What a great accomplishment. After 18 wonderful (and quick years) your child is now off to start this amazing new chapter in their life. They couldn’t wait to get settled in their new digs. Perhaps off to explore a new city. And, at a school you both really like, perhaps for different reasons.
In fact, your college age child is also of legal age – although it’s hard to imagine them making all the adult decisions they will need to make without you. And, as such, your ‘parental rights’ in a legal sense, are effectively terminated. Well, they still need you to help with the finances and you have a good relationship – so –nothing to worry about – right ?
Wrong. Being legally independent gives your child a host of new rights and terminates ones you used to have. One important example of this is in the area of making medical decisions. Everyone knows that it makes sense to appoint a Health Care Agent when they do their Will. Most people prepare these documents later in life (usually after the children are born). But, what if something happened to your college age child (now legally an adult) and someone needed to make medical decisions ? Is it clear that you will be the one ? Without a properly drafted and signed Health Care Agent appointment, the answer is no.
But, what if something even worse were to happen. We all hope that another VMI incident never occurs. But, if it were to, chaos ensues. People rushing to an emergency room to find out the condition of loved ones. Surely the hospital personnel would speak to you and help you understand the condition of your loved one ? Not so. Federal law (HIPAA) has now tightened up medical providers’ ability to disclose confidential information about a patient without their prior consent. The fix is easy: A HIPAA Release. This pre-authorizes medical providers to speak with the named individuals about a patient’s condition. Also a form typically done later in life when one does one’s estate plan documents.
Why wait ? Why not begin to teach your children about keeping their affairs in order early by suggesting that they consider (as a legal adult) already appointing a health care agent to act on their behalf if they ever were to have a catastrophic accident and couldn’t speak for themselves ? And, while they’re at it – do a HIPAA Release so that not only Mom & Dad can get through easily to the nurses station to see how they’re doing – but – so too could grandparents or siblings.
These documents are easy to prepare and simple to make available in a time of need. Consider a trip to the family lawyer’s office when they’re home for holiday break and give them a gift of guidance around very important issues. And, for the college student reading this article – think about taking initiative yourself and contacting a lawyer to draw up these simple papers for you.
For more information, or to schedule an appointment for your college age child, contact info@squillace-law.com
Wednesday, July 22, 2009
Monday, July 20, 2009
Charitable Remainder Trusts May Provide Benefits
We’ve attached a worthy article about Charitable Remainder Trusts “CRT”). These are important vehicles that can help client’s accomplish life planning goals (like reduced taxes and enhanced retirement income planning) while at the same time benefiting their favorite charity or group of charities. It is one piece of a bigger puzzle that could fit into your own estate plan – depending on your overall goals and objectives.
Many people don’t understand CRT’s. Hopefully, this will help bridge that gap.
CRTs may provide benefits
Times Herald Record
by Laura Medigovich
Charitable remainder trusts are gifting vehicles that provide for two sets of beneficiaries, a current income beneficiary and a remainder beneficiary.
CRTs can also provide the donor with substantial income tax savings and estate tax savings as well. In a nutshell, the donor donates an asset to a charity through a trust. The charity sells the assets and invests the proceeds. The income beneficiary receives an income stream for a term, not to exceed 20 years. At the end of the term, the remaining proceeds belong to the charity.
For illustration purposes, let's assume you are 50 years old, and you have $1 million worth of ABC stock. You purchased the stock 30 years ago for $200,000. So you have a low cost basis (the amount you paid for the stock) of $200,000. If you sold ABC stock for $1 million you would have to pay capital gains tax on $800,000 ($1 million minus $200,000 minus your cost basis equals $800,000). The federal tax bite alone would be $120,000 ($800,000 x 15 percent = $120,000).
Provides income stream
Instead, you can create an irrevocable charitable remainder trust and donate the ABC stock to "favorite" charity through the trust. The trust sells ABC stock on behalf of "favorite" charity and invests the $1 million of proceeds at a 6 percent rate of return. For the next 10 years, you receive an income stream of $50,000 a year as the income beneficiary. At the end of 10 years, "favorite" charity receives the remaining principal assets from the trust, approximately $582,065.
The above example illustrates the many benefits the donor and charity receive through a charitable remainder trust. First, our donor would receive a federal income tax deduction based on the $582,065 (the remainder amount) the charity would receive at the end of the 10-year term. Second, by gifting $1 million worth of assets, the donor has reduced his or her taxable estate, therefore creating estate tax savings. Third, the donor has also created a stream of income for himself or herself. Of course the donor has also provided the charity with a sizable donation, which is good for everyone involved.
One of the major disadvantages with a CRT is that it is irrevocable. Which means once you have donated the asset, you have lost all claims to it. So you should be confident that you have enough other assets to live comfortably, before you make the donation.
This has been a simplified discussion regarding charitable remainder trusts. When it comes to CRTs, there are several variations on the theme, such as CRATs, CRUTs and NIM-CRUTs. Each has its own nuances. As with any estate planning strategy, it is important to consult with your attorney and tax adviser to determine which is best for you and your family.
Laura Medigovich is a financial planner and assistant vice president for M&T Bank's Hudson Valley region.
Many people don’t understand CRT’s. Hopefully, this will help bridge that gap.
CRTs may provide benefits
Times Herald Record
by Laura Medigovich
Charitable remainder trusts are gifting vehicles that provide for two sets of beneficiaries, a current income beneficiary and a remainder beneficiary.
CRTs can also provide the donor with substantial income tax savings and estate tax savings as well. In a nutshell, the donor donates an asset to a charity through a trust. The charity sells the assets and invests the proceeds. The income beneficiary receives an income stream for a term, not to exceed 20 years. At the end of the term, the remaining proceeds belong to the charity.
For illustration purposes, let's assume you are 50 years old, and you have $1 million worth of ABC stock. You purchased the stock 30 years ago for $200,000. So you have a low cost basis (the amount you paid for the stock) of $200,000. If you sold ABC stock for $1 million you would have to pay capital gains tax on $800,000 ($1 million minus $200,000 minus your cost basis equals $800,000). The federal tax bite alone would be $120,000 ($800,000 x 15 percent = $120,000).
Provides income stream
Instead, you can create an irrevocable charitable remainder trust and donate the ABC stock to "favorite" charity through the trust. The trust sells ABC stock on behalf of "favorite" charity and invests the $1 million of proceeds at a 6 percent rate of return. For the next 10 years, you receive an income stream of $50,000 a year as the income beneficiary. At the end of 10 years, "favorite" charity receives the remaining principal assets from the trust, approximately $582,065.
The above example illustrates the many benefits the donor and charity receive through a charitable remainder trust. First, our donor would receive a federal income tax deduction based on the $582,065 (the remainder amount) the charity would receive at the end of the 10-year term. Second, by gifting $1 million worth of assets, the donor has reduced his or her taxable estate, therefore creating estate tax savings. Third, the donor has also created a stream of income for himself or herself. Of course the donor has also provided the charity with a sizable donation, which is good for everyone involved.
One of the major disadvantages with a CRT is that it is irrevocable. Which means once you have donated the asset, you have lost all claims to it. So you should be confident that you have enough other assets to live comfortably, before you make the donation.
This has been a simplified discussion regarding charitable remainder trusts. When it comes to CRTs, there are several variations on the theme, such as CRATs, CRUTs and NIM-CRUTs. Each has its own nuances. As with any estate planning strategy, it is important to consult with your attorney and tax adviser to determine which is best for you and your family.
Laura Medigovich is a financial planner and assistant vice president for M&T Bank's Hudson Valley region.
Wednesday, July 8, 2009
Women, Wisdom, & Wealth: Being prepared means peace of mind
Here is a great little article from a paper down in Florida that stresses the importance of proper estate planning. I really like when she comments: “Over a decade ago as new residents of Southwest Florida, we educated ourselves on proper hurricane preparedness procedures. We took the necessary actions and implemented a plan. We share the details with family members and revisit our plan each year; just in case. The peace of mind of being prepared is priceless. In the event of an emergency the last thing we need is to be searching and scrambling for important documents or contact information. Instead we’re available to help our friends and neighbors.”
By DARCIE GUERIN
Macro Eagle
Tuesday, July 7, 2009
Last week you were introduced to my friend Grace who was recently widowed. She and her husband had the difficult conversations while he was alive and discussed what the future may hold if one of them were to pass. In doing this while he was alive, she was much better prepared to handle the financial responsibilities of widowhood. The rewards were most worthwhile and helped make a very difficult time a little bit easier for her to deal with. Below are a few practical financial matters to be dealt with by widows and widowers.
PROPERTY
How are your assets owned? Is everything titled as joint tenants with rights of survivorship (JTWROS)? If the answer is yes, transfers occur immediately, but this isn’t always the best choice. If property was owned as tenants in common it will go through probate. If property was owned by a trust, the terms of that trust will determine how the property will be distributed. If there is no will, you’ll need to go through probate. You’ll also need to identify ownership of and transfer titles of bank accounts, real estate, stocks, bonds, mutual funds and retirement plans. Call your lawyer and financial advisor for assistance.
LIFE INSURANCE
Be sure to contact the Social Security Administration, current and past employers and any life insurance companies to determine and obtain all benefits you may be entitled to. Don’t forget to check on military benefits if your spouse was in the service. This may be an overwhelming task so start with just one phone call at a time.
RETIREMENT
If you’re the beneficiary of your spouse’s plans you have several options and choices to make on how to receive the benefits. Start by contacting the custodian or trustee of the plan. The selections you make on how to receive these funds are critical to your future financial well-being, so be sure to consult a trusted financial professional for guidance. And don’t forget to update your beneficiaries on retirement plans and life insurance policies.
HEALTH INSURANCE
Coverage will depend on your age and your spouse’s employment status. If covered by an employee group plan you’re probably eligible for continued coverage at a cost through COBRA or you may qualify for Medicare.
TAXES
Seek professional tax advice and request IRS Publication 559 for survivors. You may file a joint tax return and claim an exemption for your spouse in the year he or she dies. If there was a life insurance policy owned by your spouse or if proceeds of a policy were payable to the estate, the death benefit may be included in the estate for estate tax purposes.
INVESTMENTS
Grace’s husband was a savvy investor. He enjoyed keeping up with the markets and monitoring their investments each day. Grace’s primary concern was to identify income sources and evaluate her expenses. Then she determined if the investments were suitable for her needs and risk tolerance. This allowed her to ensure that her immediate and longterm financial needs would be met. Again, it’s helpful to seek professional advice as you work through these choices.
As you can see, there are many important financial matters to consider. You’ll want to coordinate efforts among the team of professionals you already have in place. It’s much easier to develop these relationships over time rather starting from scratch during a crisis.
KEY PLAYERS
Here are a few of the key players in your important decision making: Financial advisor, accountant, attorney, employer’s benefit department and insurance agents.
Over a decade ago as new residents of Southwest Florida, we educated ourselves on proper hurricane preparedness procedures. We took the necessary actions and implemented a plan. We share the details with family members and revisit our plan each year; just in case. The peace of mind of being prepared is priceless. In the event of an emergency the last thing we need is to be searching and scrambling for important documents or contact information. Instead we’re available to help our friends and neighbors.
Lack of preparation is one reason many widows and widowers face financial hardship. It doesn’t have to happen to you. Give yourself the gift of organizing and arranging ahead of time. If you do experience the unfortunate loss of a spouse, at least you’ll be as ready as you can be. There’s no better time than now to take control of the things you can. And in the meantime, after you’ve done your homework, enjoy each other’s company.
Darcie Guerin, Financial Advisor & Branch Manager, Raymond James & Associates, Inc. located at 606 Bald Eagle Drive, Suite 401, Marco Island, and FL 34145 provides this article. If you have questions please contact Darcie Guerin via e-mail at Darcie.Guerin@RaymondJames.com. Phone (239) 389-1041, toll free (866)-343-0882 or at RaymondJames.com/Darcie. Past performance may not be indicative of future results.
Information contained in these postings is for educational purposes only. No warranty, expressed or implied, is made as to their use. No one should consider this legal advice. If you have a question about your own affairs, you should seek the advice of a licensed attorney.
By DARCIE GUERIN
Macro Eagle
Tuesday, July 7, 2009
Last week you were introduced to my friend Grace who was recently widowed. She and her husband had the difficult conversations while he was alive and discussed what the future may hold if one of them were to pass. In doing this while he was alive, she was much better prepared to handle the financial responsibilities of widowhood. The rewards were most worthwhile and helped make a very difficult time a little bit easier for her to deal with. Below are a few practical financial matters to be dealt with by widows and widowers.
PROPERTY
How are your assets owned? Is everything titled as joint tenants with rights of survivorship (JTWROS)? If the answer is yes, transfers occur immediately, but this isn’t always the best choice. If property was owned as tenants in common it will go through probate. If property was owned by a trust, the terms of that trust will determine how the property will be distributed. If there is no will, you’ll need to go through probate. You’ll also need to identify ownership of and transfer titles of bank accounts, real estate, stocks, bonds, mutual funds and retirement plans. Call your lawyer and financial advisor for assistance.
LIFE INSURANCE
Be sure to contact the Social Security Administration, current and past employers and any life insurance companies to determine and obtain all benefits you may be entitled to. Don’t forget to check on military benefits if your spouse was in the service. This may be an overwhelming task so start with just one phone call at a time.
RETIREMENT
If you’re the beneficiary of your spouse’s plans you have several options and choices to make on how to receive the benefits. Start by contacting the custodian or trustee of the plan. The selections you make on how to receive these funds are critical to your future financial well-being, so be sure to consult a trusted financial professional for guidance. And don’t forget to update your beneficiaries on retirement plans and life insurance policies.
HEALTH INSURANCE
Coverage will depend on your age and your spouse’s employment status. If covered by an employee group plan you’re probably eligible for continued coverage at a cost through COBRA or you may qualify for Medicare.
TAXES
Seek professional tax advice and request IRS Publication 559 for survivors. You may file a joint tax return and claim an exemption for your spouse in the year he or she dies. If there was a life insurance policy owned by your spouse or if proceeds of a policy were payable to the estate, the death benefit may be included in the estate for estate tax purposes.
INVESTMENTS
Grace’s husband was a savvy investor. He enjoyed keeping up with the markets and monitoring their investments each day. Grace’s primary concern was to identify income sources and evaluate her expenses. Then she determined if the investments were suitable for her needs and risk tolerance. This allowed her to ensure that her immediate and longterm financial needs would be met. Again, it’s helpful to seek professional advice as you work through these choices.
As you can see, there are many important financial matters to consider. You’ll want to coordinate efforts among the team of professionals you already have in place. It’s much easier to develop these relationships over time rather starting from scratch during a crisis.
KEY PLAYERS
Here are a few of the key players in your important decision making: Financial advisor, accountant, attorney, employer’s benefit department and insurance agents.
Over a decade ago as new residents of Southwest Florida, we educated ourselves on proper hurricane preparedness procedures. We took the necessary actions and implemented a plan. We share the details with family members and revisit our plan each year; just in case. The peace of mind of being prepared is priceless. In the event of an emergency the last thing we need is to be searching and scrambling for important documents or contact information. Instead we’re available to help our friends and neighbors.
Lack of preparation is one reason many widows and widowers face financial hardship. It doesn’t have to happen to you. Give yourself the gift of organizing and arranging ahead of time. If you do experience the unfortunate loss of a spouse, at least you’ll be as ready as you can be. There’s no better time than now to take control of the things you can. And in the meantime, after you’ve done your homework, enjoy each other’s company.
Darcie Guerin, Financial Advisor & Branch Manager, Raymond James & Associates, Inc. located at 606 Bald Eagle Drive, Suite 401, Marco Island, and FL 34145 provides this article. If you have questions please contact Darcie Guerin via e-mail at Darcie.Guerin@RaymondJames.com. Phone (239) 389-1041, toll free (866)-343-0882 or at RaymondJames.com/Darcie. Past performance may not be indicative of future results.
Information contained in these postings is for educational purposes only. No warranty, expressed or implied, is made as to their use. No one should consider this legal advice. If you have a question about your own affairs, you should seek the advice of a licensed attorney.
Thursday, July 2, 2009
Who would have thought?
When our Firm receives calls from three people (around the age of 50) in one day to suddenly get started with their estate planning, you know there has been a seismic shift in terms of how people think about this work. It’s not just for the elderly. It’s for everybody !
There are very few deaths that will garner more attention than that of a celebrity. Michael Jackson’s recent passing at the age of 50 is one such death that serves as a wake-up call. High-profile deaths often bring about interesting responses from people. In one day we witnessed two. Farah Faucett’s, though tragic, was not unanticipated given her battle with cancer. Michael Jackson’s however, was a surprise for most and a reminder that it can happen at any age.
From what we have been able to ascertain so far (simply by what is made publically available from court filings), Jackson’s Will is similar to the Wills we often provide our clients. It is known as a Pour Over Will and intended to place all of his assets in trust for the children and other beneficiaries in his Family Trust. The Family Trust was likely a Revocable Living Trust (which, if properly drafted, becomes Irrevocable at death.) If handled correctly, we should never know the detailed provisions of the Family Trust since it is not required to be filed with the Court.
However, depending on whether his Family Trust was ‘funded’ during his lifetime, will inform whether we learn more details about his assets. Typically people do not complete this funding process (which essentially involves re-titling of assets from one’s personal name to the name of one’s trust) and instead rely on the Pour Over Will after death to get the assets into the trust. This process is the Probate process that we all know about and usually try to avoid. We will not know for some time yet whether the Pour Over Will is actually going to be used to re-title assets into Jackson’s Family Trust. My guess is yes – and – it will cost the family considerable time and money with lawyers and other professionals to do this which is why we usually recommend to our clients to fully fund, and keep updated and funded, their trusts during their lifetime.
Concern about privacy is obviously important for celebrities – but – it is also important for families wanting to protect their loved ones from unwarranted solicitations from any number of vendors. Keeping details of a family’s finances out of the public eye is an important benefit to doing estate planning with these types of trusts – and funding them during your lifetime and keeping them updated. There is always the risk that somehow (from a beneficiary or otherwise) Jackson’s Family Trust could be leaked to the press and would become publically available anyway.
People have asked us: “What about his debts?” Revocable Living Trusts usually do not a provide any way to avoid debts you accumulate during your lifetime. (This can vary based on state law.) Generally speaking, you are your revocable living trust for purposes of creditors and therefore your debts are not extinguished at death. (There are other types of planning vehicles for asset protection that sometimes can address these issues.) A trust can, if properly drafted, provide certain creditor protections, remarriage protections and other types of protections, but only after the funds have been properly placed into that trust. Michael Jackson’s affairs will need to be put in order including selling property, paying debts, settling claims, etc. After that, any assets left will be available to his children and other beneficiaries through the terms of his Family Trust.
So, while Michael Jackson did indeed have a Will, it is still unclear how the trusts were set up and funded. We will not know for some time whether these were properly drafted to provide the important protections they should. We cannot stress how important it is to update your estate plan.
There are very few deaths that will garner more attention than that of a celebrity. Michael Jackson’s recent passing at the age of 50 is one such death that serves as a wake-up call. High-profile deaths often bring about interesting responses from people. In one day we witnessed two. Farah Faucett’s, though tragic, was not unanticipated given her battle with cancer. Michael Jackson’s however, was a surprise for most and a reminder that it can happen at any age.
From what we have been able to ascertain so far (simply by what is made publically available from court filings), Jackson’s Will is similar to the Wills we often provide our clients. It is known as a Pour Over Will and intended to place all of his assets in trust for the children and other beneficiaries in his Family Trust. The Family Trust was likely a Revocable Living Trust (which, if properly drafted, becomes Irrevocable at death.) If handled correctly, we should never know the detailed provisions of the Family Trust since it is not required to be filed with the Court.
However, depending on whether his Family Trust was ‘funded’ during his lifetime, will inform whether we learn more details about his assets. Typically people do not complete this funding process (which essentially involves re-titling of assets from one’s personal name to the name of one’s trust) and instead rely on the Pour Over Will after death to get the assets into the trust. This process is the Probate process that we all know about and usually try to avoid. We will not know for some time yet whether the Pour Over Will is actually going to be used to re-title assets into Jackson’s Family Trust. My guess is yes – and – it will cost the family considerable time and money with lawyers and other professionals to do this which is why we usually recommend to our clients to fully fund, and keep updated and funded, their trusts during their lifetime.
Concern about privacy is obviously important for celebrities – but – it is also important for families wanting to protect their loved ones from unwarranted solicitations from any number of vendors. Keeping details of a family’s finances out of the public eye is an important benefit to doing estate planning with these types of trusts – and funding them during your lifetime and keeping them updated. There is always the risk that somehow (from a beneficiary or otherwise) Jackson’s Family Trust could be leaked to the press and would become publically available anyway.
People have asked us: “What about his debts?” Revocable Living Trusts usually do not a provide any way to avoid debts you accumulate during your lifetime. (This can vary based on state law.) Generally speaking, you are your revocable living trust for purposes of creditors and therefore your debts are not extinguished at death. (There are other types of planning vehicles for asset protection that sometimes can address these issues.) A trust can, if properly drafted, provide certain creditor protections, remarriage protections and other types of protections, but only after the funds have been properly placed into that trust. Michael Jackson’s affairs will need to be put in order including selling property, paying debts, settling claims, etc. After that, any assets left will be available to his children and other beneficiaries through the terms of his Family Trust.
So, while Michael Jackson did indeed have a Will, it is still unclear how the trusts were set up and funded. We will not know for some time whether these were properly drafted to provide the important protections they should. We cannot stress how important it is to update your estate plan.
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