Respect at the End of Life

Do you sense a theme here?

This topic is one that I have thought about often and researched, and I have some very specific and personal thoughts, which I feel compelled to share.  There is certainly a legal component, but also deep and philisophical aspects.

As part of a complete estate plan, clients will execute a Heath Care Proxy. This document appoints an agent who is authorized to make health care decisions in the event of incapacity of the principal.  

The Health Care Proxy, however, is limited in that it focuses strictly on medical care, but not on other wishes you may have regarding your care as you near the end of life.   It is just as important that your agent and others close to you understand your wishes with respect non-medical matters.    It is crucial to have meaningful discussions with those on whose behalf you will be making decisions.  There are many decisions to be made that go beyond an understanding of strictly medical matters.

Just as important as the medical care is an understanding of what the patient wants toward the end of life.    While the patient is still mentally competent, ask the patient:  What is your understanding of the situation and its potential outcomes? What are your fears and what are your hopes? What are the trade-offs you are willing to make and not willing to make? What are your priorities beyond merely being safe and living longer?  And what is the course of action that best serves this understanding?

These questions, and the  responses to them,  help the agent and the family understand the wishes of the patient separate and apart from the strictly medical realm.  When does a patient cross the line from quality of life, to no quality of life?  If quality of life exists, the patient may wish to continue treatment in order to maintain that quality.   Quality of life means something different to each indivudual.  Of course, the severity of the treatment must also be considered—will the treatment be so invasive or painful that quality of life is compromised?   The decision is different for everyone, and it is crucial to understand not only what medical procedures are to be withheld or provided, but also to understand the patient’s fears, hopes and goals as they progress to the end of life. 

Ultimately, everyone hopes for a good death, a death with dignity.  Understanding the patient’s philosophies, fears, hopes, goals, and how to implement those, will guide the agent and the family when faced with making some very difficult choices. It is not only about medical interventions, but also about the decisions one must make in respecting the wishes of the patient.  It is about death with dignity, however defined for each individual.

Ethical Wills

A typical estate plan includes, among other documents, a Health Care Proxy which guides the appointed agent in making decisions about end of life care. This document, however, is strictly legal in nature and does not allow the principal to express any other thoughts and wishes. 

Many who take the steps to establish an estate plan ruminate over how to communicate matters  important to them other than those strictly financial.  This may be done by an Ethical Will.

Unlike a "living will" or "last will and testament," an Ethical Will isn't a legally binding document. It could be a letter—ranging from half a page to a bound book—or a video recording, addressed to those parties with whom you wish to share it. There are no rules governing what goes into it, or when the contents should be shared with the heirs, but the idea behind it is simple: Convey values, not valuables.

Ethical Wills are becoming more common as a way to express non-legal thoughts. It is a letter or document in which you can set out other things that are or have been important to you during your life.

The Ethical Will is written for the benefit of the heirs, but the process can be very cathartic for the author as well.  The author has the opportunity to reflect on his life in ways he might otherwise never do.

Ethical Wills may take many forms.  One verson might be more formal, and include any or all of the following items, or any others not listed here with are important to you:

Your history, past and present.

            Your earliest memories and childhood.

            Your teenage years.

            College years.

            Early Adult years.

            Marriage.

            Children.

            Grandchildren.

Work

Travel

Your later years

Personal Values and beliefs

            At different points of your life, and why?

            What values resonate with you?

            What values are most important to you?

            Who taught you these values?

            What values do you wish to see in others around you?

            What values do you wish to leave to others?

Your hopes for the future

            Hopes and dreams for loved ones

            Family traditions to be continued

            How to help others     

            How to do good in the world?

            How to make a difference?

            How to find peace

Life lessons and achievements

Growth from losses and failures

Achievements and accomplishments

Gratitude:  what are you thankful for, and why?

Advice to your family and friends

Personal values and beliefs

Any closing thoughts

Another version may be more informal, and simply be an enumeration of things you would want others to remember about you.

In simplest form, an Ethical Will talks about quality of life issues, what constitutes a “good death”, and when that good death should be allowed to happen.  It provides guidance to your Health Care Agent which, in the context of a grave or terminal condition, expresses at what point you feel your quality of life would be so compromised, or non-existent, so that you wish further treatment to be discontinued.   In making such decisions, you might discuss with your doctor, and/or your loved ones, what fears you have, what your priorities are,

Ultimately, it can be whatever you choose it to be.  It may provide history, thoughts, feelings and hopes about your life and those you hold dear.  is a gift to your loved ones.

The Gifts that Keep on Giving

I often work with seniors in putting together estate plans designed to see them through the rest of their lives.  Their goals are diverse, and my job is to help them put their affairs in order as they choose. In addition to executing the documents appropriate for that stage of life, however, there are other things seniors can to do ensure the orderly administration of their estates.  Customarily, each spouse will name the other as the Personal Representative of their estate, so the surviving spouse will be charged with that responsibility after the loss of the first to die.  After the death of the survivor, most commonly one or more of the children are named as Personal Representative(s), and will be responsible for the administration and probate of the estate of one, and possibly two, parents. There are, as I call them, three gifts that parents can give their children to make the administrative process easier when the time comes. 

 First, the parents can do what is known as “pre-need funeral planning”.   The parents make all arrangements in advance, from choosing a funeral home, to arranging for burial or cremation, to the selection of items such as a casket or urn, an officiant, the type and location of a funeral or memorial service, a wake or shiva, and all other matters that are important to them.  The parents pay for all in advance, so upon their passing, everything is already in order.  This takes an enormous burden off of the children who are otherwise faced with making many choices very quickly at a time when they may not be in an emotional condition to make rational decisions.   There is also no need to worry about having access to sufficient funds to cover the costs of a funeral.    

The next gift the parents can give their children is to keep accurate, organized and complete financial records in one location so that the Personal Representative doesn’t have to wander through stacks of random paperwork to determine what mom or dad owned at death.  I have an image in my mind of an incredibly disorganized client whose random bank statements, stock certificates, investment account information, retirement account statements, life insurance policies and who knows what else (you get the idea) are bursting out of drawers all over the house.  The assembly and unraveling of all of that information will be like the most frustrating treasure hunt the searcher will ever experience.  So even if you are the most disorganized pack rat known to man, give your children the gift of breaking that habit, at least for these purposes.

Finally, I often tell my senior clients that one of the greatest gifts they can give their children (with tongue in cheek) is to “clean the attic”.  Often parents have been living in the same home for decades and have amassed a staggering collection of items that they have not thought of in almost as long.  When the time comes that the children must clean out the house, the job will be far more challenging if nothing has been done to purge in advance.  Many professional organizers offer services to help seniors assess and dispose of ancient and unwanted items, so that dismantling the home will be more manageable for the children later on.  Of course, this does not apply to the antique tiffany lamp sitting in the attic for three decades that two of the children suddenly both want and will fight over for weeks, nor does it apply to the situation where the children each put a colored sticker on various items around the house in order to lay claim to them.  (All true stories, and it amazes me sometimes what happens to sibling relationships when it is time to divide up mom and dad’s personal property.)  That aside, there is no doubt that the attic and basement will be stuffed with long-forgotten items that can be disposed of in an organized purge with the assistance of a competent professional organizer.

I urge seniors to consider whether they wish to address these “gifts”.  Any or all of the above will be greatly helpful to those you leave behind. Unless, of course, you have “ungrateful children” and want to make them work as hard as they can on purpose.  This is the last gift you can offer to your children, from the grave.

But I Don’t Like or Trust My Child’s Spouse! Trusts, part two

In the post immediately prior to this post, I discussed the use of a trust to prevent a spendthrift child from squandering his or her entire share of the parents estate.  This form of trust has another purpose as well.

Consider the situation where mom and dad really dislike or do not trust their child’s spouse (for fun, let’s call him or her the “evil spouse”).  They don’t want the evil spouse to have access to their child’s share, lest the evil spouse divert those assets and use them for purposes that Mom and Dad never intended.  Customarily the parents intend that the child’s share pass on to the next generation at the death of the child, but if the evil spouse can access the assets, he or she may have other ideas.  So what are Mom and Dad to do?

The answer again is to establish a trust for the benefit of their child.  Such a trust will be substantially the same as the one described in the last post.  While the purpose of a trust for a spendthrift child is to protect against inappropriate spending, the purpose of a trust in this case is to keep the evil spouse from getting access to the assets so long as they remain in the trust.  The evil spouse will have access only to those assets which have been distributed outright to the child.  The child has the option to maintain assets in trust to keep the assets beyond the reach of the evil spouse.   This will prevent the evil spouse from commandeering the assets meant for the child.  Mom and Dad will rest much easier knowing that the evil spouse only has access to the trust assets to the extent their child chooses to request outright distribution, and one can only hope that the child has the wherewithal to prevent the evil spouse from spending the assets in ways that were not intended.

The Spendthrift Child: Trusts Part One

I often work with clients who have adult children, and as is typical, wish to leave their estate to their children in equal shares.  Customarily, at the death of both parents, the shares for adult children will be distributed to each outright, free and clear of all trusts.  But sometimes one of the children is financially irresponsible, and the parents are uncomfortable simply handing over that child’s share of the estate outright.  There may be concern that the child will not manage his or her share responsibly or in the way that the parents intended.   So how do parents of such a child protect that child’s share of the estate and prevent such events from occurring?

The answer is  for the parents to create a trust, and maintain the share for the spendthrift child in that trust for the life of the spendthrift child as beneficiary of that trust.  Most often, the trust will be in the form of a testamentary trust contained in each parent’s Will.  Upon the death of  the second parent, the share for the spendthrift child will not pass outright, but instead will pass to the trust established for his or her benefit.  The trustee appointed to oversee the trust will have the authority to make distributions of income and principal to the beneficiary, in the trustee’s discretion for the “best interest and general welfare” of the beneficiary.  The trustee may release trust assets to the spendthrift child for purposes consistent with the language of the trust and has broad discretion to do so. 

The parents must appoint a trustee to manage and distribute trust assets according to the foregoing standards.  If the siblings have a good relationship, the parents may appoint one of their other children as trustee, knowing that the trust assets will be made available to the beneficiary for appropriate purposes without acrimony.  If the parents are concerned about straining the relationship among their children, however, naming one child to act as trustee for another may be a poor choice.  In that case, the parents might identify an independent person or corporate trustee to serve.  Such a trustee is likely to be more conservative about making distributions only according to the specific language of the trust.

Whatever the terms of the trust may be, the establishment of a trust to hold the share of a spendthrift child is an effective way to ensure that the spendthrift child will not fritter away the whole share in ways that are inconsistent with the parents’ intentions.

End of Life Care: Part Three

I have written twice previously about the important topic of discussing the subject of end of life care with aging seniors, a significant concern for those approaching the end of life and and those who care for and love them.  The discussion of this subject has, apparently, "gone viral", and this is a positive thing.  The topic that previously we rarely heard about in the context of estate planning, medicine and other relevant places is now everywhere.  Why the sudden global interest?  Whatever the case, the issue is being discussed in many different contexts.  Things are changing for the better. 

Seniors age 65 and older are entitled to Medicare coverage, which provides health care insurance to the older population during the last years of life.  And as I have discussed, in addition to strictly medical concerns, several other factors contribute to an assessment of whether patients are getting the care they want or need as they approach the end of their lives.  In many cases, the wishes of those patients are unmet.

To the credit of the Centers for Medicare and Medicaid Services, as of 2016, Medicare will begin covering advanced care planning, including discussions between physicians and other health care professionals and their patients regarding end-of-life care and patient preferences.  

I am encouraged that the populations of seniors approaching the end of life are finally being afforded the consideration and respect they have long deserved but not always received.

We all die.  Wouldn't it be nice if we could all express our philosophies and our wishes in a meaningful way, and be heard, so we can die with dignity, just as we have lived?

Testamentary Trusts

A testamentary trust is an estate planning tool whereby a trust is established through a testator’s will, and comes into effect when the testator dies.  In the past, absent a particular circumstance, clients were advised to avoid testamentary trusts for several reasons.  The Will would have to be filed for probate in order for the trust to take effect.  The court would then have continuing oversight of the testamentary trust, and the trustee was required to provide the court with annual accounts.  In order to avoid the ongoing administrative obligations and costs of probating an estate and managing a testamentary trust, most often estate plans would avoid testamentary trusts and instead include a “pourover trust”.  The testator’s will would provide for the estate to “pour over” into a separate trust over which the court would have no authority or supervision.  The pourover trust might contain essentially the same provisions as would the testamentary trust, but would be administered privately without the court’s involvement. 

Under the new Massachusetts Uniform Probate Code, testamentary trusts have come back into favor. The Court no longer has continued supervision over a testamentary trust, and the previous administrative obligations no longer exist.    With the relaxing of the former requirements, testamentary trusts will often be a more simple, direct and appropriate method for leaving estate assets in trust.

It should be noted, however, that although testamentary trusts may be a simpler yet equally effective method of trust planning, it will be necessary to file the will for probate in order for the provisions of the testamentary trust to be implemented.  If probate avoidance is an important component of a client’s wishes, a testamentary trust will not be the proper vehicle.  Rather, to avoid probate, all assets must be held in non-probate form, and the pourover trust will continue to play an important role in achieving the goal of probate avoidance.  Under the new MUPC, however, testamentary trusts have regained favor and are often the estate planning vehicle of choice.   

Irrevocable Life Insurance Trusts

Under federal and state estate tax laws, the face (payout) amount of a life insurance policy owned by an individual will be included in the taxable estate of such individual at death if the policy is owned in the name of the insured during his or her life.  If the life insurance policies have substantial payout amounts,  the decedent’s taxable estate may exceed the allowable estate tax exemption.  If life insurance policies represent much of the taxable estate, a Irrevocable Life Insurance Trust (ILIT) is a good tool for removing the face amount of a life insurance policy from the taxable estate of the insured. 

The ILIT is created to own the life insurance policies in its name, and is also named as the beneficiary of any policies owned.  Upon the death of the insured, the proceeds of the policies on the life of the insured will be paid to the ILIT and held by the ILIT in accordance with its terms.  Generally the ILIT requires that the proceeds of policies owned by the ILIT are held for benefit of the surviving spouse. Distributions may be made to the spouse only at the discretion of the Trustees.  Upon the death of the surviving spouse, the terms of the ILIT will govern the division and distribution of the assets in the Trust.  Most commonly, upon the death of the surviving spouse, the proceeds will be distributed to children according to the terms of the ILIT, though any successor beneficiary may be named if there are no children to receive a share.  By using an ILIT, the policy proceeds will not be included in the taxable estate of either the insured or the surviving spouse.

If you are applying for new life insurance and have established an ILIT, the application should be made by the ILIT rather than by the individual.  When the policy is issued, it will be owned by the ILIT, and In that event, the tax protections of an ILIT are immediately available.   If you transfer already existing policies into an ILIT, there is a three year waiting period before the transfer is deemed complete.  If the insured dies within that three year period, the proceeds of the ILIT will come back into his/her estate.

It is important to note that or an ILIT to be effective, the policy owner must give up all “incidents of ownership” in the policy. Thus, an independent third party trustee must be named to take active responsibility and control at inception.  it is important to name a trustee with whom the surviving spouse will feel comfortable since the Trustee controls the payout of trust assets.  It is prudent to name at least one successor trustee in the event the initial trustee is unable to serve.  Because of the potential length of time the ILIT may exist, it is prudent to select a younger person as trustee to ensure they will be able to serve for the duration, and to name a series of successor Trustees to avoid a complete vacancy in that office.

The Trustee will be responsible for all administrative duties.  One such duty is the payment of annual premiums on the policy.   When a premium is due, the insured may not pay the premiums directly. Instead the insured must make a “gift “ in the amount of the premium to the ILIT, and the Trustee will then pay the premium from that gift.   To comply with gift tax laws, the beneficiaries are entitled to withdraw a portion of the gift within a 30 day period after the gift is made.  These are known as “Crummey Powers”.  The trustee must send written notices to each beneficiary of the gift made and the right of withdrawal.

Although there are great advantages to using an ILIT to own life insurance policies, there are certain downsides:

1.       An ILIT is irrevocable. The insured surrenders all control over the policies and any other contributions made.  The settlor of the trust cannot change the beneficiaries, cancel the policies, borrow against the trust, or otherwise alter the provisions of the trust if circumstances change, nor can anyone compel the Trustee to do any of those actions.  

2.       If an existing policy is transferred to the Trust less than three years prior to the death of the insured, the ownership of that policy will revert back to the estate of the insured and the face amount thereof will be includible in the calculation of his or her taxable estate.

3.               The beneficiaries are given a mandatory withdrawal right which could result in the exercise of that right in opposition to your intent.

4.               The surviving spouse as beneficiary of the ILIT does not receive the policy proceeds free and clear, but instead must work with the independent trustee on matters of management and distribution of trust assets.

Notwithstanding these limitations, an ILIT it is widely considered to be a worthwhile tool in estate planning as a very effective way of reducing the size of a taxable estate, thereby reducing estate taxes by a substantial amount.  

What do I Tell My Heirs?

When a client completes an estate plan, I am often asked whether they should give a copy of the documents to their children, or otherwise share the content.  Unless there is close relationship or unusual circumstances, I generally advise the client not to do so.  I do recommend that they give a copy of the Durable Power of Attorney and Health Care Proxy to both the primary and the alternate appointees, because those are documents that might have to be accessed quickly in the case of sudden illness or catastrophe. But otherwise,  I encourage clients to keep the contents of the other documents to themselves.  Even if assets are distributed equally among children, one may be appointed in a fiduciary role, which may insult another child.  One child may feel that he or she is entitled to more than their equal share.  One may have special needs that warrant giving such child a larger share of the estate.  There may be an asset (such as a vacation home) which some children want but others don’t.  Any or all of these, and many other circumstances, may create ill will among the children that the creator of the plan would rather avoid. There are myriad circumstances that warrant keeping the information private until death, so that the children have no opportunity to influence a parent to make changes during life time.  It is best to make your own assessment, and you may determine that keeping the information to yourself is the best course of action.

It's Time To Have That Talk

As parents age, many families still have difficulty discussing end of life care.  Adult children don't like to think of their parents as mortal, and if they refuse to have the discussion, maybe mom or dad will never die.   Unfortunately, this is not true.  Perhaps the adult children feel that such a discussion is unnecessary.  Perhaps they are just too busy to find the time.  But many adult children become caregivers for their elderly parents, either physically, by having mom or dad move in with them, or administratively, by ensuring that mom and dad get the needed care elsewhere, such as in assisted living, or home with a caregiver.  It is very important for adult children to sit down with mom and dad and discuss a couple of things.  One is end-of-life care in the event of a terminal illness-- what medical interventions would they want, and not want, as they see the end of their life?  For this, a Health Care Proxy is an invaluable tool on which the adult children can rely for guidance, but it is no substitute for the conversation.  The other major topic is burial and funeral wishes.  Some wish to be buried in a plot, others wish to be cremated.  Some would like a funeral or memorial service, others do not.  Some would like visiting hours or shiva, others would prefer to skip those things.  By having the discussion with elderly parents ahead of time, when mom or dad passes away, the children will not have to guess what to do, especially at such an emotional time.  Most funeral homes offer advance arrangements, such as identifying a burial plot and discussing the type of services that will be needed.  This is difficult stuff, and losing a parent might be one of the greatest emotional challenges an adult child will ever face, but it is a gift you can give both to your parents and to yourself if you are armed with this information in advance. 

Estate Planning for the Childless

According to an August 2013 report from AARP, 11.6 percent of women ages 80 to 84 were childless in 2010. By 2030, the number will reach 16 percent. By 2010, the caregiver support ratio was more than seven potential caregivers for every person over 80 years old. By 2030, that ratio is projected to decline to four to one. By 2050, it’s expected to fall to three to one.  Children usually provide about 70 percent of long-term care.  But for those without children, alternate plans must be made.  The following article from the New York Times discusses those alternates.  http://www.nytimes.com/2014/02/15/your-money/the-childless-plan-for-their-fading-days.html?smid=fb-share.

Estate Planning in the Digital Age

Since the beginning of time, estate planning in some form has existed as even our biblical ancestors thought out which assets to leave to which individuals.  In recent times, planning has primarily involved the transfer of real estate, financial assets and personal property by will or trust.  As we have entered this new digital age, however, it behooves us to consider not only our tangible assets, but also our digital assets.

To begin with, most people these days keep information about assets in digital form.  Each of these accounts will be password protected, so the Personal Representative (PR) of the estate must have the passwords in order to access these accounts.  For this reason, the principal should keep a list not only of what assets they own, but also of the passwords for any and all accounts or assets that are accessed in digital form.  This list must, of course be kept in a safe place such as a jointly owned safe deposit box, a password protected document, or other secure location.

In addition to online information about assets, many people are now opting to receive bills only in online form and not by paper and mail.  This can result in bills not being paid if the PR is unaware of those bills, possibly accruing substantial late fees and interest or even having utilities shut off.  For that reason, it is also important that the principal maintain a list of all paperless bills, and passwords for each, so that the PR can be sure to pay any liabilities of the decedent without adverse effect. 

Further, some digital assets may have monetary value, such as online photos taken by a photographer, writings of an author, and the like.  It is suggested that the owner of such assets hold title in the name of a revocable trust to avoid the issue of probating the digital assets, which can be challenging.

Finally, there is the issue of social media.   Facebook, Twitter, LinkedIn or other accounts may continue life long after the person is deceased.    The PR should have the passwords to those accounts as well, so that they may be terminated once the owner is deceased or at some appropriate time thereafter.

So the message here is important.  Just as you should maintain a list of all tangible assets so that the PR may best administer your estate, so should you keep a list of all digital assets, accounts and other such items, with passwords, so that the PR will be able to locate and access all such assets and accounts for the most orderly management of your estate.

Get Your Affairs In Order

I recently heard a story from a couple in their 80's that struck me as interesting.  Though in relatively good health, they each have their maladies and one has started to develop some more serious health issues.  They recounted that in a recent visit to their primary care physician, in addition to the medical exam, the physician initiated a conversation with them about end-of-life issues.  "You are nearer to the end than to the beginning", said the physician.  "Do you have all of your affairs in order, including estate planning, burial wishes and arrangements and the like?"  I was taken somewhat aback, but quite pleased,  by this story, as it had not occurred to me that this was advice that would come from a physician.  I was happy to hear that the physician was advising the couple on how to prepare for their end not only in a medical context but in an overall life context.  I commend this physician on doing so and hope this is a common practice in geriatric medicine.

As I have often said, particularly to elderly clients, putting your affairs in order, having a complete estate plan, and sharing your wishes for end-of-life care with your loved ones are all immense gifts you can give to them.   As children and grandchildren must mourn the loss and adjust to life without their loved one, it is an additional burden to have to go on a treasure hunt to gather information about the estate of the deceased and deal with a disorganized probate process to transfer assets.  It is also imperative for parents of minor children to establish guardianships and a method of managing assets for the benefit of the children while they are young.  For this reason, I highly recommend that everyone, regardless of age, take the time and effort to establish an estate plan that will allow for the orderly administration of an estate in the event of a loss.   Life is precious but fleeting, and one never knows when it might be taken, whether expected or otherwise.  I specialize in compassionate,  comprehensive and competent assistance with these matters.  Make it your new year's resolution to call me and take care of this work in 2014.

It's Time For Gifting

If you have done any estate planning (or even if you have not, in which case you should be calling me without delay), lifetime gifting is an effective way to reduce the overall value of your estate, which could have the benefit of lower estate taxes due and/or asset protection in the context of MassHealth planning.  This year, any individual may make a gift of $14,000 per donee (and an unlimited number of donees) without any gift tax implications at all.  A married couple with joint assets, may therefore, make gifts of $28,000 to as many recipients as they choose without any gift tax consequences.  Lifetime gifting to children or grandchildren can be an effective way of reducing wealth and saving on estate taxes.  Of course, you have to be able to afford to make such gifts and still leave yourselves with sufficient assets to live on, but in families without conflict, the donees (usually the children) may set aside the gifts received in a separate account in their names in case of that "rainy day"
when Mom or Dad may run out of money and need financial assistance.  We have just over one week left in 2013, so if you are considering doing any lifetime gifting for estate planning purposes and have not done anything this year, you still have ten days left to take advantage of the gifting exclusion for 2013.  So go get out those checkbooks and start writing!