbilt was an heiress to a massive fortune. She was born into a trust fund with the equivalent of roughly $35 million in today’s terms. When she died, people thought Cooper would receive a similarly sizable fortune. Gloria Vanderbilt was estimated to have a net worth of roughly $200 million. However, probate documents have shown that Cooper will only receive $1.5 million, according to Page Six.

The 95-year-old Vanderbilt was diagnosed with advanced stomach cancer only about a month before she died, according to Cooper. While it’s likely that she’d already considered her estate planning, her very quick bout with cancer is an important reminder to those diagnosed that it can be wise to plan ahead.

While it can be challenging for patients and their family to think about financial planning while still reeling from a cancer diagnosis, the sooner it’s addressed, the less stressful it will be. You don’t want to delay until your disease and treatment have progressed, so that it’s taxing for your physical and mental energy. This would make thinking about finances even more undesirable.

Talk to an experienced estate planning attorney about the important documents you should have.

Reference: Survivor Net (July 8, 2019) “Gloria Vanderbilt’s Estate and Anderson Cooper: Surprising New Details That Show How Important Estate Planning is on a Cancer Journey”

What Are the Biggest Estate Planning Questions I Need to Answer?

“The word “estate” conjures images of great wealth, which may be one of the reasons so many people don’t develop estate plans. Afterall, they’re not rich, so why make the effort?”

However, if you have a family, you can probably benefit from estate planning, regardless of your asset level. The Montrose Press published an article, “Estate plans can help you answer questions about the future,” that answers some of the big questions:

What will happen to my children? As part of your estate planning, you should name a guardian to take care of your children, if you pass away. You can also name a conservator–sometimes called a “guardian of the estate”–to manage the assets that your minor children inherit.

Will there be a battle over my assets? If you fail to put a solid estate plan in place, your assets could be subject to the time-consuming, expensive and public probate process. During probate, your relatives and creditors can get access to your records. They may even challenge your will. However, with proper planning, you can maintain your privacy.

Who will control my finances and my living situation, if I’m incapacitated? You can sign a durable power of attorney. This permits you to name someone to manage your financial affairs, if you’re incapacitated. A medical power of attorney lets the person you choose handle health care decisions for you, if you’re not able to do so yourself.

Will my family feel cheated if I leave significant assets to charities? As part of your estate plan, you have options. You could establish a charitable lead trust. This will provide financial support to your chosen charities for a set period. The remaining assets will then go to your family members. On the other hand, a charitable remainder trust will provide a stream of income for family members for the term of the trust. The remaining assets will then be transferred to one or more charitable organizations.

Careful estate planning with the help of an experienced estate planning attorney can answer many of the questions that may concern you.

Once you have your plans in place, you can face the future with greater clarity, peace of mind and confidence.

Reference: Montrose Press (July 7, 2019) “Estate plans can help you answer questions about the future”

What Happens When the Family Fights over Personal Items or Artwork?

“The key to avoiding bitter conflict among heirs, is to have candid discussions well before the reading of the will.”

A few years after her death in 2014, Joan Rivers’ family put hundreds of her personal items up for auction at Christie’s in New York.

As The Financial Times reported in “Why an art collector’s estate needs tight planning,” a silver Tiffany bowl, engraved with her dog’s name, Spike, made headlines when it sold for thirty times its estimated price.

This shows how an auction house can generate a buzz around the estate of a late collector, creating demand for items that, had they been sold separately, might have failed to attract as much attention.

A problem for some art and collectible owners is that their heirs may feel much less passionately about the works, than the person who collected them.

A collector can either gift, donate or sell in their lifetime. He or she can also wait until they pass away and then gift, donate, or sell posthumously.

The way a collector can make certain his or her wishes are carried out or eliminate family conflicts after their death, is to take the decision out of the hands of the family, by placing an art collection in trust.

The trust will have the collector’s wishes added into the agreement, and the trustees are appointed from the family and from independent advisers with no interest in a transaction taking place.

Many collectors like to seal their legacy, by making a permanent loan or gift of art works to a museum.However, their children can renege on these agreements, if they’re not adequately protected by trusts or other legal safeguards after a collector’s death.

Even with a trust or other legal structure put in place to preserve a legacy, the key to avoiding a fight over a valuable collection after the death of the collector, is to have frank discussions about estate planning with the family well before the reading of the will. This can ensure that their wishes are respected.

Reference: Financial Times (June 20, 2019) “Why an art collector’s estate needs tight planning”

How Has the New Tax Reform Affected Charitable Giving?

“After years of strong growth, total charitable giving rose just 0.7% in 2018, according to a new report on philanthropy by Giving USA. When adjusted for inflation, total giving declined 1.7%.”

People typically don’t donate to charity because of tax benefits, but without it they’re likely to give less.

CNBC’s recent article, “Charitable contributions take a hit following tax reform,” reports that 2018 was the first time the effect of the new tax law could be gauged. The law eliminated or significantly reduced the benefits of charitable giving for many would-be donors.

In total, individuals, bequests, foundations and corporations donated roughly $430 billion to U.S. charities in 2018, according to Giving USA. However, while the giving by individuals dropped, contributions from foundations and corporations went up.

Even though the deduction for donations was unchanged in the Tax Cuts and Jobs Act, individuals still are required to itemize to claim it. That is now a much higher bar, because of the nearly doubled standard deduction.

Under the new tax reform legislation, total itemized deductions must be more than $12,000, which is the new standard deduction. That is an increase from the past $6,350 standard deduction for single people. Married couples need deductions exceeding $24,000, which is an increase from $12,700.

Because of this change, there will be fewer people who itemize their individual tax returns. The result is that many people won’t enjoy the tax benefits of their charitable contributions.

One analysis from the Tax Policy Center showed that the number of itemizers fell from to about 19 million under the new tax law. That’s’ a decrease of more than half, from about 46 million. At the same time, lower tax rates also reduced the marginal benefit of giving, the Tax Policy Center said.

Tax reform probably impacted the middle households that used to itemize the hardest, one tax analyst remarked. As a result, lower-income families reduced giving, a change that could be an issue for non-profits in the long term. The greater the revenue is concentrated in only a few sources, the greater the risk for these charities.

Another study from the Fundraising Effectiveness Project revealed that there was a nearly 3% increase in large gifts, defined as $1,000 or more in 2018. However, modest gifts between $250 and $999 dropped by 4%; and gifts under $250 decreased by more than 4%. In addition, the total number of donors declined.

Reference: CNBC (June 18, 2019) “Charitable contributions take a hit following tax reform”

Is Estate Planning Really Such a Big Deal?

“Your obligations to your family or loved ones do not stop, even if you have already passed on. If your family, especially your children, are still heavily dependent on you, you can still provide for them through proper estate planning, even if you are no longer present.”

Delaying your estate planning is never a good idea, says The South Florida Reporter, in the new article entitled “Why Estate Planning Is So Important.” That’s because life can be full of unexpected moments and before you know it, it’s too late. Estate planning is for everyone, regardless of financial status, and especially if they have a family that is very dependent on them.

Estate planning is designed to protect your family from complications concerning your assets when you die. Many people believe that they don’t require estate planning. However, that’s not true. Estate planning is a way of making sure that all your assets will be properly taken care of by your family, if you’re no longer able to make your decisions due to incapacity or death.

Without estate planning, a court will name a person—usually a stranger—to handle your assets and finances when you die. This makes the probate process lengthy and stressful. To protect your assets after you die, you need to have an estate plan in advance. You also need to address possible state and federal taxes. Your estate plan is a way to decrease your tax burdens.

With a proper estate plan, your final wishes for your assets will be set out in a legal document. With a will or trust, all of your assets will be distributed to your beneficiaries, according to your final wishes.

This will also save your family from having to deal with the distribution of your assets, which can become very complicated without a will. There can also be family fights from the process of distributing assets without a will.

 It is also important to remember that if you do create an estate plan, you’ll need to update it every once in a while—especially if there’s a significant event that happened in your life, like a birth, a death, or a move. Your estate plan should be ever-changing, since your assets and your life can also change.

It’s vital that you work with an experienced estate planning attorney, who can help you draft the legal documents that will make certain your family is taken care of after you pass away.

Reference: South Florida Reporter (June 12, 2019) “Why Estate Planning Is So Important”