What is keeping you from signing a healthcare directive?

A recent article in Reuters mentions that only 2 out of 5 U.S. citizens have some kind of healthcare directive, and that our own U.S. laws might be the cause. A study done by Rebecca Sudore of the University of California, San Francisco found that “Most states had practical restrictions that could make it difficult for many people to complete an advanced directive… In addition, many of the documents used in end-of-life planning were written in complicated legal language that the average person would have trouble understanding.”

Some portions of an advance directive might be written in complicated legal language out of necessity, but we don’t think that’s any excuse not to have one, especially not if you have a knowledgeable and trusted attorney who is willing to go through the legal language with you to ensure you are comfortable with it. As for the other obstacles, the fact that “many states do not allow oral advance directives, and usually require that written documents have witnesses’ signatures, be notarized, or both…” and that currently “40 states do not automatically allow domestic partners and same-sex partners to become the default healthcare proxy;” well, these seem to us to be all the more reason to make sure you DO contact your attorney and get your healthcare directive in place.

A healthcare directive, along with a will and a durable power of attorney, are the three foundational documents of any estate plan. Whether you choose to move on to more advanced planning techniques or not, every person should have these three documents at the very least. These simple documents can end up saving you and your family a world of heartache and expense.

Of course, according to Reuters there is one other possibility about why you might be putting off your healthcare directive, “The biggest issue is that people do not want to do advance directives… There is a fear of planning for how we die.” Don’t let superstition keep you from protecting yourself or your loved ones.

“The best laid plans of mice and men often go awry.” Although we hate to admit it, this statement will also sometimes apply to estate planning; and more often than we would like, it happens with powers of attorney.

A power of attorney is the document in which you nominate an agent (or attorney-in-fact) to make financial decisions and take legal action for you when you are incapacitated or otherwise unable. (This does not include healthcare decisions, covered in another document called a health care directive.) Unfortunately, as this recent article on the Elder Law Answers website points out, “many people experience difficulty in getting banks or other financial institutions to recognize the authority of an agent under a power of attorney.”

This difficulty usually has nothing to do with the validity of the document; rather, it is the bank’s attempt to protect itself. But while a little bit of caution is understandable, it can have frustrating—or even tragic—results if not addressed. Luckily, there are steps you can take to improve your chances of having your power of attorney honored. The article mentioned above includes a number of good suggestions:

• Talk to your bank about your plans ahead of time.
• Ask your financial institutions if they have any requirement for powers of attorney, or even their own standard form.
• Update your power of attorney forms or documents frequently (every 2-5 years.)

Talking to a representative from your bank every 2-5 years may seem like an inconvenience now, but imagine the inconvenience if you are incapacitated and your agent is unable to access the funds he or she needs to pay your bills, make your mortgage payment, or provide for the needs of your family. A little bit of time spent now can save a mountain of stress later on.

If you and your spouse complement each other, work well together, and support each other, does it makes sense to go into business together? Can you effectively be partners in marriage, partners in parenting, and partners in business? Although it may not be easy, many couples have proven that the answer is yes—a business partnership with your spouse can be very rewarding.

As rewarding as it can be, there are a few steps that must be taken in order to protect your partnership—inside and outside the office:

• Have a detailed plan that you both agree on
• Be specific about each of your job descriptions to avoid stepping on each other’s toes
• Agree on the amount of risk you are both willing to take
• Know each of your strengths and weaknesses
• Have a safety net
• Be sure you are both contributing to your own retirement plans
• Don’t skimp on the paperwork; have an attorney draft the documents you need to protect your business and your personal assets
• Plan personal time together when work is “off-limits”. Vacations, regular date nights, a business cut-off time—all of these can be helpful in setting boundaries and preserving the romance
• Hope for the best, but plan for the worst: have your attorney help you draft a buy-sell agreement in the event that one (or both) of you someday wants to gracefully step down

Being in business with your spouse can be paradise or perdition, and at times it will probably be a little of both. Each family—and each family business—will be different, and our office can help you navigate the tough legal terrain to find the best fit. Being prepared and taking the right legal steps will bring paradise a little closer by allowing you to relax and enjoy what you and your spouse have built together. Whatever your arrangement, don’t neglect the future. In business, having a good plan is the best protection there is.

One of the main concerns of anybody who is retired or nearing retirement is how to pay for medical expenses. Research shows that a healthy 65 year old couple can expect to pay somewhere around $305,000 in out of pocket medical expenses during the course of their retirement—and that’s a healthy couple! With expenses like this staring them in the face, it’s no wonder senior citizens are concerned about Medicare.

For those who don’t know, Medicare is a government administered insurance program providing health insurance coverage to people aged 65 and older, or to disabled persons who meet certain qualifications. The Medicare program has many parts which variably cover hospital insurance, medical insurance, and more recently, some prescription drug costs. The Medicare program has proven to be a valuable resource for senior citizens since it was signed into law in 1965, but the program is far from perfect or comprehensive. This, plus recent developments with the health care reform bill have many people asking questions about the future of health care insurance for retirees.

To help answer these growing concerns about health care costs and the Medicare program, Time Magazine has published a special article about how to navigate the Medicare maze. One of the most valuable portions of this article is “When—and How—to Enroll in Medicare”, but the article discusses other important issues such as:

• Medicare’s Part A, B, D and More
• How Medigap Policies Can Help
• When to Buy Long-Term-Care Insurance

Still, the best way to assure that you are getting the right medical coverage for yourself or your spouse during your retirement is to talk to a professional. Federal and State sponsored health insurance programs offer necessary help and coverage—but they can be fraught with confusing procedures and enrollment difficulties. Your estate planning or elder law attorney will be able to help you with the process. Don’t wait until it’s too late.

By Jonathan Wittlin, CPA, CFP®

Raising children is hard work. Raising financially literate, well-rounded, and grounded children is harder still. Given the economic rollercoaster ride of the last two years, as well as the approaching holiday season, there has never been a better time to engage your children in a meaningful dialogue about money and personal finances.

Many of us spend significant time building our wealth, planning for our financial future, and making certain there will be adequate resources for our children. In effect, we are preparing our money for our children. However, not many people spend the same amount of time preparing their children for the money. Whether it be an inheritance, funds to pay for college, to buy their first car or home—we tend to focus our efforts on the means, not the end. For parents, that end is to raise financially literate, independent children with good judgment who will grow up to be good citizens.

With the holidays just around the corner, many parents are asking how they can put some meaning back into the season and teach their children the importance of giving and not just getting. There are certainly a number of different ways to approach any given situation, but the following will provide a few ideas to help put new meaning into their favorite time of year:

• Ask your children to think of a sum of money they would be willing to contribute to a charitable cause in place of receiving a gift for themselves. Once all members of the family have made a decision, set up an evening to discuss how to use the money to make a difference for somebody less fortunate. You can then turn this exercise into an annual tradition for your family.

• Give your children a sum of money – the amount is less important than the action that follows. Ask them to give the money away to a worthy cause, and in lieu of purchasing a gift for you, have them write a short story for you about what they did with the money and why.

• Organize an afternoon for your children and their friends to bake cookies for children in a hospital, elderly people at a nursing home, or adults in a homeless shelter. Drive the children to the destination and have them personally hand out the cookies so they can make a connection with the people for whom they have created something.

• Adopt a family and make sure that family has a meal and gifts for their children. Actively involve your children in the selection and giving of gifts.

• Help your children to start a holiday business venture, such as a holiday card service, and use the exercise to begin an understanding of revenues, expenses, marketing, and other basic business and money management concepts.

• As the holidays approach, create a new twist on their “wish list” by having your children make a list of wants and a list of needs. Have them explain the difference.

With just a little time and creativity, we can all impart some very valuable money lessons to our children. But remember, improving children’s financial literacy is a year-round effort. The holidays are a good time to start but don’t stop come January. Keep at it. You and your children will be the better for it.

Jonathan Wittlin, CPA, CFP® is Senior Vice President, Financial Planning in the San Francisco Office of Lenox Advisors. Learn more about Lenox at www.lenoxadvisors.com.

Why do people give so many charitable gifts in December? The holiday spirit may not be the only thing inspiring people to give to the less fortunate this month, it may also have something to do with lowering your 2009 tax bill. If it’s taxes you’re worried about, there are a few other moves you can make after you’ve done your charitable giving. Ashlea Ebeling of Forbes has a whole list of things you can do to lower your 2009 tax bill before year’s end, we’ll mention just a few of them here:

• Fund those retirement savings accounts. As the article above points out, you can fund your 2009 retirement accounts up until April of 2010, but if you have an employer who will match your investment it’s likely they’d like to know before the end of the year what amount they’ll be matching. If you’re self employed you’re on a tighter schedule because the deadline for setting up a solo 401(k) is December 31.
• If have plans to receive any expensive medical procedures in the near future that won’t be covered by your insurance, you may want to consider having them done before January 1^st. Unreimbursed medical expenses that exceed 7.5% of your adjusted gross income are deductable.
• If you’re in the market for a new home, the homebuyer credit has been expanded from November 30^th to May 1^st 2010. This credit used to be only for newcomers to the real estate market, but is now available for both new homebuyers and longtime homeowners looking to purchase a new home.
• A different—but related—course of action is making upgrades to the home you already own. Certain energy efficient improvements to your home can also get you a credit on your taxes… if you get the improvements done before the end of the year.
• One more way you may save money on your taxes this year that you won’t find mentioned in the Forbes article is to create an estate plan which includes a trust. To the extent that the legal planning services cover tax advice or regard income producing property, the fees you invest in establishing and operating a trust are deductible from your federal income taxes.

All of these are good ways to save money on your 2009 taxes, but action needs to be taken before the end of the year. That gives you only… 24 days left to take action!

Everyone knows that the estate tax is also sometimes known as “the death tax”; similarly, estate planning attorneys are also sometimes known as “those death lawyers.” This is something most of us have learned to good-naturedly roll our eyes at; but eye-rolling aside, the worst thing about the “death lawyer” assumption is the disservice it does to you—our clients. You see, as estate planning attorneys our role is to help you protect your family and your assets, both of which exist in the here and now, not in some ethereal “someday”. What follows are only a few of the things we can help you with right now:

Retirement planning: Ask about the recently developed Retirement Trust, which not only extends your retirement fund past its initial payout date, but gives you more options for distributions.

Saving for college: If you have children who will one day be in college, we can help you make sure they will have the wherewithal to follow their (and your) dreams for education in the event that anything happens to you. An education trust is the perfect way to provide for your children’s schooling.

Investing for the future by laying a foundation NOW: The future is the business of an estate planning attorney, whether it be protecting your life insurance policy for your family, saving your property from probate fees, or minimizing your taxes; but neglecting to prepare now means it may be too late when the time comes.

Yes, as estate planning attorneys our specialty is going to be helping you prepare for your inevitable death (which will take place sometime far in the future, of course) but one thing we know for sure is that the best way to prepare for the future is by taking action in the present. Family, finances, health and education—all of these are within the realm of the “death lawyer’s” expertise, and all of these need your attention today. Let us help you with the things that are important to you and your family right now.

Alzheimer’s disease affects as many as 5.3 million people in the United States; which means it affects as many as 5.3 million families, because Alzheimer’s is a disease that affects everybody it touches—husbands, wives, children and grandchildren—they all bear witness to their loved one’s slow demise.

Sadly, emotional stress is not the only stress that accompanies Alzheimer’s disease; those loved ones serving as caretakers may carry a huge amount of financial stress as well. According to this article by Denise Bonilla the cost of caring for an Alzheimer’s patient can run anywhere from $64 a day to $77,380 a year, and because Alzheimer’s disease can be such a long-lasting disease (a person can suffer from Alzheimer’s for up to 20 years) the costs of care can end up being astronomical. It’s obvious that people can’t do it alone.

Some of the options to help Alzheimer’s patients pay for medical expenses are long-term care insurance or Medicaid [Medi-Cal in California] (Medicare doesn’t cover the cost of long-term care). Long-term care insurance can be very helpful… if you’ve thought ahead and purchased the policy before you or your spouse began suffering from symptoms of Alzheimer’s. As for the government programs, those also can be helpful… if you fall in the right category and know how to navigate the complex system.

Unfortunately, learning how to navigate the system is not something you can do in an hour or two. Because your experience will depend on a number of unique factors we can’t give you an easy set of instructions to follow. The best advice we can give is to say that right now, the best way to navigate the Medicaid/Medi-Cal system is to find someone who knows the system to assist you. Most estate planning and elder law attorneys help their clients with these issues on a regular basis. If you want to ensure that you and your loved ones will be cared for no matter what the future may bring, don’t be afraid to ask your attorney for help.

When choosing among the options for transferring assets to their beneficiaries, clients often ask me “At what age should my children receive the money after I’m gone?”

Truthfully, there is no magic number. And one answer I sometimes give can raise client’s eyebrows: “Children should NEVER receive the money!”

I know that may sound extreme. But when you weigh the pros and cons of the various options, “never” can actually make a great deal of sense. To understand why, it’s important to look at an overview of some of the planning options on the table.

One option is what I call stated-age trusts. As the name implies, these trusts continue until a certain point in time, generally when the child reaches a given age, such as 30 or 35, at which time the trust terminates and the assets are distributed to the child outright. At first glance this might seem appealing to the adult child. But on closer inspection, outright distributions could subject the child to some pretty unpleasant stuff, like creditors, divorcing spouses or estate taxes.

So parents keen on safeguarding the assets – and ensuring the money is put to good use – might want to consider a second option: what I call lifetime asset protection trusts. This kind of trust can help preserve the assets for the child throughout the child’s life and even beyond. Structured properly, the trust is protected from creditors, ex-spouses and even estate tax in the child’s estate. The best part is that the child can have their cake and eat it too – their parents can structure it so that when they feel the child would be mature enough to own the assets outright, the child can be given effective control over the trust. In this way, the child can have all the benefits of outright ownership without many of the drawbacks.

With the high divorce rate and increasing litigation in our society, there is a lot of value in protecting the assets we leave our children. In that context, choosing an age to cut them a check becomes less important. Want to leave your children vulnerable? Never!

It’s easy to feel down about your finances in such challenging times. But at the “Good News For Parents” workshops this past weekend, about 20 families were excited to learn ways to take control of their finances and protect their assets.

The workshops, which I did alongside Kristin Harad, a certified financial planner, really seemed to hit home for parents who’ve felt like they’ve been living in fear during the recession.

It’s only natural to feel anxious about money, especially these days. But settling into this default position of fear can heighten your anxiety and can actually increase financial guilt (should I buy this muffin with my cup of coffee?), conflict with your partner and, worst of all, negative inertia and a self-fulfilling prophesy!

In reality, you have a choice. You can focus on the large number of things you actually can control. This includes creating a plan for intentional saving and spending and protecting your family and your assets.

So parents at the workshop were really jazzed to learn about some key ways to take action. They learned how to get over their fears by setting intentions for their finances, and creating a financial plan and strategy that fit their needs. At the end of the day, I was inspired by the parents’ enthusiasm for regaining control of their financial life.

If you missed this event, and are interested in learning more about how to protect your family and your assets, we’ll be hosting our popular Kids Protection Planning workshops in September. Click here for more information.

Wishing you health, wealth and happiness,
Thea