We recently had a call from Josh, a client we’ve assisted on other matters. He had a question about a family disagreement—not unusual when there’s an inheritance at stake. Their father died in 2012; their mother in 2016. They had an AB Trust. The estate included the family home that was paid in full, but a mortgage was opened a few months before their mother died to pay for health care expenses, property, a timeshare and personal belongings.

After nearly two years, the estate is still not completely settled for two reasons:

1. A timeshare. This was a last-minute revelation; it was not included in the Trust, and therefore, needed to go through Probate. Each sibling had sent a release of any interest in the timeshare.

2. Withholdings. Josh’s brother, Peter, became the estate Executor, and he hired a lawyer to navigate the process. $100,000 ($25,000 per child) was held back until the siblings “released” Peter from any future claims and/or contests against him or the estate. The siblings also discovered that Peter took an Executor fee of $20,000. Once settled, the estate would be worth about $600,000.

How much should the estate’s Executor be paid?

Josh wanted to know if the Executor fee is a standard practice, and if so, what determines the amount. None of the siblings disputed that Peter worked hard to settle their parents’ affairs, and all agreed that Peter was the most qualified sibling to fill this role, and that he deserved compensation. They also agreed that the compensation should have been clarified in the beginning and that the fee was excessive.

Being the Executor for the family estate is a thankless job

The estate can drag on for more than a year in even simple cases. It’s not uncommon that a family’s loved ones are incapacitated at the end of their lives, and bills from endless healthcare providers, Social Security and Medicare continue to trickle in. Peter already had a family and a demanding full-time job; he managed their mother’s estate for two years, including dealing with a Probate. A fee of $20,000 is likely not unreasonable.

When my own parents died within months of each other, my brother became the Executor and we were all eternally grateful. He was diligent in his efforts to be fair and professional; he communicated with us at regular intervals. I believe he took $10,000 for his fee, and I would have gladly paid him much, much more not to have to do this myself. He took care of everything—the nursing home, assisted living, their CPA, etc. Ours was a fairly straightforward case, yet it dragged on for well over a year.

Under California Probate Code, the Executor typically receives 4% on the first $100,000, 3% on the next $100,000 and 2% on the next $800,000. For an estate worth $600,000 the fee works out at approximately $15,000. They usually take a year to settle, but can take longer, depending on the complexity of the estate.

We can learn from Josh and his family’s experience

Signing release forms at the end of this process is pretty standard. In retrospect, Peter should have been more upfront about his fee, and he should have explained how he arrived at the $20,000 figure. Peter’s siblings also might have been more generous. Peter had always been the siblings’ leader, and as usual, they assumed he would be the Executor. They should also have assumed that he needed to be adequately compensated for his efforts.

Is creating a Living Trust one of your 2019 resolutions? Schedule an appointment today!

Schedule an appointment at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

A 2019 Tax Break for Small Business Owners

Small business owners may be looking forward to a tax break in the new year. The GOP tax plan was hastily engineered and rolled out to benefit big corporations--not small business owners. Now a 20% deduction is available to entrepreneurs—but there are limits. You may qualify for the break if your taxable income is below $157,500 if single, or $315,000 if married.

Becoming an LLC may come with additional requirements

Many of our clients over the last few years have upgraded their business status to an LLC or other corporate structure. The reasons are simple— it separates the business from its owners. A corporation acts like a completely separate body that can do things like buy and sell property, be taxed and enter into contracts. Most importantly, it protects its owners from personal liability for corporate debts and obligations. LLCs are very popular right now, and an LLC can save you money on taxes, but there’s a caveat.

Here are some things to think about if you’re considering an LLC:

1. An LLC isn’t a free-for-all

The new tax law's 20% deduction on qualified business income is subject to limitations that keep it from being a free-for-all for every entrepreneur. In general, to qualify for the full deduction, your taxable income must be below $157,500 if you're single or $315,000 if you're married and file jointly.

2. If income exceeds these thresholds, you may not qualify for the deduction

Entrepreneurs with potentially high-earning service businesses, such as doctors, lawyers, CPAs and financial advisors—those positioned to make a lot of money--may not be able to take advantage of the deduction because their incomes exceed the limits.

3. Your spouse’s income: Another caveat that may further limit the potential deduction 

Partners in a business may find themselves in another situation in which one owner gets the 20% deduction and the other doesn't. While partners may qualify, if they have a high-income spouse, they may wind up exceeding the taxable income threshold. In this case you can have two people doing the same work for the same pay, but only one can take the deduction on his/her return because of other factors.
An LLC protects owners from having their personal assets seized by the business' creditors. For many entrepreneurs and small business owners, an LLC remains the best choice for an upgrade to a sole proprietorship. With the new tax laws, an LLC now provides additional benefits.

Are you planning to upgrade your business status to a corporation in the new year?

Make an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

Early Dementia Detection Helps Seniors Manage the Disease

In 2016 The New York Times devoted a special section to Alzheimer’s. It was a beautifully written story, Fraying at the Edges, by N.R. Kleinfield, that focused on Geri Taylor’s heroic journey with the disease. Ms. Taylor had become forgetful; mundane tasks often confused her. One day she got off the subway and had no idea why she was there. She tried to pass off increasingly frequent memory problems as inevitable infirmities of old age. But the day she looked in the mirror and didn’t recognize the face staring back at her was her come-to-Jesus moment. She knew she could no longer ignore what was happening to her mind.

Diagnosis: Mild cognitive impairment, a precursor to Alzheimer’s disease

Her doctor put her on Aricept, a drug designed to improve cognitive performance, and it seemed to sharpen her thinking. But as her doctor told her, she wasn’t just losing her memory, she was losing “executive function”— forgetting the sequence of steps in the processes of all the little things we do, the things we take for granted.

It’s important to get help sooner for people whose minds are slipping

Patients showing signs of mental decline or dementia should be getting checked during routine medical visits. Dementia is an uncomfortable topic for patients and their families. It’s also a difficult topic for their doctors, but family physicians need to do a thorough evaluation and share the diagnosis.

Patients and family members should push for an evaluation if they’re worried that symptoms might not be normal aging. We all laugh about misplacing our keys. But there’s a difference between occasionally misplacing keys and putting them in the freezer. By the time you’ve gone from misplacing your keys to forgetting what those keys are for, you’re too far gone to participate in your own care. It’s not just memory that suffers, but judgment, and sometimes it can be years before dementia is diagnosed.

The growing need for early diagnosis

• About 50 million people worldwide have dementia; Alzheimer’s is the most common form of the disease. In the U.S., nearly 6 million people have Alzheimer’s and an estsimated 12 million have mild cognitive impairment, a frequent precursor.
• In 2015, Alzheimer’s Association research using Medicare records suggested that only about half of those being treated for Alzheimer’s had been told by their health-care providers that they had been diagnosed with the disease.
• Physicians often hear of symptoms or memory complaints from patients or their spouses and say, “you know, you seem okay to me today, so check back in six months”. The consequences? Patients may end up hospitalized because they forgot to take their medications.

Medicare has begun covering mental assessments

Medicare recently started covering mental assessments as part of annual wellness visits, but doctors aren’t required to do it and there is no guidance on how to do it. In some cases, it might be as cursory as asking “how’s your memory?”

The guidelines do not recommend screening everyone

The Medicare guidelines outline what health care workers should do if people describe worrisome symptoms. It includes checking for risk factors that may contribute to dementia or other brain diseases, including family history, heart disease and head injuries. There are pen-and-pencil memory tests and imaging tests to detect small strokes or brain injuries that could be causing memory problems.

Doctors are trained to heal, when there is no cure for Alzheimer’s

Dr. Michael Sitorius, family medicine chairman at the University of Nebraska Medical Center, said dealing with mental decline adds to the challenge of caring for frail elderly patients. It’s a tough diagnosis to make for many doctors, he said, because medical training focuses on “trying to cure people, and Alzheimer’s and dementia are not curable.”

Dr. Sitorius gives his older patients mental tests at their annual checkups, but sometimes patients or their loved ones don’t want to hear the results. In those cases, Sitorius still addresses related issues including depression, safeguarding medication, nutrition and whether patients should continue driving. The new guidelines are a welcome reminder for family doctors to tackle these issues earlier. “We strongly encourage a full disclosure,” including diagnosis, stage and prognosis, he said.

Meet Anne Hunt, 81, who once ran a busy Chicago cooking school

At her daughter’s urging, Anne Hunt visited her family doctor in 2011 because of increasing forgetfulness. The 81-year-old now recalls struggling with memory tests involving letters and numbers that her doctor had her perform. The test results were inconclusive and there was no diagnosis.

“We didn’t do much about it,” said Bruce Hunt, Anne’s husband, until five years later, when her behavior was clearly worsening – more memory lapses, repeating herself and forgetting where to put things. She was diagnosed with Alzheimer’s after an imaging test showed brain changes associated with the disease.

The benefits of early diagnosis

“There’s no pill they can take to make it go away, so some people think there’s no point to getting a diagnosis,” but that’s being short-sighted, the National Institute of Aging’s Silverberg said. “It really does offer an opportunity to plan.” Alzheimer’s medication such as Aricept and Namenda can ease symptoms. Other benefits include a chance to join experiments testing treatments, opportunities to resolve finances, find caregivers, make homes safer and use memory aids and calendars to promote independent living. The diagnosis energized the Hunts. They joined support groups and a singing ensemble, finding new things to help them cope.

For many, the biggest fear is the unknown. Dementia can be a slow-moving disease. Receiving a diagnosis helps many Alzheimer’s patients make the most of the time they have left.

A big part of end-of-life planning is creating a Living Trust. Make an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

Small business owners may be looking forward to a tax break in the new year. The GOP tax plan was hastily engineered and rolled out to benefit big corporations--not small business owners. Now a 20% deduction is available to entrepreneurs—but there are limits. You may qualify for the break if your taxable income is below $157,500 if single, or $315,000 if married.

Becoming an LLC may come with additional requirements

Many of our clients over the last few years have upgraded their business status to an LLC or other corporate structure. The reasons are simple— it separates the business from its owners. A corporation acts like a completely separate body that can do things like buy and sell property, be taxed and enter into contracts. Most importantly, it protects its owners from personal liability for corporate debts and obligations. LLCs are very popular right now, and an LLC can save you money on taxes, but there’s a caveat.

Here are some things to think about if you’re considering an LLC:

1. An LLC isn’t a free-for-all

The new tax law's 20% deduction on qualified business income is subject to limitations that keep it from being a free-for-all for every entrepreneur. In general, to qualify for the full deduction, your taxable income must be below $157,500 if you're single or $315,000 if you're married and file jointly.

2. If income exceeds these thresholds, you may not qualify for the deduction

Entrepreneurs with potentially high-earning service businesses, such as doctors, lawyers, CPAs and financial advisors—those positioned to make a lot of money--may not be able to take advantage of the deduction because their incomes exceed the limits.

3. Your spouse’s income: Another caveat that may further limit the potential deduction 

Partners in a business may find themselves in another situation in which one owner gets the 20% deduction and the other doesn't. While partners may qualify, if they have a high-income spouse, they may wind up exceeding the taxable income threshold. In this case you can have two people doing the same work for the same pay, but only one can take the deduction on his/her return because of other factors.
An LLC protects owners from having their personal assets seized by the business' creditors. For many entrepreneurs and small business owners, an LLC remains the best choice for an upgrade to a sole proprietorship. With the new tax laws, an LLC now provides additional benefits.

Are you planning to upgrade your business status to a corporation in the new year?

Make an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

Special Needs Planning: A Multigenerational Effort

A daughter and sibling steps up to bear a heavy load

Let’s step into Sharon’s shoes. She’s the sister of Andy, who is developmentally disabled. Their elderly parents now count on Sharon’s help for shopping, getting to doctor appointments and overseeing their financial affairs.

Sharon lives the closest to their parents, so by default, the bulk of their care has become her responsibility. With their own failing health, her parents can no longer take care of Andy. Without long-term care planning, whether through savings, insurance or both, all of this family care becomes Sharon’s responsibility.

This is a heavy burden to place on anyone

This is a signifiant responsibility, especially for someone with a career, which is the case with Sharon, a CPA. She has two kids, a husband and a dog, and her life gets really nuts for at least three months every year. Sharon just turned 40, and she’s trying to save money for her kids’ college and her own retirement. Some days it all looks completely impossible.

With a special needs child, the needs grow exponentially

We talk a lot about being proactive, doing comprehensive estate planning that includes Living Trusts. But when there’s a family member with significant disabilities, the stakes quickly get higher; planning for their care becomes a family affair that transcends generations. Siblings need to be involved in the planning and care of their special-needs family member.

Parents of special needs children are focused on planning for a time when they will no longer be there to care for that child. Planning must cover a range of issues:

• Who will manage the assets set aside for the child?
• Who will oversee the child’s care needs?
• What financial planning must be done now to ensure there are adequate assets to provide for that child?

Planning and financing two retirement strategies

As parents of special-needs children plan for retirement, they need to be developing and financing two retirement programs—one for themselves and one for their special-needs child.

Sharon’s story illustrates the importance of financial planning

Many parents of special-needs children envision their special-needs child living at home with the parents throughout their lives. That’s a good strategy, but if the child outlives his/her parents, it’s short-sighted. Adjusting to a new living arrangement can be traumatic for special-needs individuals. It takes time and stamina to research and leverage government and community benefits to reduce the burden on the other family members.

Does your family need to create or update a Special Needs Trust?

Make an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

Don’t Underestimate the Power of a Deed

Jeff had been trying to sell a house he’s owned for 20 years. His realtor found a good buyer, but the preliminary title report showed that the man from whom he had purchased the property had a lien against it. The title company won’t issue title insurance for the new buyer until Jeff gets the lien removed, and Jeff has no idea why it’s there or where to start after so many years.

This cautionary tale illustrates the importance of a properly transferred Deed

These kinds of Deed issues are uncommon, but when they do occur, they make you aware of the power a Deed. Without clear title to a Deed, you can neither buy nor sell a property.

Deed of Trust is a mortgage lien on a property

In California we use a Deed of Trust to put a mortgage lien on a property. The Deed of Trust is recorded and serves as a lien. Deeds of Trust usually carry a provision that if the property is sold or otherwise transferred, the bank can call the loan due and payable immediately. Also, the presence of the lien on the property clouds the title, resulting in your not being able to sell the California property without paying off the existing mortgage and releasing the lien.

The mechanics of paying off the mortgage are straightforward

When you close escrow on a property, the escrow officer takes whatever money is necessary from the sale proceeds and pays off the existing mortgage. The escrow office then records a Reconveyance Deed, which cancels the Deed of Trust in the public records, letting the public know that the Deed of Trust is no longer in effect, thereby clearing the title.

So what happened in Jeff’s case?

In Jeff’s case, the most probable scenario is that the title company and escrow company that handled the purchase made a mistake. It happens. It’s likely they paid the balance of the loan, but through an administrative error, either failed to record the Reconveyance Deed or perhaps recorded it under the wrong parcel number.

• At the same time, the title company issued a title insurance policy. The purpose of this policy is to protect you from exactly this type of problem.
• Title insurance works just like your car insurance. If you get in an accident, you notify your insurance company so they can take care of you. The process is the same with title insurance.
• What Jeff should do is call his old title company and find out how to make a claim.
• At this point, the title company should figure out what they need to do to clear the title.
• If the mortgage company that is the beneficiary of the Deed of Trust still exists, they may be willing to go ahead and record a Reconveyance Deed.
• If the lender can’t be found, or otherwise isn’t willing to remove the lien, the remaining step is to file a lawsuit and ask a judge to clear the title.

In Jeff’s case, unfortunately, there’s been a 20-year interlude, and it well may require a legal intervention for him to get the title to his property so that he can sell it.

Do you have a Deed that needs to be transferred?

A Deed transfer is something that we can accomplish fairly easily, sometimes within a day. A cautionary note–many people have done refi’s over the last few years, and it’s easy to forget to move your property’s Deed back into your Trust. Make an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

New Opportunities for an Aging Work Force

Robert Metoli, 57, worked for eight years as a skilled technician at Lee Spring, a small Brooklyn manufacturer. His job required his standing all day and it took a toll; debilitating back pain meant he would have to quit a job he liked. The company’s CEO didn’t want to lose a good employee, so he gave him an opportunity to join a team of engineers that created work orders for jobs going out into the factory. The company scheduled and paid for the necessary training.

An experiment that worked

This mutually beneficial information-sharing between Metoli and the engineers was successful, and he’s now able to continue working, free of pain. A New York Times story, Reaping the Benefits of an Aging Work Force, by Kerry Hannon, shows how other employers are finding creative ways to keep their older workers on the job. They value their loyalty, experience and work ethic and flesh out their workforce with GenXers and millennials.

Trends and statistics on older workers and retirement

• Many people, especially those who own their own businesses, don’t have any immediate plans to retire, or perhaps plan to semi-retire.
• More than half of baby boomers plan to work past age 65 or not retire at all, according to a report by the Transamerica Center for Retirement Studies.
• Many worry that they will outlive their savings, that Social Security benefits will be reduced, and that they may someday need expensive long-term medical care.
• Two age groups, 65 to 74 years old and 75 and older, are projected to have increasing annual rates of labor-force growth, according to the Bureau of Labor Statistics.
• A problem associated with this growing demographic of older workers: Negative attitudes about the cost of older workers, their stamina, their technological ability and their enthusiasm for learning new ways of doing things.

A rising number of employers are hiring, retaining and supporting workers over 50

• In our example above, Lee Spring was among 13 New York businesses and nonprofits that received Age Smart Employer Awards through this program.
• The employers offer training and education opportunities and flexible scheduling; adapt physical tasks to the abilities of workers; provide advancement and leadership training for workers of all ages; retrain older workers; and allow phased retirement.
• According to one expert, Dr. Linda Fried, Dean of the Mailman School: “We’ve increased our life expectancy by 50% in the last 100 years. Now we have to design society for longer lives.”
• 100 businesses and nonprofits entered the 2017 Age Smart Employer competition, double the number in 2016. Here are four other companies with pioneering programs for older workers.

1. Military shipbuilding company, Huntington Ingalls Industries, operates The Apprentice School in Newport News, VA

• No age limit. The company’s overall workforce of 22,000 is composed of 38% baby boomers, 40% millennials and 20% GenXers.
• It takes a long time to become a master shipbuilder; this company values experience.
• Keeping its workforce engaged with their work, there are intergenerational mentoring programs. Younger workers mentor older ones in the use of technology.

2. PKF O’Connor Davies is part of a network of independent accounting and advisory firms in 440 cities and 150 countries

• Their 800 employees, ranging in age from 21 to 83, have the option to work shorter work weeks or flexible hours.
• Some employees have relocated to offices closer to home for easier commutes or they telecommute part time.
• Employees nearing retirement have reduced their hours or work as consultants.
• “Hiring older workers for our team has been a homerun for us as well as for workers about to go into retirement or in retirement,” said Thomas F. Blaney, a partner and director of the firm’s Foundation Services. “It’s not about age really. We just want talented people.”

3. Silvercup Studiosis a New York, family-owned film and television production company

• It was the film site for “The Sopranos,” “Girls” and “Sex and the City”.
• Two workers recently celebrated their 30th anniversaries with Silvercup.
• People with experience makes sense—they’re more settled and loyal. The costs of acquisition and training are high.

3. Michigan furniture maker, Steelcase, offers workers a phased retirement program

The company began a phased retirement program in 2012.

• For the past year and a half, David Rinard, 62, director of environmental special projects, has been transitioning toward retirement.
• He started his career at Steelcase in 1979 as an assistant environmental engineer and moved steadily up the ranks to director of global environmental performance, a position he held for 13 years.
• Today, he’s semiretired. He earns an income without worrying about health care coverage before he is eligible for Medicare at 65.

A wide range of retirement-related conversations

Living Trusts are an important service for us, and many of our clients are in their 60s or 70s, so retirement-related topics are frequently part of our office dialog. If a Living Trust is something you keep putting off, there’s still time to complete your Trust in 2018. Make an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.