Faith and Estate Planning

Using estate planning documents to instill religious values in heirs can be difficult.  Although the Illinois Supreme Court has upheld a trust which disinherited grandchildren who did not marry within their faith, the better strategy for ensuring religious adherence is to discuss faith based issues with heirs over time and to live life accordingly.  Related, clients with a strong faith need to be careful when executing living wills and health care powers of attorney top ensure compliance with their beliefs.   

Sports Blog Post II

Paul Daugherty of the Cincinnati Enquirer was gracious enough to allow me to guest blog again for him today.  Check out my ruminations on sports, OTR tours, and music, among other topics.

Estate Planning Mistakes

Forbes addresses 7 common estate planning mistakes. To me the highlights are:

1. Not having a plan. This is self explanatory.

2. Using an on-line or DIY service instead of a professional. Estate planning lawyers of years of experience to guide clients and help them make wise choices.

3. Not reviewing beneficiary designations to ensure that they meet current wishes and plans.

4. Leaving assets outright to adult children who might not handle them responsibly or who might not need them.

Planning Issues for Women

Because women live longer than men, they have differing financial and estate planning needs. Specifically, they should address the following issues:

1. They need to save more money for their longer lifespans.
2. If married, their spouse should use the joint life option for pension benefits.
3. They should consider the purchase of long term care insurance to pay for nursing home expenses.

This Can Not Be True

This sounds like either a late April Fool's joke or a solution for estate planners declining revenues.  After several UK residents had difficulty accessing the on-line accounts of a deceased relative, people have started including account passwords in their wills.  Because wills are public record, this solution seems worse than the problem.  Of course, attorneys would remain very busy if they revised wills every time someone changed a password.

The better practice is to empower the executor to access the accounts.  Additionally, a list of the passwords should be kept somewhere accessible after death.  

Inherited IRAs

Inherited IRAs survived a Congressional proposal to limit their duration to 5 years rather than the life expectancy of the beneficiary.

There are several issues that arise for the beneficiary:

1.  The rules for trusts receiving the benefits must be strictly complied with.  The advisor in the article has a more negative take on trusts as beneficiaries than I do.   The benefits of trusts as beneficiaries can be great and the compliance is not that difficult.

2.  Inherited IRAs should be re-titled after death to read:  "William Smith, Deceased (date of death) IRA F/B/O James Smith, Beneficiary.

Children With Drug Problems?

The Foxbusiness expert whiffed on advising a couple with children with drug problems. Sure, showing them a revised will that excludes them might make them stop using drugs, but the distant inheritance is most likely not an immediate incentive and eventually they will be disinherited and still have a drug problem. 

I prefer using a trust to hold their inheritance with the stipulation that it can not be disbursed until they are clean. I also would provide that their share can be used to pay for treatment programs. This type of provision is too complicated to administer solely through a will.

I prefer using a trust to hold their inheritance with the stipulation that it can not be disbursed until they are clean. I also would provide that their share can be used to pay for treatment programs. This type of provision is too complicated to administer solely through a will.

Long Term Care Insurance

Long term care insurance can be worthwhile to protect against high nursing home costs.  The insurance itself can be expensive.  Premiums have risen dramatically in recent years with several companies pulling out of the market.

For an individual, the key policy factors to consider are:

1.  Daily benefit.  $250/day should cover most costs.  
2.  Length of care.  3 years is the average stay.
3.  Protection against inflation.  5% increase is the most common policy provision, but also the most expensive.    

A policy provision that should be included is one paying for alternative care such as an in-home assistant.

Planning for Dementia

Apparently Mike Wallace was suffering from dementia at the time of his death.  Because it can never be repeated enough, an individual should have the following documents to enable his family to manage his affairs in the event he suffers from diminished capacity:

1. Health Care Power of Attorney
2.  Living Will
3.  Financial Power of Attorney
4.  Revocable Trust

Pets After Death

A woman's 1988 will specified that all of her pets were to be euthanized upon her death. Presumably, she was concerned about them being mistreated after her death.  When her trustee, 5/3 Bank, noticed that animal related charities were the primary beneficiaries of her assets, after talking with neighbors and friends they found a home for her healthy, 11 year old cat instead. They surmised that she would prefer a good home for the cat to euthanizing.

Two lessons can be learned:

1.  Clients should update their wills to reflect their current circumstances and wishes.
2.  Pet trusts can be used to provide for animals after the death of the owner.

Props to 5/3 for being humane.    

       

Avoid Time Shares!

Clients often ask my advice about buying time shares.  I almost always advise them to avoid the purchase unless they plan on using it regularly.  This article affirms that time shares rarely appreciate (in fact prices on some units are $1) and that annual maintenance fees are expensive (average is over $700).

Time to Make Gifts?

For clients with large estates ($5 million+), this is the year to make large gifts.  If the client is worried about needing the funds in the future, the client can make the gift in trust and have the spouse be a beneficiary of the trust (which indirectly benefits the client if the couple remains married) with the assets ultimately distributed to the children.    

The ability to make large gifts will most likely lapse next year due to changes in the gift tax law.

Removing a Trustee?

Beneficiaries of a large trust are unable to move the trust to a different trust company because the agreement they signed with the current trustee requires all 94 beneficiaries to consent to the change of trustee.  The beneficiaries are displeased because the bank has had poor investment returns.  The beneficiaries have sued the bank.

Several lessons can be learned:

1.  Trust documents should allow for the removal of a trustee by a majority of the beneficiaries.
2.  If the trust allows for separate shares for each beneficiary, that beneficiary should be permitted to select his own corporate trustee.
3.  In Ohio, poor investment performance is not grounds for removing a trustee in a lawsuit which makes lessons 1 and 2 more important.  

Children and Money

Jon and Eileen Gallo (yes, of those Gallos) offer advice on raising financially responsible children.   Seven characteristics shared by parents include:

• Being optimistic about changing money behaviors
• Valuing financial savvy and financial intelligence
• Thinking about the meaning of money in their lives
• Educating their children financially.
• Recognizing that their money deeds have a strong impact on their kids.
• Feeling that children should hear “no” and “enough” in terms of money education
• Wanting children to work for a sense of satisfaction as opposed to money.  

For more, check out their book, "Silver Spoon Kids"  which is indispensable to upper income families.