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!

Professional Wills

Often, my estate planning clients are engaged in a professional practice of some sort, be it law, medicine, psychiatric care, accounting or the like, and many are sole or principal practitioners.  The customary documents most often do not provide any specific instructions for the winding up or disposition of the professional practice.  As such, in addition to the standard Will, Trust, Durable Power of Attorney and Health Care Proxy, it may be wise for such a client to execute a “Professional Will” addressing the winding up and disposition of the professional practice.  Some professions have regulations addressing file retention, client notification and other such matters, and it is important that a qualified person be in charge of seeing the process through in full compliance with all applicable matters.

A Professional Will differs from a personal Will, in that it is not a legal document, but rather a detailed set of instructions for an appointed “Professional Executor” to follow.  The Professional Executor (“PE”) generally would not be the person named as Personal Representative or Trustee of the other documents, but rather a professional colleague who understands the nature of the practice and the steps to be taken.

The PE should be empowered to do any or all of the following:

1.         Identify all of the clients to be contacted to inform them of the death or incapacity of the professional.  This may be done in person, by phone, or in writing, but should be done with proper sensitivity.

2.         Access all records relating to the practice, and as referred to below.

3.         Change voice mail message, website and any other internet-based sites relating to the professional.

4.         Notify any professional liability insurance carrier of the death or incapacity of the professional, and deal as needed with current or future coverage.

5.         Refer current client matters to other practitioners or to him/her self.

6.         Return files to clients, if they request that, or otherwise dispose of closed client files in a responsible manner (shredding, burning) to maintain confidentiality.

7.         Inform all professional organizations of the death or incapacity, and terminate memberships.

8.         Maintain all other files in compliance with any applicable laws, rule and regulations.

9.         Reconcile all financial records, pay liabilities and collect receivables.

A Professional Will should include:

1.         A list of all of the clients to be contacted to inform them of the death or incapacity of the professional, and a statement empowering the PE to contact those clients.

2.         A statement identifying where all current client files are kept.

3.         A statement identifying where all old files are kept.

4.         Identifying the location of all billing and financial records relating to the practice, including passwords if they are kept on a computer.

5.         A statement identifying the location of all databases of client names, addresses and phone numbers, with passwords if applicable.

6.         A list of all email addresses, websites, and other on-line resources used by the professional and passwords for all.

7.         Location of any keys required to unlock file cabinets or other storage facilities.

8.         Any specific information to be provided to clients.

9.         If applicable, the name and contact information for the professional liability insurance carrier, and any other professional organizations to which the decedent may belong.

10.       Arrangements, if any, for compensation to the PE for the work he or she does.

11.       Any additional instructions to the PE.

If you have already had an estate plan prepared, you may want to consider adding a Professional Will to the document set.  If you have no estate plan, now would be an excellent time to put one into place, and a Professional Will may be a part of such a plan.  It behooves you to leave proper information and instructions in the hands of a trusted person who is qualified to attend to the difficult task of winding up a professional practice in an appropriate manner.

Waiver of Subrogation Clauses

I have a client who owns several residential and commercial rental properties and I have prepared lease templates for him for his use.  These templates include a so-called "Waiver of Subrogation" clause, and the client asked me what this means.  As I was writing him a reply, it occurred to me that i might as well do a post here on this very topic.

To start, of course you have to understand what subrogation is in the insurance context.  It means that if there is an insurance claim paid out by your insurer to you for any reason, and it is then determined that another party is responsible, the insurance company would have the right to go after the negligent party for recovery of what it paid out. 

Most leases provide that both landlord and tenant must maintain insurance.  If there is a loss, then the party sustaining the loss would submit a claim for recovery under his/her policy.  If the claim is a covered claim, the insurer would pay that party under the policy regardless of who is responsible for the damage.  The subrogation waiver essentially provides that if there is a loss caused by the negligence of one party to a lease, the negligent party is will not be liable for the resulting damage to the extent that the damage is covered by applicable insurance proceeds.  It prevents either party from going after the other party, or its insurer, for recovery of a claim paid regardless of who is responsible, so long as the damage is covered by insurance. 

An example where a waiver of subrogation would come into play would be if a landlord's property was damaged.  The landlord would submit a claim and receive recovery under his/her policy if the loss is covered by the policy.  If it turns out the property was damaged by the tenant, then absent the waiver, the landlord's company would be required to pay the claim, but then it could seek to collect damages from the tenant.  With the waiver of subrogation, the landlord's insurer could not pay the claim and then try to collect reimbursement from the tenant; rather if the claim was covered, landlord would receive payment and the insurer would not be able to seek recovery from the tenant thereafter.

Generally, a waiver of subrogation clause in a lease is something that both parties would want to have, since it protects each against liability for damage they may cause which is covered by  insurance.