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?”

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.

FIVE REASONS TO NEVER GIVE AN OUTRIGHT INHERITANCE TO YOUR CHILDREN

If you’re like me, you want to leave an inheritance for your children. But giving outright ownership of our assets to the kids could put everything you’ve worked so hard to leave behind at risk. Why? Let me give you five reasons and then show you the way to protect your kids’ inheritance for many, many generations.

1. Your Child’s Future Divorce
Approximately forty-two percent (42%) of our children will divorce during their lifetime. In most divorces property is divided evenly. So if you have a married child, or a child who will get married in the future, and you leave them an inheritance, and they later divorce, as much as half of their inheritance could go to their ex-spouse. You aren’t working as hard as you are to support your child’s future ex-spouse, right? Good news, there is an alternative!

2. Extreme Debt/Bankruptcy
Your child may incur such extreme debt that the only possible relief will come through bankruptcy. Possible causes of such debt are a business venture gone bad or a health event, such as addiction, mental illness, accident, or disease that results in either a temporary or permanent inability to work in combination with staggering medical bills. Bankruptcy does happen to good people, and you can ensure that the inheritance you leave behind will never be at risk due to a mistake or health issue.

3. Lawsuit
Unintended neglect that injures someone’s person or property could wipe out an inheritance you leave your children. For example, in a 2009 case in Florida, the defendants thought they were doing the neighbors’ son an act of kindness by allowing him the “fun” of driving the four wheeler around the family property. Apparently, they didn’t tell the young man about the barb wire on the property. Their good intended neglect, resulting in the decapitation of their neighbor’s son, was not seen as good by the parents or the court, who ordered the $20 million judgment. In sum, good intended, but neglectful behavior on the part of your children could wipe out any inheritance you leave them.

4. Mismanagement:
I have many clients who tell me they do not trust their children to manage money. This could mean that their children are spendthrifts, unwise investors, or easily manipulated out of the money. And, the statistics support this.

According to Prof. Jay L. Zagorsky of Ohio State University, 18.7 % of individuals who inherit more than $100,000 will spend or lose the entire inheritance. On average individual who inherit lose 50% of the money. It’s quite likely that if that inheritance was left in a different way those numbers would greatly improve. I’ll share more with you about that below.

5. Lost Work Ethic:
My father once said, “Some people can’t handle prosperity.” He was right.

For example, Thomas Stanley and William Danko in their book, The Millionaire Next Door, uncovered research showing that children who received an inheritance were worth four-fifths less than others in their same profession who didn’t. Vic Preisser, of the Institute for Preparing Heirs, says that unprepared children who inherit money are susceptible to excessive spending, identity loss, and guilt over receiving money they didn’t earn. Preisser says, “In a year to 18 months, everything falls apart — marriage, finances — and if there is a drug problem it becomes worse.” Thus leaving an outright inheritance to our kids, may do harm instead of good. But there is an alternative!

As we can see, an outright inheritance is NOT the best answer for your kids.

Our office can assist you or your family in what to do instead.

AGE in PLACE- WHERE?

“Aging in Place” has become a preference I often hear from clients. It is usually shorthand for a fear of spending last days in an institution like a nursing home.

The reality, as shown by joint study done by an investment firm and AgeWave, shows many seniors have already moved or planned to move to a place they will own – a newer home with modern appliance, no steps, and much less maintenance, such as a condominium. And why are they moving? As reported by Caring Right At Home, a major supplier of home health care, many move to be closer to family (29%), reducing home expenses (26%) and because of changes in their health (17%).

It is not just “downsizing” but what I call “right sizing”, as people realize the large house with stairs and a lawn to maintain isn’t necessary after the kids have left. Because of modern medicine, we are living longer and tend to be more active – not just my grandparents sitting on the porch in a rocking chair. Why spend the time maintaining a home?

Regardless of location, the majority of seniors want long-term care in their home for as long as they are able, so watch for the continued growth of the home care agency. Since, in Ohio, licensing is not required, check out carefully the experience and customer satisfaction stats for any potential caregiver, or see us about making a family member that designated person. Live until you die!

PLANNING FOR CHRONIC ILLNESS

Sayings are repeated because they contain some real truth. Two that I often repeat to clients are: “Life is what you experience while you are planning other things” and, in contrast, “Failure to plan Is  planning to fail”. Both contain truth and apply when you or a spouse receive a diagnosis of a long term and perhaps fatal, chronic illness.

 

Aside from the personal sorrow and fear when the diagnosis comes, we need to be responsible for those in our families who will be involved in care-giving and care decisions. That is done with a thorough review of the health prognosis, evaluation of assets, projected care costs, and projected impact on the family. Elder law attorneys (like us) are used to dealing with these complicated questions and helping families find the right answers for them. Frequently, it may mean modification of a house for wheelchairs and access, changing the registration of title and accounts, moving to a single-floor residence, adding on a suite to a child’s home, preparing care agreements, setting up trusts for long-term care, investigating financial resources, including Medicaid and veterans benefits, identifying care-givers, and, most of all – making the best of the situation for all the loved ones who will be affected.

 

There are answers but usually not ones you can “do yourself”, because the issues are complicated. We look forward to talking with you in a no-cost initial conference that can lead to the best answers.

LATE-LIFE PLAN

One thing you quickly realize in the elder law planning area is how complex the situations are and how many variables affect the decisions of our elder population. One thing I know: placing your head in the sand is not a good option. That option just places greater stress on other loved ones who then, by default, must make decisions for you.

I regularly correspond with other elder law attorneys and caregivers – always looking for better ideas. One article Dr. Caroline Dott recently submitted to ElderCareMatters, a cross-disciplinary group I belong to, had some real value. She recommended that we all need a “late-life plan” and need to discuss it with our family while we still have our mental faculties so we can enjoy the best possible late life stage. This is far better than defaulting in a crisis to the oldest daughter or son, who now, in the middle of raising his or her family, must make decisions for you.

Caroline recommended having discussion with your parents now. Begin by fantasizing what the most comfortable and fulfilling last stage of life would be like, and then ask for some details:
• Where and/or with whom will you live?
• What pleasurable, exciting activities will you participate in?
• Where and with whom will you travel?
• What experiences will you have to avoid any regrets at life’s end?
• How will you fund your plans for the rest of your life?
• When and how will you complete all legal transactions?
• Which family members/friends/experts will be responsible for managing your finances, medical/psychiatric, legal issues and funeral arrangements when you no longer can?
• After making the plan, notify all participating parties, providing them with copies of documents related to their responsibilities.

Well-made plans pay huge dividends to those that make them. Do it today.