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.

It's a Jungle Out There

Lots of buyers looking, not a lot of inventory.  Bidding wars, multiple offers, lost opportunities.  The March 20, 2016 Business section of the Sunday Boston Globe has much to say about this topic.  Take a look.  Home Buyers' Blues.

Home Inspections

You are looking to buy a house.  You find something you love, and to your pleasure and possible amazement, your Offer is accepted.  So what comes next?  The home inspection.  The buyer wants to know absolutely everything about the property and be informed of all possible defects.  The inspector wants to find everything and cover their tail so that the buyer doesn't come back to them later alleging negligence for missing something.  (This often leads to inspectors flagging small issues that turn into big issues during negotiations.)  The seller, of course, doesn't think there is anything wrong with the property, and questions the inspector's conclusions.  So what happens?  The parties (usually via the brokers) will enter into negotiations to try and resolve their differences and come to some agreement about what seller will repair and what seller will refuse to address.  In some cases, seller will agree to perform, or have performed by a hired worker, a specific task.  In other cases, when seller doesn't want to get involved in the actual work, the parties will negotiate a dollar amount which seller gives buyer as a credit at closing to cover the defect.

Often, the buyers will see the inspection as an opportunity to negotiate price reductions or free repairs from the seller.  In truth, that is not the purpose of the inspection.  Generally, a buyer should be worried about major issues, and not whether the faucet leaks.  I often counsel clients that the issues to be addressed should be only of the sort that seller would have to repair in order to sell the house to anyone.  This includes things like a defective boiler or HVAC system, a leaking roof, the presence of  asbestos, mold, radon or other such substances, substantial rotting, or structural defects.  The seller is likely to be uninterested in loose toilets or dryer hoses, missing screens on windows and small matters of that sort.  Buyers should pick and choose those issues that are most serious and most important.

In a seller's market (where we are now), the seller is less likely to agree to address any inspection issues at all, because there are probably four more offers in the wings.  In those cases, the purpose of the inspection is only to give the buyer information and not to use as a point of negotiation.  Based on the inspector's findings, is the property sound?  Are the repairs limited in scope and within budget for the buyer to repair?  Or are there hidden defects that make a buyer choose to walk away?

Except in cases of substantial defects, buyers are best served by examining the home inspection for informational purposes, and not for the opportunity to extract concessions from the seller.

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?

Are Mortgage Opportunities Coming Back?

The mortgage industry has been in a challenging place for several years, and many very qualified borrowers have been unable to obtain a mortgage loan simply because they lacked sufficient funds to provide the required down payment.  The New York Times now reports that once again, it may be possible to obtain a mortgage with a smaller down payment and without incurring the obligation to pay mortgage insurance.  Read more at http://www.nytimes.com/2016/03/12/your-money/mortgages/a-smaller-down-payment-and-no-mortgage-insurance-required.html?emc=edit_tnt_20160311&nlid=10789246&tntemail0=y&_r=0.