Thoughts on Giving to Charities

moneyI have had a number of clients who have no children or natural heirs, and have struggled with what to do with their estates after death.  Others want to “mix it up,” giving some to their heirs, but not everything.  An easy answer is a charity – a cause or organization which reflects or advances their values during their lifetime.  Here are some ideas for those thinking along these lines to consider:

●    Think About Whether the Organization Will Still Be Around.  Like people, organizations “die” or cease to exist.  They also merge or change in form.  Consider this when giving to an organization, and the possibility that you may outlast it.  One solution is to provide an alternative organization, or destination for the money.  At the very least, consider having your estate planning attorney make it clear that the gift may be given to “any successor organization.”

●    Give an Address.  I sometimes place current addresses in some estate planning documents, especially when dealing with organizations.  Consider doing this to help out your executor or trustee.

●    Consider Giving “Shares” or Percentages.  Percentages are self adjusting, in case you have less than expected in your estate upon death.  Giving a percentage instead of a fixed sum could prevent “crowding out” those who receive a residuary gift in your estate (or trust).  Another idea: Give a fixed sum, but not to exceed a specific percentage.

●    Don’t Forget Lifetime Giving.  If you can afford it and feel comfortable doing so, consider giving some or all of your overall gift during your lifetime.  Expenses of charities are ongoing – if you make lifetime gifts, you might be able to see the fruit of your giving during life.

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Problems with a Joint Tenancy

piggybankWhile the method is often used, holding property in joint tenancy is not always the best estate planning tool.  It  often has unexpected results.

What is joint tenancy?  Under California law, a joint tenancy is property held in undivided equal shares by two or more persons.  The primary feature of a joint tenancy is a right of survivorship – the surviving joint tenant(s) obtain title to the property as a matter of law.

This is why a transfer of a joint tenant account avoids probate, and why it is often used as an estate planning tool.  For example, if a parent wants to transfer a bank account to a child, he or she could make the account a joint tenancy account.  The parent has use of the account during his or her life, but at death the child has ownership.  In general, joint tenancy transfer prevails over the will, and it is generally used as a “non-probate transfer.”  Even if a will lists a joint tenancy account as an asset, disposition of the account is generally not governed by the will.

Yet, pitfalls abound.  I have had clients with property in a joint tenancy, where an unexpected death results in a completely unexpected transfer.  Moreover — especially with real property — there may be gift tax consequences of placing property in joint tenancy with another.  If the son or daughter joint tenant (in my example, above) is in an automobile accident and insurance does not cover the loss, the parent’s account may be subject to debt collection – as another example.

And, of course, the joint tenant can always withdraw the funds!

Holding property in a trust is much more flexible, with a reduced possibility of unexpected consequences, and the parent (or other giver) may maintain control over the funds.  Also, it is difficult to have a coordinated estate plan with joint tenancy accounts.

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The Importance of Selecting the Proper Trustee and Agent

I often tell clients that one of the most important aspects of an estate plan is their selection of a trustee, agent, or other fiduciary.  The best plan in the world can fall apart with a poor selection of fiduciary.  Conversely, a plan fraught with problems can be saved or partially salvaged with the proper selection of (for instance) trustee.  The human element is all important.

As a case in point, Zsa Zsa Gabor’s husband was, allegedly a very poor choice for her agent, for her durable powers of attorney.  While a good agent/trustee ordinarily might keep matters out of court by acting in the best interests of the creator of the agency (the “principal”) or trust (as the “settlor”), the actions of Prince Frederic von Anhalt has evidently kept the power of attorney documents in active litigation, according to this article in the Examiner.com.  That article goes on to state:

If Zsa Zsa Gabor had it to do over again, she might have chosen a better fiduciary under her power of attorney. Gabor is 95 years old today and her current and ninth husband, Prince Frederic von Anhalt, is 25 years her junior. Von Anhalt is her power of attorney.

Gabor’s daughter Francesca Hilton has been concerned for years that von Anhalt has abused his position as her mother’s power of attorney, alleging he has used the money for birthday parties, billboards, and his own mayoral campaign in L.A. Francesca has also accused von Anhalt of unnecessarily heavily sedating Gabor and restricting Francesca’s access to her mother.

This is a good lesson for all.

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“Death Tax” Hikes Hitting Farmers

On January 1, 2013 the individual estate tax exemption is set to fall from $5 million to $1 million, following the expiration of the Bush tax cuts. The maximum tax rate will rise from 35% to 55% of assets. If Congress and the President fail to reach an agreement extending the exemption and rate, the expiration will occur by operation of law at the beginning of the year.

The family farmer will feel the hit, with unique consequences. The farmer’s only asset is in “dirt,” according to a Fox News article covering the expiration of the exemption.  The farmer and rancher have no way to liquidate his only asset without selling it off entirely or in pieces. But selling it off in pieces makes the farm less productive as a whole. The alternative for his heirs is to sell off the entire farm to pay the tax:

“The idea behind the estate tax is to prevent the very wealthy among us from accumulating vast fortunes that they can pass along to the next generation,” said Patrick Lester, director of Federal Fiscal Policy with the progressive think tank — OMB Watch. “The poster child for the estate tax is Paris Hilton — the celebrity and hotel heiress. That’s who this is targeted at, not ordinary Americans.”

According to the American Farm Bureau, up to 97 percent of American farms and ranches will be subject to an estate tax if the exemption falls to $1 million.

“We’re not millionaires in the terms of making a million dollars a year,” said Kester who lives in a modest home and whose family — not outsiders or a corporation — runs his ranch. “I have a half-a-million dollars in soil.”

Kester can’t spend it, without selling land. But by selling the land, each year the ranch would become less viable.

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Tomb of the Unknown Soldier, During Hurricane Sandy

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The Importance of the “Durable Power of Attorney”

I have read others’ opinions implying the  relative lack of importance of the Durable Power of Attorney for asset management (“DPOA”) as an estate planning tool — as if it were somehow a “throwaway” or an “extra” document.  Even in my own counseling of clients, I often get the question: I am asking you to prepare a trust.  I will also have a Will.  Why do I also need this document?”  In the past I explained that the “durable power of attorney ‘fills in the gaps’ left by other documents.”

My explanation was certainly true — but the significance of this document goes much further.  After my own experience caring for a parent and using my own estate planning document, I can say this:  It is an extremely powerful and useful tool.  Trusts are important, as are Wills.  However, the DPOA for asset management is indispensable.  As a caregiver I would have been lost without that document, and I otherwise might have been required to open an expensive conservatorship.

An example is in order: My first use of the DPOA was with a major credit card company.  With the onset of her dementia, my Mother left a tangled web of charges and confused billing.  The company would not even speak to me until I produced the DPOA.  After receiving the document, they resolved the issue without incident.  If I was unable to provide this document, I would have been unable to resolve the issue.

I continued using it throughout my Mother’s disability, all the way up to the time of her death.  I was able to access phone records and resolve billing issues.  Unfortunately, banks were unwilling to honor my form, which is not unusual.  It is possible under some circumstances to compel a party to accept a durable power of attorney in California, under Probate Code section 4541(f), but the time and expense involved (yes, even for an attorney!) can make enforcement impractical or undesirable.  Banks usually insist upon their own form.  However, in a worst circumstance, it may still be possible to force them to accept the form.

Even forgetting that problem, this powerful document was indispensable.  Yet, there must be care in both preparing DPOA, and in selecting the appropriate agent

I will address these issues in later posts.

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An Alzheimer’s/Chronic Stress Link?

It seems like there is a new study every few months concerning the causes of Alzheimer’s disease.  However, this new study from the University of Kuopio in Finland, reported in the U.K. Express, suggests that lifestyle may be a significant contributing  factor in developing the disease.  The link between the long term effects of stress and Alzheimer’s could “run the gambit,” causing mild memory impairment on one end of the spectrum, to Alzheimer’s on the other.

The study from the University of Kuopio is only one of several.  The article goes on to report:

Scientists at Gothenberg University in Sweden found those who complained of repeated periods of stress, including irritation, anxiety or sleeping problems were significantly more likely to develop dementia in old age than those who led worry-free lives.

As part of the new study, researchers will track the volunteers’ levels of cortisol, released by the body in response to chronic stress. A number of illnesses are known to develop earlier or made worse by chronic stress including heart disease, diabetes, cancer and multiple sclerosis. 

Stress can lead to high blood pressure which increases the risk of a heart attack because the heart has to work harder to pump more blood around the body. Cholesterol is also linked to the condition as it is a by-product of cortisol.

Describing the findings, Professor Holmes of the University of Southampton commented that “all of us go through stressful events.  We are looking to understand how these may become a risk factor for the development of Alzheimer’s.  Bereavement or a traumatic experience, possibly even moving home, is also a potential factor.”

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Some giving is tax free

This blog and so many others dwell on taxes, and how to avoid them. It is easy to forget that the gift of our time is tax free – and can be a much more meaningful gift than money.

Joplin, Missouri is my birthplace.  Although I have not lived there since I was very young, for a variety of reasons I still consider Joplin “home.” Not only is the country beautiful, but the people are down to earth and genuine. I believe there is a wonderful Easter story within a recent news article in the Joplin Globe detailing how some non-resident volunteers, cleaning up in the aftermath of Joplin’s May 22, 2011 EF5 tornado, fell in love with the town and moved there.

One such story is Michelle Tatela, a Chicago pediatric nurse turned volunteer, who pulled up stakes and moved to Joplin after the tornado:

She applied for a traveling nurse job in Tulsa, Okla., and an Oklahoma nursing license, put her two Labradors, Morgan and Maisy, in the back of her Jeep, and found a Joplin apartment — nothing fancy, just some place to shower, leave the dogs and sleep, and began calling Joplin home.

“Some thought it was crazy, others saw it coming. My brother said, ‘You just need to move there,’” she recalled.

Tatela has spent her days ever since doing “whatever needs to be done — painting, taping, mudding, organizing college kids, bringing supplies to the job site.”

“I get paid,” she said, “just not with money.”

“The people here are exceptional. I feel like there is something here special that you don’t find everywhere else. They are kind and appreciative. They don’t focus on what they lost, but what they have. It is teaching me lessons and I have grown in a way I’ve never grown before. You can’t put a paycheck on that.”

“We, as people, seek out the company of others like us,” she said. “I have found that here. I fit in.”

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What to do if you win the Lottery

There are almost none of us who will have this “problem” — but what actions should be taken if you win the lottery?  Some of this involves common sense.  For example, I would never suggest going to your local inner-city liquor store, and shout that you are the new Mega-winner.  Not a good idea.

This article in the Columbus Dispatch offers some estate planning/common sense/practical suggestions, and for almost all of us an entirely academic exercise in fantasy:

Storing the winning ticket in a fireproof safe and taking it to the lottery office with armed escorts might seem extreme, but it’s sensible, said Robert B. Barnett Jr., an attorney at the Carlile Patchen & Murphy law firm in Columbus. Barnett specializes in estate planning, trust and probate law, and he represents past Powerball lottery winners.

Finding an attorney and investment adviser skilled in dealing with the “super rich” should be at the top of a winner’s to-do list, Barnett said. And as tempting as it is to tell everyone the good news, it’s better to keep a $640 million secret under wraps.

“They will be inundated with every possible invasion of privacy you can imagine,” Barnett said. Nuisances ranging from phone calls to kidnapping could plague winners who recklessly share their news.

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A Medicare Resource for Choosing a Nursing Home

The question of whether to place mom or dad into a nursing home can be daunting enough.  If the answer is “yes,” or “it has to be done,” then comes the natural follow-up question – OK then, which one?

Medicare’s nursing home guide provides a good place to start, and it even provides ratings.  The ratings cover areas, such as “health inspections” and “staffing.”  The site also evaluates “quality measures.”

For example, one nursing home local to my office was rated a “3 of 5″ star rating for “health inspections.”  Inspectors determined that during a January 2012 inspection, the home failed to “[p]rovide 3 meals daily at regular times; or 2) serve breakfast within 14 hours after dinner; or 3) offer a snack at bedtime each day.”  The violation was evidently seen as relatively insignificant, because the level of harm was deemed “minimal” (specifically, 2 of 4, in this instance).   This is only an example of a number of rating factors.

In a recent CNN/Money article, the following advice was given regarding the use of this website resource:

Just don’t take the star ratings as gospel, says Jocelyn Montgomery of the California Association of Health Facilities.

Instead, click on “health inspections” and “staffing” to drill down on the details. For example, are citations due to medication errors (beware), or failing to create a care plan (less harmful)? Check how much time each resident gets with nurses: the more hours, the better.

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