ASSET PROTECTION- WHAT DOES THAT MEAN

A person interested in conserving their assets and conveying them to the next generation may have heard of the concept of asset protection. You will find it is not as simple as giving your assets to the kids and hoping for the best.  The tools used vary greatly and one should consider the least costly and most efficient process after evaluation of all the possible solutions.  The difficulty is that asset protection can mean a lot of different processes and legal tools, some simple and some very complex.  This is an area where expert advice is absolutely required.

The general rule is that your assets should be available to satisfy your expenses and payment of your creditors.  In order to shield assets from creditor claims, it is necessary to anticipate and plan in advance the transfer of title to assets before the claims arise.  Otherwise, the transferring party has likely engaged in a fraudulent conveyance, which a court can reverse.  The various forms in which  asset protection can arise might be as simple as incorporation of improvements into personal residential property,  placing property in a limited liability company, forming a family limited partnership, creating a domestic asset protection trust, (which is an irrevocable trust), or creating an offshore trust, held in a foreign country.

The complexity and cost of such transactions varies greatly.  The right choice takes into consideration many factors, including your age, health, trustee selection, potential beneficiaries, potential liability sources, and goals.  When done well, the party creating an asset protection plan can rest knowing that their goal of preservation of property has been accomplished.

A SURVIVING SPOUSES’ RIGHTS

In Ohio and in addition to other rights, a surviving spouse has a number of basic rights available to them in a probate estate. The purpose of these legislated rights is to attempt to assure surviving spouses are not impoverished or that they have resources for necessities on the death of their husband or wife. Our legal system has generally memorialized these rights in Ohio Revised Code Section 2106. The rights include but are not limited to the following which I have listed in no certain order. A spouse has a right to two automobiles of limited value that are not specifically listed in the Last Will and Testament. He or she has a right to live in their home (aka “the mansion house”) for up to a year if it is not transferred or bequeathed to them otherwise. They have the right to purchase property from the deceased spouse’s estate. He or she has a right to an “allowance for support.” This allowance depends on the money available in the estate and other factors. Additionally, the survivor receives preferential treatment on appointment as the fiduciary to their spouse’s estate. If the surviving spouse wishes to exercise any of their rights, they have 5 months after the appointment of an executor or administrator of an estate to do so. The decision to make is whether they would like to elect to take under the will or to take against the will (which means exercising the rights listed above). Depending on the estate and situation, it may behoove a widow or widower to elect against a will if they were not adequately provided for in the will. Now one reality to watch out for is a situation where the surviving spouse is completely cut out of an estate by the late spouse. Sometimes this is unintentional or intentional and almost always because the late spouse received bad counsel from whoever they held as advisors. Your advisor should be an attorney who can explain the positive and negative ramifications of an estate plan. There are many, many non-attorneys in Ohio doing a disservice to citizens by looking (and sounding) sophisticated regarding estate planning but lacking the professional competence to advise on such heavy matters.

EXPLORING PRE NEED FUNERAL PLANNING

 

Pre-Need planning is a wonderful gift to those you love. As a rule of thumb, a pre-need funeral contract refers to the purchase of funeral goods and services before a person passes away. Why would someone want to pre-plan?

The pre-arrangement allows the person to speak directly to the funeral director about his or her own funeral wishes and preferences. By having pre-planning the service, the individual is providing significant relief to surviving family members from having to make decisions during a time of tumult and grieving in addition to relieving the survivors from a financial burden. Additionally, there is a Medicaid planning benefit to planning as well. Persons who currently qualify for Medicaid assistance or who anticipate qualifying may pre-pay their funerals without impacting their Medicaid eligibility. As this is an exempt purchase. The drawback to pre-planning is that the person is tying up the money.

Now there are really two types of pre-need contract: a guaranteed price contract and a non-guaranteed. In a guaranteed price contract the funeral home guarantees the funeral goods and services the planning person selects at the amount of money stated in the agreement. Which means there will be no need for additional payment later.selected for the amount of money stated in the contract. This means that you or your estate will not be required to pay any additional cost for the guaranteed items. The “non guaranteed contract” treats the amount paid for planning as a deposit against the final costs which is determined at the time of the actual funeral services provided.

If the contract does not guarantee the prices charged, the price of the funeral will be determined at the time the services and merchandise are provided. Any amount you pre-pay will be considered as a deposit to be applied toward the purchase price.

Some good questions to ask (in addition to your wishes) during your pre-planning session are:

* Where will the pre-need funds be deposited until they are needed?
* Will I receive verification from the financial institution that the prepaid funds have been deposited in the trust account?
* If the funds are used to purchase an insurance policy, will I receive verification that the policy has been purchased?
* What is covered by the price guarantee?
* Is the pre-need contract irrevocable or revocable?
* If the contract is revocable, how can I cancel the contract?

I have had to handle funeral arrangements for family, friends and client and can tell you. It is a marvelous relief to know a plan was already in place for our loved one.E

TAX PLANNING – AGAIN

I spent over 30 years analyzing and planning estates for my clients to minimize the bite of estate tax. The mechanisms were complex, not logical, and for many a burden. But in those days before tax reform, the family business, the family farm, and live savings were all exposed to state and federal estate tax that made such planning necessary to minimize their impact.

They’re gone – almost. The Ohio estate tax is gone and the federal filing threshold is $5.9M. But now, the most important tax issue is basis and capital gains tax for beneficiaries. Since property transfers to the next generation more often now in the form of an IRA, annuity, or some survivorship designation, it is important, if you want to preserve assets, to understand how each works and the income tax impact on beneficiaries.

You can do this planning yourself if you understand this, but most don’t. Don’t leave this to chance – come talk to us because the tax bite can still hurt.

THANKFUL

I frequently have opportunity to view people, especially seniors and those taking care of seniors, in situations that are challenging them – financial, health, family situations, etc – and the way they respond to perceived crisis.

For many, challenges early in their life conditioned and toughened them so they can still puzzle through a new challenge.  For those of more fortunate circumstances and few life challenges, the experiences of failing relatives is terrifying and upsetting.  “But Dad has always……” (But Dad can’t any more), or “We might lose all……” (Yes, life has no guarantees to preserve inheritance) or “Why us? (Why not?)

But those with faith in the Lord rise up as on eagle wings, sometimes shedding tears, but smiling internally and eternally as they know the future.  Those clients are more resilient, understanding, and survive by keeping things in biblical perspective. If one trait were used to describe these clients, it is “Thankful” in all things.  Nothing guarantees that we will not have trials or that our children will inherit what we have, but if we are thankful for all we receive, there is a special joy and contentment that you have to see to believe.

In this blessed Christmas season, my hope is that you will be thankful for all, as I am thankful for all of you.

TWO PORTLY GENTLEMEN

In October of 1843, Charles Dickens began writing one of the English languages most beloved stories. What began as his attempt to supplement his family’s meager income has in excess of 170 years, become cherished by many with its tale of special spirits, warmth to others and much of the byproduct of Christmas.

One of my favorite scenes is the oft overlooked part in Chapter One where the “two portly gentlemen” are let into the miser’s counting house by his employee, Bob Cratchit. They engage Mr. Scrooge to solicit resources for the poor and destitute. He summarily does not like the entreaty and presses them on their perspective. I wonder: what are the legal implications of their presence in his office that fictitious night? The laws impacting the scene if it occurred today could include: premises liability (what if one slip and fell?); propriety of their solicitation (were they registered with the State? would the donation be tax deductible?); agency (did the employee have the right to let them in?); trespassing (Scrooge would argue it.); hostile work environment we would need to ask Bob Cratchit); employment (was Bob an “at will” employee, independent contractor or salaried under contract?); fraud (were the two guys honorable at all or something akin to the IRS phone scammers we have today?); and the list goes on.

As we consider our lives and how they are impacted by an almost innumerable number of regulations and laws (state, federal and international), we can know well that life can be a complex bag of rules, tensions, met and unmet expectations. I hope this Christmas season we can all understand in our heart of hearts the question put forth by the two portly gentlemen from the pen of Charles Dickens. “A few of us are endeavoring to raise a fund to buy the Poor some meat and drink, and means of warmth. We choose this time, because it is a time, of all others, when Want is keenly felt, and Abundance rejoices. What shall I put you down for?”

DEPRESSION AND THE CAREGIVER GUILT

I regularly meet with sons, daughters, and spouses of an elder client who is failing. These close relatives often attempt to be the “care giver” for the failing elder, fulfilling their wish to remain at home.
While that is a laudable goal and one that many share, I always caution the caregiver to be very careful about burnout from trying to do too much, both mentally and physically. Care giving for a failing elder is stressful and when it is an around-the-clock obligation, the health of the caregiver is sometimes at risk.
Solutions are very family specific, depending upon who is available. One important theme is for a caregiver to be self-forgiving. I like the myths that my friends at Right at Home, a home health agency recently listed. Each of these (with my paraphrasing) is not true:
• I need to be perfect – no;
• I should only have positive thoughts about what I am doing – no;
• I shouldn’t talk about what I’m experiencing – no;
• I shouldn’t let others know about what is going on – no;
• My needs need to take a back seat to the services I am providing –no;
• Other caregivers are better at this than me and have a better attitude –no;
• I should do it all myself – no.
Caregivers – protect yourself. Dark, cold winter days will increase the chance for depression. Get some relief and thank you for what you do.

Protecting Americans from Tax Hikes Act of 2015 (aka PATH Act)

On December 18 last year, the above named act was signed into law. The PATH Act made permanent dozens of provisions which were set to expire. These provisions are no longer subject to expiration. This is not to be taken as tax or legal advice but merely to focus a light on the possibilities which exist for tax and legal planning toward the end of the year. Here is a sampling of the newly permanent benefits which might be of interest to different taxpayers.

1. Above the Line Deduction for Teachers’ Classroom Expenses. Kindergarten thru 12 grade teachers can deduct up to $250 of unreimbursed expenses relating to books, equipment, supplies and even some software. While that does not sound like a lot to many educators, just remember the old adage, “it all adds up” or “a nickel richer.”

2. Deduction of Mortgage Insurance Premiums. 2006 Legislation created an itemized deduction for premiums paid or accrued on qualified mortgage insurance. Generally, this type of insurance is acquired in connection with debt on a qualified residence.

3. Qualified Charitable Distributions from IRAs. In years past, persons age 70 ½ or older can exclude from gross income up to $100,0000 in “qualified charitable distributions” from either a traditional IRA or a Roth IRA. These distributions are not deductible as charitable contributions, but the exclusion from gross income is even a better result for the taxpayer. A qualified charitable distribution is any distributions from an IRA made by the trustee directly to the public charity.

4. College Tuition. Through 2016 there continues to be an above the line deduction for “qualified tuition and related expenses”. The deduction limit is $4,000 with the full deduction only available to taxpayers with adjusted gross incomes of $65,000 or less (or $130,000 for married filing jointly). If income exceeds the aforementioned limits then the maximum deduction is $2,000.

5. Conservation Easements. The limitations for contributions of property for purposes of conservation have also been expanded. It used to be in exchanged for placing qualified property into conservation like a land trust, the taxpayer could deduct 30% for any one year and carryover up to five years. Now, the he or she may deduct up to 50% of his or her contribution base with a carryover of 15 years. If he or she is what is a called a “qualified farmer or rancher” the 50% limitation increases to 100% with the 15 year carryover. To be “qualified”, the farmer or rancher’s gross income from farming or ranching concerns must exceed 50% of their total gross income. You can see where there may be opportunity for planning in situations where the taxpayer does not have an aversion to these types of conservation efforts.

These are just a few expansions available to individual taxpayers. The purpose of this article is not for tax or legal advice. Again, we are simply focusing a light on the possibilities which exist for tax and legal planning as we come toward the end of another tax year. All readers should consult with an independent professional prior to taking any action. We hope your fall continues to be wonderful as you bring in your harvest.

PREPARING FOR WINTER – AND SAVING MONEY

It has been part of the cycle of life to do certain things in season.  As we enter the fall, we see the farmers gathering the harvest, the boats of summer being put in storage, our furnace filters being replaced, leaves being raked and a host of other “fall” action items.  The holidays and family-gatherings are just around the corner.

Fall is a good time to also get your affairs in order so you can spend a comfortable, content winter by the fire or go south.   And everyone has a best way to do that – some with simple account registration changes, others with wills and powers-of-attorney, and some with trust arrangements.  Each family situation is different and what is a good fit for one might be too complex or too expensive for someone else.

Yes, trusts are great and the best tool in some situations, but don’t buy the sales pitch “You need a trust” until you meet with us, to explain where trusts work best and whether it fits your situation.   A Corvette is a great, fun car to drive but try driving to work in one through the snow.  When you have the right vehicle, you save money.

We can survive the winter that is coming but it will be much easier if we prepare now.

WHAT WILL YOUR CHILDREN REMEMBER ABOUT YOU?

Many of the estate planning conferences we conduct with clients fall into a discussion of children – their strengths, weaknesses, and the hopes that clients have for their future. Then we talk about stuff: how much stuff do the clients own? How much stuff might be left after long-term illness and nursing home bills are paid?  What will the children do with the stuff:

 

On a deeper level, however, I would raise with all clients “What will your children remember about you”? That usually brings a shocked, blank stare, as that question is not usually raised by anyone else. But it is an important question, because, for most, parental relationships have the greatest effect on a child’s personality, adjustment, and life success. And I can say, from the perspective of 40 years doing this, it is rarely how much money or property a child inherited that answers the question.

One’s legacy, from my perspective, is more about value systems, perspectives on life challenges, goal-setting, love, affection, forgiveness, and shared experiences, like family outings, vacations, holidays, than about inheritance. So when you arrive at the point in life where you are planning for not being here and what will happen in your absence, think on those matters and don’t miss an opportunity to add another great memory to the book, rather than an additional valuable piece of property. Focus on what really counts. We can help guide the discussion.