Washington Estate Planning

Will, or are, Adult Children Financially Responsible for Indigent Parents?

Some 30 states currently have laws making
adult children responsible for their parents if their parents can't afford to
take care of themselves. These “filial responsibility” laws have rarely been enforced, but six years ago
when federal rules made it more difficult to qualify for Medicaid
long-term care coverage, some elder law attorneys predicted that nursing
homes would start using the laws as a way to get care paid for.

There has been a recent stir in
Pennsylvania regarding one man being forced to financially care for his ailing
mother. As a recent Pennsylvania appeals court case dramatizes, many of us with
elderly loved ones receiving expensive care may just end up footing the bill.

The case is Health Care & Retirement Corporation of America v. Pittas
(Pa. Super. Ct., No. 536 EDA 2011, May 7, 2012), and the law at issue is a type
of “filial responsibility law” on the books in as many as 30 states. Both the
case and the law were addressed in a recent blog post titled “Son Liable for Mom's $93,000
Nursing Home Bill Under 'Filial Responsibility' Law.”

If you haven’t yet heard of
“filial responsibility,” it is the cornerstone of Confucius’ Analects, the
Bible, and much of modern estate law. That noted, in this Pennsylvania case and
the laws of numerous states, filial responsibility is a way to ensure someone
comes up with the payment.

In this Pennsylvania case, John
Pittas’ mother entered a nursing home after a car crash and later left both the
nursing home and the country once she recouped. She recovered well before
Medicaid was able to process her application and assume payment for the nursing
home. As a result, the nursing home saw $93,000 appear in its accounts
receivable column.

Rather than wait for Medicaid to
consider payment, the nursing home filed a lawsuit against Mr. Pittas for his
mother’s bill under the state’s filial responsibility law. Note: the nursing
home didn’t care that there were a number of family members – other children
and a spouse – and neither did the court. Why? Because under the doctrine of
filial responsibility, the nursing home could simply pick its target to receive
payment, and they chose John Pittas.

While this horror story is
specific to Pennsylvania law and its court system, the basic concepts of this
law and its application are shared by many states. It is important to note,
also, that this case only existed because Medicaid (or Medicare) hadn’t reviewed
and approved the bill. If Medicaid (or Medicare) had paid the tab, then the no
claim would have been established against John Pittas.

Reference: ElderLawAnswers.com
(May 11, 2012) “Son Liable for Mom's $93,000 Nursing Home
Bill Under 'Filial Responsibility' Law

Simple Community Property Protection Strategy

Despite [some] admitted shortcomings of
Community Property Divisions, they can be a fantastic asset protection tool for
those who currently have no significant debts or creditors, and have a strong
and lasting relationship.

In any marriage, and in any
relationship, there is going to be a question of what’s “his stuff,” “her stuff”
and “our stuff.” Question: how can you protect those assets that are not owned
solely by you or solely by your spouse, but rather by the two of you as “community
property?”

Community property is a unique
form of ownership between spouses in only nine states (AZ, CA, ID, LA, NV, NM,
TX, WA, and WI).. A recent article in Forbes
titled “Community Property and
Creditor-Debtor Law Explained” provides a
nice overview of the asset protection features of community property.

The article is not only
informative, but is also replete with color-coded charts. Basically, whenever an
asset falls into the category of “our stuff,” a community property couple should
consider a community property division. As a result, each spouse will own his
or her separate property, plus one-half of what was community property before
the division. From an asset protection perspective, doing so may reduce the
couple’s potential risk to creditors and litigation.

However, there are a number of
difficulties that can arise with this kind of planning. After all, you are
dividing assets long before any potential divorce or any estate property shift.
In other words, asset protection is a particular attitude with which to
approach planning more generally, and community property divisions have to be
understood in that context.

eference: Forbes (May
20, 2012) “Community Property and Creditor-Debtor Law
Explained”

Are Prenuptial Agreements in Vogue?

More people are getting married later in
life, or for a second or third time. As a result, they have more income,
assets, and obligations when they arrive at the altar. So it is no surprise
that prenuptial or premarital agreements are becoming a more frequent topic of
discussion among to-be-weds.

Regardless of who you are, what
you do, who your loved ones are, and what you own, planning for your family and
for your assets is a necessary and ongoing activity. Estate planning is a
process, not an event.

This is especially true when you
and your family situation happens to be a little more complicated than most. In
that case, proper planning is absolutely vital. What may be a trend for a new
generation of complexities and one that is making headlines anew, believe it or
not, is the prenuptial agreement.

The recent murmurs about
prenuptial agreements come like most financial news these days, by way of Facebook’s
newlywed Mark Zuckerberg. A recent article in CBS MoneyWatch titled, “Why Mark Zuckerberg needs a
prenup,” makes the case for his need for a
prenuptial agreement.

Zuckerberg and his millions (or whatever
his net worth) aside, the prenuptial agreement has its place in an era of mixed
families, divorces, remarriages, and all the other increasingly common family
structures today. In addition, as pointed out in the original article, people
are getting married later, or otherwise remarried, when they already have
complicated assets. Divorces aside, complicated assets often necessitate
complicated planning.

Reference: CBS
MoneyWatch (May 19, 2012) “Why Mark Zuckerberg needs a prenup

Alzheimer’s Miracle Cure on the Horizon?

In a clinical trial that could lead to
treatments that prevent Alzheimer’s, people who are genetically guaranteed to
develop the disease — but who do not yet have any symptoms — will, for the
first time, be given a drug intended to stop it, federal officials announced
Tuesday.

In today’s world, planning for
old age can be a challenge- both financially and legally. Additionally, supporting
an elderly loved one who is almost certain to be diagnosed with Alzheimer’s
becomes even more troubling.

Are you or someone you love at
risk for Alzheimer’s in the future? What if the disease could be “cured” before
it struck? There may be hope on the horizon, as reported in a New York Times
article titled, “New Drug Trial Seeks to Stop
Alzheimer’s Before It Starts.”

While nearly two years away from
having even preliminary data, researchers have isolated the genetic family
bearing the Alzheimer’s blueprint and are working on a new experimental drug
that could cure the problem before it strikes millions bearing the offending
gene. These breakthroughs take time.

In the meantime, it’s necessary
to make financial and legal plans as if the miracle drug won’t come to pass.
Accordingly, long-term care financing (e.g., long-term care insurance and/or
elder law planning) ought to be considered, along with implementing (or
refreshing) your most fundamental legal instruments (e.g., powers of attorney
and advance health directives).

As always, consult competent
financial and legal counsel before proceeding. This is not a DIY
(do-it-yourself) exercise. Too much is at stake.

Reference: The New York
Times (May 15, 2012) “New Drug Trial Seeks to Stop Alzheimer’s
Before It Starts”

Using Easements to Preserve Posterity Property

If you have property that you would like preserve
in its present form, there is nothing so close to a free lunch as the donation
of an easement. Out in the country, you will call it a conservation easement.
In the big city it is a facade easement. In either case, the principle is the
same.

Sometimes one of the greatest
charitable gifts you can bestow is the mere promise not to do anything with, or
to, what you own. Of course, this common conundrum occurs most frequently when
you happen to be sitting on a piece of history.

Whether the property is in the
country or in the city, the challenge is the same: how to protect the property
from development in perpetuity. Sometimes, however, the key is convincing the
IRS of the charitable value of the property itself. If you have an asset worth
this kind of consideration, and the hope to preserve it, then an “easement” may
be necessary.

In the city there are “façade”
easements, and in the country there are “conservation” easements. Both are
worthwhile means to a charitable end.

Consider Peter Reilly’s recent
post in Forbes, titled “Donating TriBeCa Facade
Easement Is Like Renouncing Your Super Powers,” about an
illustrative case in TriBeCa, Manhattan. The story highlights some possible,
practical complications that may arise when the situation seems too good to be
true. After all, an easement is a unique way of giving to charity and your
neighborhood, but only when the IRS agrees.

A practical concern, if
successful in obtaining the easement with IRS approval, is in finding a charity
to enforce your charitable gift and the easement of your property.

Ultimately, the end result may
be worth the work if you preserve your posterity property in perpetuity from
development in the hands of an inevitable McDonalds or Starbucks franchisee.
The charitable tax deduction can come in handy, to boot.

Reference: Forbes (May
7, 2012 “Donating TriBeCa Facade Easement Is Like
Renouncing Your Super Powers”

“Death Puts” May Secure Income and Estate Value

A little-known strategy called a 'death put'
can help you lock in higher returns -- without stiffing your heirs.

Are you concerned about the return
on your investments or the return of those investments en route to your heirs?
If yes, then you might consider an “estate put.”

When it comes to later-in-life
investments, yield and time can be unfortunate obstacles. In order to secure
the highest yield, you must make long-term investments. Unfortunately, when making
such long-term investments, fearing they’ll survive you and fall apart without
your guidance is common.

Fortunately, a recent SmartMoney article featured the “death
put,” or “estate-feature put,” as known in more dignified circles.

The article, titled “Yield-Hungry Retirees Turn to
'Death Puts,’” describes how the put is just a built-in device that
allows heirs to redeem the investment at face value and recoup all that went
into the original investment. You can find it on many investment vehicles, even
CDs purchased through brokers. Sound attractive? There’s more.

A “death put” can guarantee an
investor that an investment won’t eventually turn south or clutter up their
estate for their survivors, but it will still secure a decent yield (in a world
of low yields) today.

In substance and in form, “death
puts” are an add-on and, although comparable to a form of insurance, this means
they are subject to the manner in which your broker or investment company
writes them. Translation: the devil is in the fine print.

For more on “death puts,”
investment ideas, and some of the numbers involved, read the original article.
Regardless, this subject matter is another reminder for you to carefully
consider (and even reconsider) your investments in the context of your present
income needs and future wealth transfer to your heirs.

Like any strategy, a “death put”
should only be put in play after thoughtful advice and counsel from your team
of trusted professional advisors.

Reference: SmartMoney
(May 1, 2012) “Yield-Hungry Retirees Turn to 'Death Puts”

Helpful Advice for Non-Profit Entrepreneurs

These times are not only good for starting
“for-profit” enterprises, but they’re also good for starting non-profits. Here
are some easy steps to start a charity.

Giving to charity can be a
particularly taxing activity even when you’re doing it for all the right
reasons. Whether it’s picking the right charity or the right assets to give, it
can be a daunting task. If you haven’t found just the right charity, perhaps
you should consider starting one yourself.

Starting a charity is no walk in
the park. Worthwhile goals are rarely reached without a bit of elbow grease.
Still, for many business-savvy philanthropists, it’s not enough to think solely
about the goal and the gift; you’ve got to be the leading edge as well.

If your current challenge has
been bested or if you’re moving onto a second career, there are few things that
can beat the sensation of creating a thriving charity. That being said, you may
need some planning and advice. Why? A charity is essentially a business (with
extra effort and sans profit).

Never fear. A recent article in
Forbes titled “How To Start A Charity”
can help jumpstart the process and get your charity up and running.

Be sure to engage in competent
legal and tax counsel before you leap. There are plenty of landmines awaiting
the unwary that could impede on good your intentions.

Reference: Forbes (May
7, 2012) “How To Start A Charity”

Wealth Transfers Worries

Younger members of ultra-wealthy households
are grappling with their forebears for a say in wealth planning, and women are
concerned about how money affects their relationships, the study found, after
surveying 53 families with a net worth of $100 million or more earlier this
year.

Planning your wealth transfer can
be complicated. While there are many elements to consider, forgetting the
“family factor” could be detrimental.Obscure laws, politics, budgets,
financial markets, returns, etc., are all important elements of wealth
transfer. Unfortunately, for many planners, it’s a sad irony that they
oftentimes overlook the true object of the process – the inheritors. So, how do
inheritors factor into planning?

Financial Planning magazine recently weighed in on this issue with
an article titled, “Younger Inheritors, Women
Concerned About Pitfalls of Wealth.” The article featured the
results of a new survey by Campden Wealth and Morgan Stanley Private Wealth
Management. This survey examined multiple generations within high-net worth
families for their opinions on their family estates and their roles in planning
for the future. The results are telling.

79% of next-generation
inheritors responded that they wanted to be good stewards of the family wealth.
In fact, they want more involvement in the finances. Although these respondents
diverged regarding what they would do with the investments, most were
enthusiastic.

It’s clear that families
planning for wealth transfers should consider bringing the inheritors to the
table sooner rather than later. The educational opportunity is profound when an
interest is present.

Interestingly, 79% of female
inheritors indicated concern over how the impact might affect them. They also
expressed concern over potential mismanagement of wealth outside of their control.
Education is certainly essential regardless of gender, but perhaps more so for females.
Traditional stereotypes still remain relevant.

In either case, the biggest
takeaway from the original article is this: today’s inheritors are eager for
information and inclusion.

Whether your estate is monstrous
or modest, when it comes to the ultimate inheritors, a little foreknowledge will
go a long way toward ensuring the success of your wealth transfer.

Reference: Financial
Planning (May 8, 2012) “Younger Inheritors, Women Concerned About
Pitfalls of Wealth”

ELDER LAW

Increasingly, my friends and I -- most of us in our mid- to late 50s --
are starting to see the same thing: elderly parents who are grappling with
memory loss and finding it difficult to manage their finances. And most of us,
I'm learning, are making the same mistake: we're waiting too long to act.

Baby Boomers are discovering
that one of life’s most difficult passages is when the child becomes the
caretaker for his or her parents. Tough subjects and hard choices can leave us
paralyzed when we need to act quickly.

Communication, early and often,
is critical.

The primary problem with
understanding and caring for elderly loved ones lies in recognizing a
deteriorating mental condition. Alzheimer’s, for one, affects one in eight
persons over the age of 65. Simple dementia, on the other hand, is difficult to
define, but far more Americans within that age group suffer from it.

If your elderly loved ones may
be susceptible to Alzheimer’s or dementia, there are certain warning signs to
recognize and steps to take. While there is no consensus on exactly how to
approach the problem, a recent SmartMoney
article titled Talking to Mom About Alzheimer’s and Her
Money provides some practical advice on understanding and discussing
the problem.

Simply put, there are red flags
that cannot be ignored. It is necessary to address this subject with your
elderly loved one and begin to take steps to provide for their interests and
care. At a minimum, make sure fundamental legal documents are signed while your
loved one is mentally capable of understanding. Such documents should include
Advance Health Directives, a Living Will, a Financial Durable Power of Attorney
and a Last Will.

Here’s the bottom line: if you
and your loved one wait too late to have “the conversation” and take action,
then the result may be unnecessary legal fees, courts and costs.

Reference: SmartMoney (May 7, 2012) Talking to Mom About Alzheimer's and Her
Money

Estate Planning Challenges In The Face Of Uncertainty

The current scheduled changes in the estate
and gift tax rates and exemptions have me struggling to come up with some good
titles for people with a net worth of $4 to $15 million. How about
“midmillionaires,” or “midmills” for short?

In the upcoming year many
favorable tax laws are set to expire, and the political winds are blowing with
great uncertainty- especially as the election season heats up. Estate planners
in particular find themselves on shifting sands when it comes to reading the
tea leaves for their clients.

Who do estate planners think are
most susceptible to the legal and tax currents this year? Peter Reilly at Forbes has given them a name: the “midmills,”
short for the “midmillionaires.” According to Reilly in his article titled Beating The Possible Estate Tax Increase
Without Switching To Cat Food - The Midmill Dilemma, this group of
taxpayers has a fairly high net worth- somewhere between $4 and $15 million.
So, what kind of estate planning should they pursue? After all, the current
exemption amount to the estate tax, which is unified with your lifetime gift
exemption, is only set at $5.12 million until December 31, 2012. Unfortunately,
next year is uncertain.  

The good news is that Peter
Reilly is not one to just acknowledge problems. He’s a census-taker too. Consequently,
Reilly has compiled the opinions of various Forbes
columnists and has weighed in himself. At least one thing is clear: no one is
certain about “Midmill Dilemma.” In the end, the dilemma comes down to you,
your risk aversion, and the kinds of assets you have.

Regardless of whether one has a few
millions at stake or not, we’re all in the same boat. Proper estate planning is
a necessary tool for everyone, even when we’re not sure what Congress will
throw at us.

Reference: Forbes (May
2, 2012) Beating The Possible Estate Tax Increase
Without Switching To Cat Food - The Midmill Dilemma