Elder Law and Estate Planning Blog - Lancaster, PA

According to the Insurance Institute for Highway Safety, drivers over the age of 80 have the highest rate of fatal car crashes per mile, higher than even the teenage age group.  Vision problems, slower reactions and other effects of aging increase the risk of crashes and make it unsafe for many people to continue driving.  Additionally, most state legislature doesn't acknowledge the problem.  In Pennsylvania, licenses have to be renewed after 4 years instead of 8, but the renewal may be made via mail or internet instead of in person and requires no written test, eye exam, or on the road test.

Driving represents independence and freedom for many seniors, as well as providing them with mobility, so many politicians are hesitant to make the renewal process more stringent.  Since lawmakers tend to sidestep the issue, it's often up to families to take action when their loved one is no longer a safe driver.

If you suspect their driving skills are starting to falter, take a ride with your loved one, noting if he or she has trouble following traffic signals, maneuvering the car, remembering the route, or judging gaps in traffic.  If there is a problem, address it head on instead of waiting until after an accident and it is too late.  Here are a few simple tips on how to approach the subject:

• Chose the most appropriate person to first bring up the matter with your loved one.
• Unless it is clear the driver is unsafe all the time, try limiting driving instead of prohibiting it.  For example, suggest driving only during the daytime and staying off highways.
• Investigate alternative transportation options and their costs.  You can calculate how much money your family member would save by driving less or not at all and point out that these savings can be used for other modes of transportation.
• If an aging loved one resists giving up driving, let the physician or department of motor vehicles be the bad guys.
• If all else fails, you may be able to gain guardianship over your parent and get a court order to prevent him or her from driving.  You could also hide the car keys or disable the car, but some families find this option to backfire.

For more information on safe senior driving, visit http://seniordriving.aaa.com/.

First, let me apologize for the hiatus in blog posts.  The school year started up again, and with it everyone became a bit busier, myself included.  However, I am hopefully back on track to keeping you updated and informed on Estate Planning and Elder Law.

Estate planning can be easy, and when done right it saves a lot of hassle in the end.  However, this is a confusing topic and the possibility for error is huge.  Being an estate planning firm, we have seen and heard all the horror stories about plans going wrong.  To prevent that from happening, here is a list of the most common mistakes of estate planning.

1.  Failure to plan at all!!  This is pretty simple, if you don't have a plan everything can go down the drain.  We've had stories of families being torn apart because they didn't know the wishes of their loved one.  The claims of "She wanted me to have it" are endless, and unless you have a will to truley know, the claims can cause families to fall to pieces.

2.  Having an improper or antiquated plan.  This is just as bad as not having a plan.  Think about where you were 10 years ago compared to where you are today.  Were you married then?  How about now?  Do you have kids?  Has someone passed away?  Was someone else born?  All of these changes are likely to happen in a person's lifetime and require will revisions.  Old wills may also be following old tax laws, which no longer apply and can still cause problems.  At the bare minimum, estate planning documents should be reviewed every five years, and they should definitely be reviewed after any major life changes.

3.  Improper use of joint property.  Don't be tempted to avoid estate planning by using joint accounts on property.  This planning could cause huge problems.  For example, if your co-owner is sued or files for bankruptcy, your valued asset will be attacked by creditors, causing you to lose it.  Additionally, you could accidently disinherit people completely through joint ownerships if the co-owner doesn't know (or follow) your wishes post death.  Prior planning can avoid these mishaps, but it requires thought and effort before declaring a joint owner.

4.  Not properly using IRS-approved annual gift accounts.  By current law, every American can gift $13,000 annually, completely tax free, to anyone they want.  Of course, doing so might not be the wisest move, but it might be very effective to shrink an estate.  Shrinking the estate will then lower the income tax paid by the estate.  While you may not want to give these funds to family members while they are young, it is still an idea to consider later in life.

5.  Failure to plan for the distribution of your pension retirement accounts.  An alarming 80% of all pension and IRA monies are passed (and therefore taxed) to beneficiares named on the accounts, meaning only 20% of the nation's IRA monies are used as retirement income.  In other words, we set aside pension money just in case we need it, but then don't usually touch it.  And these investments can grow to astronomical numbers, but only a few people know to plan for them.  Accounting for these pensions is a crucial part to your estate plan.

6.  Lacking liquidity to cover estaet settlement expenses.  After your passing, there will be a financial assessment, and no matter what your situation is, your heirs and executor will need cash!  Because many people don't have a sound estate plan, most heirs have to liquidate assets to generate enough cash to cover estate costs.  This can cause stress, which might have been avoided if there had been a strategic plan in place beforehand.

7.  Improperly arranged and owned life insurance.  The proceeds of a life insurance policy might pass income tax free, but they are not free from estate tax.  That is, unless the policy is owned by someone other than yourself (in which case the estate would have no claim on the account).  Another common mistake is the failure to name a contingent beneficiary.  Millions of dollars lay unclaimed due to their beneficiary predeceasing the insured.  And a third error is that many clients have antiquated policies.  These policies served a purpose for when your kids were younger, or when you just started a new business.  Now that times have changed in your life, it's time to change your policy so that it is more useful.

8.  Not planning for the cost of long-term care.  Four out of ten Americans will need long-term care, according to the Health Insurance Association of America.  This costs between $40,000 and $80,000 yearly, which is definitely enough to wipe out many estates.  Also, in order to apply for Medicare (or Medical Assistance), you must spend down your assets, by which point your estate might be gone or almost gone.  Are you prepared to take the chance that your assets will endure any potential costs?  Could you survive a long-term illness or accident financially?

9.  Not leaving behind your story.  When you pass, don't think of your legacy just being in financialy terms.  After working with older clients, we always ask what piece of advice they can give us from their experiences.  Write down this advice and your own unique history.  For the most part, these histories become faded memories before disappearing forever, so make sure yours is there to be remembered.

If you enjoyed reading this post, check out this one, What Might be Missing from Your Will.

Pennsylvania recently passed the Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act (UAGPPJA).  Although it doesn't have the shortest name, this law solves a relatively simple problem commonly known as Granny Snatching.  It addresses the issue of jurisdiction over adult guardianship (sometimes called conservatorship) by providing a mechanism for resolving multi-state disputes.  Ideally, the goal of the Adult Guardianship Act is to grant only one state jurisdiction at any one time.

Before this act, there were frequently cases of disputed guardianship.  Take the case of Loyce Juanita Parker (2008).  She was a lifelong resident of Oklahoma, but moved to Texas temporarily to be near her daughter while awaiting an opening for assisted living in Oklahoma.  Her daughter applied for guardianship in Texas, but her son applied in Oklahoma.  The case took much time and expensive litigation before it was finally ruled that the Oklahoma Court had jurisdiction.

Guardianships involve the appointment of someone or some entity to make decisions for an incapacitated person.  This differs slightly from a power of attorney, in that the incapacitated person does not need to give approval prior to the appointment.  A power of attorney grants the authority to act on behalf of the person with that person's approval.

Because the process for granting guardianship occurs in a state court, the United States has over 50 different systems.  Additionally, few states have streamlined procedures for transferring a proceeding to another state or for accepting this type of transfer.  This means that even without a dispute, there could be jurisdiction problems should the person move from one state to another.  Further problems arise because not all states recognize jurisdiction in other states, so being a Guardian in Pennsylvania may not give you access to assets in Nebraska.  By adopting a uniform set of laws, both the Pennsylvania and Nebraska courts could have communicated with one another and all problems would have been avoided.

Through the UAGPPJA, the above problems are eliminated. UAGPPJA establishes a uniform set of rules for determining jurisdiction, simplifying multi-state jurisdiction disputes.  It also establishes a framework that allows state court judges in different states to communicate with each other.  The law goes into effect on September 5, 2012 in Pennsylvania, saving guardians both time and money and allowing them to focus on the care of their loved one.

For more information, check out these resources below:

Adult Guardianship Jurisdiction Fact Sheet from the Alzheimer's Association

Adult Guardianship and Protective Proceedings Jurisdiction Act page from the Uniform Law Commission

Pennsylvania House Bill No. 1720

Did you know that one of the most common and longstanding, but preventable practices causing harm to residents in nursing homes is the overuse of antipsychotic drugs?  Last year, the Department of Health and Human Services found that 14 percent of nursing home residents were prescribed anti-psychotics.  Of these people, 8 out of 10 were prescribed off-label (that is: for purposes other than the ones for which they are FDA approved).  This overuse costs Medicare hundreds of millions of dollars and harms patients.

Still, this issue is not as simple as it seems.  Usually the meds are used because aides cannot provide basic hygiene for dementia patients without them.  Patients might be too agitated or violent for the aide to change their diaper or give them a shower.  Alternatives to these antipsychotic drugs can be time consuming and may require special skills, but are less harmful to the patients.

Alternatives, like giving a bed bath rather than a shower or changing the aide who is working with the patient, are focused on first learning why the patient acts a certain way and what triggers his or her agitation.  Once this is determined, a nursing home can make adjustments.  However, this takes both time and training, and for many facilities it is easier to give the patient a pill.  Alternative therapies, like music therapy and other non-pharmacologic solutions, may also work, but need further testing.

While perusing the internet recently, I came across an article on Forbes by Deborah L. Jacobs.  At a recent online conference for estate planning advisors, she noted the questions these advisors had.  Most of these questions had to do with inherited IRAs and 529 college savings accounts.  Since some of the advisors didn't know the answers and because some are tricky, we thought it'd be in the best interest of our clients if we shared some information on them.

Inherited IRAs

The person who inherits your IRA, like other assets, isn't necessarily the person you named in your will.  Your beneficiary designations on all accounts take precedence over wishes stated in a will.  So what happens if there's no beneficiary on file?  The heir is determined by the IRA custodian's policy.  Usually the IRA is first awarded to a living spouse, then to the estate, so if you want to pass on your IRA directly to your kids, you need a beneficiary form.  To give your heirs maximum flexibility, name both primary and alternate beneficiaries.

If you've inherited an IRA, do nothing until you know what rules apply.  For example, if you are not the spouse and have inherited an IRA, you must begin taking distributions by December 31 of the year after inheriting.  Also, unless you are the spouse, you must retitle the IRA to include the original owner's name.  And once you've inherited an IRA, make sure to designate beneficiaries.

An advisor asked if you can write on the beneficiary form "according to the terms of my will."  While this will most likely be accepted by the custodian, there's no guarantee that there won't be complications.  By writing this, you have to verify that the custodian has the will on file and that they have the latest version of the will.  Still, they may not accept the designation this way, so your best bet is still to name a beneficiary.

529 Plans

A 529 Plan is an education savings plan designed to help families set aside funds for future college costs.  As long as the plan satisfies a few basic requirements, federal tax law provides special benefits to the plan participant.  This can include gift and estate tax benefits.  You can give anyone $13,000 annually without eating into your exemption from gift or estate tax.  When it comes to 529s, however, you can deposit as much as $65,000 (or $130,000 for a couple) and treat it as five years' worth of gifts.  Once in the 520, the money can grow tax free.

One advisor said he heard that if the grandparent is the owner of a 529 plan, distributions are considered income to the child and jeopardize their financial aid eligibility.  He is correct with this.  If a grandparent makes a distribution from a 529 to pay tuition, that amount counts as income and must be reported on the following year's FAFSA (Free Application for Federal Student Aid).  A student is expected to apply 50% of all income above a certain limit to education, so if a grandparent with good intentions pays the first year's tuition, he might exhaust the 529 and endanger the student's aid eligibility.  In such a case, the 529 would be best spent paying senior year tuition.

Unfortunately, it gets more complicated.  About 250 of the most expensive private colleges use a different form to award aid.  This form requires the student to report all 529 savings accounts that name him as a beneficiary and that are not owned by his parents.  These accounts can have a huge impact on aid eligibility.  You might be able to mitigate the impact on aid by transferring the account ownership to the student's parent a year before the student applies for college.  However, this raises another question: could the transfer of ownership be a taxable gift to the parent?  While the IRS hasn't ruled on this specific issue, the answer is probably not, but still be cautious.

To read the original article, click here.

Your will, your marriage license, insurance policies, medical records.  While you may have all of these documents now, what would happen if your house were to burn down, taking these with you?  Protecting your documents is just as important as having them, and keeping them safe and accessible can be easy.  Protecting them can also make your documents easier to find should you need them in a crunch.  Consider these steps to secure your family's vital documents:

1.  Take Inventory.  Find out what documents you have, documents which might be scattered in boxes in the attic, in filing cabinets, on old computers and new laptops, and other places.  Group these items, making a group of critical items (wills, power of attorneys, car titles, insurance policies, deeds, licenses, etc.) and a group of items you want to archive (old tax returns, brokerage statements, records of when you established retirement accounts, etc.).  This is also a good time to purge old documents you no longer need.

2.  Scan them.  The most practical way to duplicate files is to scan them.  Although it takes a bit more time than photocopying, scans can save you from ever having to make and mail a copy again.  If you can't scan your documents yourself, ask your accountant, lawyer or financial advisor to send you scanned copies of you documents, or hire a scanning service.  Also, check your local library to see if they have a scanner you could use.  You don't need to scan bank statements, as those are generally available online for five years, but you should make a list of accounts, as well as email and other online accounts, and include account numbers, user names and passwords.

3.  Store electronically.  Having backups on your computer won't be much help if your home burns down, destroying your hard drive.  And documents in a safe-deposit box might be inaccessible after a natural disaster or if you need them while traveling.  Instead of having to worry about those alternatives, store your documents "in the cloud" or on a remote server.  Dropbox, Microsoft's SkyDrive, Google's Googel Drive, and Apple's iCloud are all cloud-storage platforms that allow you to access your files anywhere in the world.  You can also share account information with trusted advisors and family members so that they may access the information should you be unable to. 

4.  Store securely.  If you're wary of storing sensitive documents on a cloud storage site, you should know that you are alread doing the same thing when you send emails with attachments.  However, if that doesn't calm your worries, you can enhance security by encrypting your files before downloading or adding a password to individual documents.  There are also cloud-based storage platforms available that will encrypt your documents for you (like VaultWorthy).  These are normally costlier than other cloud-storage platforms.

Want more help deciding what documents to keep and what to trash?  Read our previous blog entry, Keeping a Clean Desk.

This article was sent out in our newsletter last week, but we liked it so much we decided to share it here as well!  Did you read it in our newsletter?  Look for a few more additions in this version.

Most wills generally have the same provisions.  However every now and then there comes a will with a strange bequest.  Here are some of the weirdest will bequests known.

• Gene Roddenberry, the creator of the Star Trek television series, requested that his ashes be blasted into space on a satellite and be distributed as it orbited the earth.  In 1997, six years after his death, Roddenberry’s ashes were able “to boldly go where no man has gone before.”
• German Countess Carlotta Liebenstein left 139 million German marks (about $66.2 million) to her pet dog, Gunther III.  The dog and his offspring, Gunther IV, lived out the rest of their lives in luxury, with a personal maid, chauffeur and customized pool.
• New York hotel magnate Leona Helmsley left $12 million for the upkeep of her Maltese terrier, Trouble.  However, after the will was contested, the dog was left with only $2 million.  Still, that’s more than two of her four grandkids, who were left with nothing.
• Charles Vance Miller, an eccentric Canadian lawyer and practical jokester, bequeathed a large sum of money for the lady in Toronto who could produce the most children in the 10 years following his death.  The Great Stork Derby, as the resulting contest was called, had 4 winners who all received 125,000 Canadian dollars, or about $121,975 in the United States.  Additionally, Miller gave joint lifetime tenancy to three men known to despise each other in his Jamaican holiday home.
• Samuel Bratt grasped an opportunity to get even with his wife after his death in 1960.  She never allowed him to smoke, but in his will, he left her 330,000 pounds ($509,025) provided that she smoke 5 cigars a day.
• Juan Potomachi left more than $50,000 to the Teatro Dramatico Theatre in Buenos Aires on the condition that his skull be preserved and used in Hamlet.
• Harold West was worried about becoming a vampire after his death, so much so that he left instructions in his will for his doctor to “drive a steel stake through my heart to make sure that I am properly dead.”
• James Bowman, from Vermont, died in 1891, after his wife and two daughters passed away.  As a firm believer in reincarnation, Bowman instructed that his 21-room mansion be maintained through a specific amount of money designated for that purpose.  In addition, he specified that each night dinner must be prepared in case the family came back.  The money ran out in 1950, before the return of the family.
• A Danish widow left the equivalent of $61,700 to six chimpanzees - Jimmy, Trunte, Fifi, Trine, Grinni and Gigi - at the Copenhagen Zoo.
• Tom Goodson asked his relatives to give everyone who attended his funeral an envelope containing a one pound note with the words, “Have a smoke, crack a joke.  Thanks for coming,” written on it.
• Harry Houdini left 10 random words to his wife in his will.  He stated that she should hold a seance every Halloween after his death, and that he would communicate with her using those ten words.  She held the seances every year for 10 years, but eventually stopped because Houdini never made his presence known.
• Janis Joplin, who updated her will just two days before her death, set aside several thousand dollars for a posthumous party for 200 of her closest friends.  This party was held at her favorite bar in San Anselmo, California, and Janis noted that she wanted her friends to "get blasted after I'm gone."
• The philosophical father of utilitarianism, Jeremy Bentham, wanted his remains to be clothed in a black suit and sitting in his favorite chair inside a wooden and glass cabinet.  And that is exactly what happened; his body is preserved in the cabinet, called the Auto-icon, at University College London, with a wax head as the real one was left looking macabre after mummification.  His body sits on display at the end of the South Cloisters in the college's main building.  It has also attended meetings of the College Council, where it was listed as "present but not voting."

Being the caregiver of an elderly parent can be a tiresome job by itself.  If you have kids to worry about, it becomes that much more difficult.  While worrying about getting your mother to her doctor appointments, giving her her medications on schedule, making sure her kitchen is stocked if she's still living at home, etc, you have to make dinner for your kids, drive them to soccer practice, and make sure they get their homework done.  In a 1990 article, Newsweek reported that the average American woman will spend 17 years raising her kids and 18 years helping her aging parents or in-laws.

Family caregivers worry about spreading themselves too thin and their own ability to cope with all the responsibilities that face them.  So how can a family caregiver handle caring for their parents and their kids?  Here are some tips that might help you feel a little less sandwiched:

• Hold a family meeting.  Family meetings are a time to discuss conflicts and propose solutions together.  They allow everyone to contribute their thoughts and may encourage feelings to be shared that would otherwise go unspoken.  If family meetings seem to go nowhere, bring in a friend or other family member to moderate.
• Educate teens about their grandparent's condition.  Talking to them honestly about their grandparent's situation, both abilities and disabilities, can help kids, especially teens, better cope.  Illness can be scary, and some, like Alzheimer's, can impact them as well.  Kids will be better able to cope if they understand the nature of the illness and how it should progress.
• Ensure that family members have their privacy.  This is especially important for teenagers, so if your mom or dad moves in with you, give them their own space.  Ideally they should have their own room as well as a TV, phone or computer.  And make sure that your parent knows that the kids need their space and alone-time as well.
• Expect your kids' help, but be realistic about what they can do.  Kids should understand that they are a part of the family and will be depended on to help.  Prepare a list of all the things you do on a daily and weekly basis, then ask them which of those things they can do for you.  And most importantly, hold them to it!
• Don't ignore the quiet ones.  Some kids are louder than others, but that doesn't mean that the quiet ones aren't struggling.  They may just not want to further stress you out with complaints or don't know how to express their feelings.  Regularly ask your kids how they are feeling and acknowledge that this is a difficult situation for everyone.
• Focus on your marriage.  Set aside time each week for your spouse to do something you both enjoy.  Also, talk about the situation and don't let your marriage suffer because of it.  Your spouse can provide the comfort you need, and you want to nurture that relationship.
• Prepare a long-range financial plan.  Do you have kids heading to college soon?  How are you going to fund your parent's long-term care?  These are questions that you should be asking yourself to better prepare for the future.  A professional financial planner can help you figure out your parents' assets and how to use them to finance their care.
• Look for the blessings.  It may seem stressful to care for an elderly parent, but it can be very rewarding, too.  Many caregivers report great satisfaction due to the closeness they achieve with their parent.  This can also be a great experience for kids as they learn to sacrifice their own needs for the family.

A Will is the legal document that declares how a person (the testator) wants to distribute his or her assets after they pass.  You may think that once their wishes are stated, there is no changing them, but an unhappy family member has the right to contest the Will.  Will contests can drag out for years and may keep all heirs from getting their entitled shares.  Although it may be impossible to prevent future relatives from fighting over your Will, there are steps you can take to minimize quarrels and ensure that your intentions are carried out.

The first step to preventing a Will contest is to understand how it can happen.  A family member may contest your Will if they believe that you did not have the requisite mental capacity to execute the Will, someone exerted undue influence over you, someone committed fraud, or the Will was not executed properly.

To make a Will contest less likely to succeed, try following these steps:

• Make sure your Will is properly executed.  Although this seems like a no brainer, it is a common way for a Will to be contested.  Each state has laws dictating what makes a Will valid.  In Pennsylvania, anyone of sound mind over the age of 18 years old may make a Will.  The Will must be in writing and signed by the testator and this signature must be witnessed by two competent witnesses.  They must also be self-proven before a notary.  The best way to ensure that your Will is properly executed is to have an estate planning attorney assist you in the drafting and executing of the Will.
• Explain your decision.  If family members understand the reasoning behind your decisions, they may be less likely to contest them.  It is a good idea to talk to family members at the time of your draft and explain to them why someone may be left out or receiving an unequal share.  If you don't talk to them about it, state the reason in the Will.  You may also want to include a letter with the Will with an explanation
• Use a no-contest clause.  A no-contest clause is one of the most effective way of preventing a challenge, but it will only work if you are willing to leave something of value to the potentially disgrumbled family member.  The way a no-contest clause works is that it allows an heir to challenge the Will, but if her or she loses the  challenge, they also lose their inheritance.  For this to work, you must leave the heir enough so that a challenge is not worth the risk of losing the inheritance.
• Prove competency.  Another common way of challenging the will is to argue that the decedent was not of "sound mind" at the time of the signing.  Avoid this argument by making sure that the attorney drafting the will tests for competency.  This may involve seeing a doctor or answering a series of questions.
• Videotape the signing.  This may be more on the extreme side, but videotaping your signing will allow family members and the court see that you are signing under your free will and makes the argument of incompetence more difficult.
• Remove the appearance of undue influence.  To avoid the appearance of undue influence, do not involve any of your possible heirs in the drafting of your will.  Family members should not be present when you discuss the will with your attorney, nor when you sign it.  To be totally safe, they shouldn't even drive you to the attorney's office.

At some point in time roles are going to be reversed.  No longer will Mom and Dad be telling you that you can't buy this item or that item, but you will have to be keeping an eye on their finances.  As your parents age, they will become more likely to be a victim of a financial predator, something millions of caregivers try to protect their parents from.  This role reversal won't be easy, but here are a few tips to get started.

• Watch for red flags.  Families are unique, and so are the situations that they live in.  But when your mom or dad stops taking care of themselves, its time for adult children to speak up.  If you notice one thing, something that they're not doing but normally would, chances are that your parents are forgetting a few other things as well.
• Start small.  As your parents get older, they are going to act like teenagers at times.  You can't tell a teen what to do, and they will not want to be told how to handle their finances.  Several financial advisors recommend giving your parents a book or an audio book on financial matters to show your concern and jumpstart the conversation.  Adult children may also ask permission to see if their parents will give them access to copies of bank statements or set up online banking and automatic bill pay.  Whichever you choose, whether these ideas or your own, make sure you are showing your parents that you want to help, not take over.
• Stay in touch with people in your parents' lives.  You can't be there all the time, especially if you live in another part of the country.  But you can stay in touch with the people that your parents will see on a frequent basis, whether it be neighbors, friends, or church members.  Also make it a point to meet their financial advisor to buld trust.  The advisor will then know that you, too, want to help and can keep you in the loop about what mom and dad are doing.
• Keep siblings in the loop.  Sharing responsibilites can cause friction in some families, especially when concerns over inheritance come into play.  Try delegating different tasks to different people, for example your sister living across the country from your parents could monitor finances online while you, since you live down the street from your parents, could handle in person tasks like doctors appointments.
• Set up a power of attorney.  This legal document authorizes an agent to make financial decisions on behalf of the grantor.  If your parent is willing to sign and notarize one, it could give you greater oversight of their finances.  This can be a touchy subject, but is highly recommended so that should your parent become incapacitated, someone else can still access their finances.