Seniors and Trusts: Should We Also Name a Co-Trustee?

“Alice” and her husband “Andrew” had a very good question about appointing a Successor Trustee for their Living Trust. At 80, Alice had been diagnosed with cancer, and she was still very weak after months of chemotherapy. Andrew was 85 and dealing with a number of health problems. He had had a stroke a few months ago and was now partially paralyzed. They were getting stronger and were able to live independently in the family home. Their daughter, Olivia, lived close by in Walnut Creek, called her parents every day and visited at least once each week.

When creating a Living Trust, couples generally serve as each other’s Trustees

Couples typically serve as each other’s Trustees and don’t generally name another Co-Trustee. In Alice’s case, however, she was reluctant to burden Andrew with this responsibility, and her cancer had left her feeling vulnerable. She decided to name Olivia as Co-Trustee to help pay bills and manage their Trust’s assets if it became necessary.

Co-Trustee agreement set up at financial institutions

Alice and Olivia went to the couple’s banks and Olivia was added to all of their Trust’s bank and brokerage accounts, in her capacity as co-Trustee of the Living Trust. Importantly, these accounts still belong to Alice and Andrew; Olivia is essentially like a trusted hired co-manager who is tasked with controlling the assets along with Alice. Olivia has a fiduciary duty to work in the best interests of Alice and Andrew.

These financial institutions also issued new checks indicating that Olivia had been added as a Co-Trustee. Olivia will be able to manage and monitor the accounts as well as pay bills from these accounts. By naming Olivia now as a precaution, she can begin taking a more active role as the need arises.

Additional benefits of adding a Co-Trustee: Protection against elder abuse

Many seniors have lost significant assets through fraudulent scams of elder abuse. Appointing a trusted family member or friend as Co-Trustee to monitor accounts can help eliminate this kind of scam. Note that the Co-Trustee does not have the power to amend or revoke the Revocable LivingTrust, and the authority invested in this role can be managed according to the agreement that is created.

A big part of end-of-life planning is creating a Living Trust, and many of our clients make this one of their New Year’s resolutions. Schedule an appointment today at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

Divorce 2019: What You Need to Know about the New Tax Laws

The holidays are over, and many Bay Area couples will begin working through the details of their Divorces. January historically has the highest number of Divorce filings. The paperwork, parenting plansand division of assets never get any easier. And this year, the changes from the GOP tax plan could add another layer of stress.

Here’s what you need to know if you and your spouse will be divorcing in 2019 or beyond:

1. Changes in alimony payments 

We’ve talked about this in previous articles. Alimony paid will no longer be tax-deductible and alimony received will no longer be taxable income. The results? This could make the divorce process more acrimonious and emotional. High-income divorcing spouses will fight aggressively to pay less alimony because the government will no longer subsidize these payments via the tax deduction. Many worry that this will penalize women, whose income typically falls sharply after a divorce. Lower-income spouses will likely fight to get as much alimony as possible, since the tax burden will be removed and the payments will go further.

2. Modifications to Divorce agreements: People who are already divorced will be grandfathered in

If divorced couples’ Divorce agreements are modified in 2019 or beyond, they could be subject to the new rules as well. If the modification states that it is to be governed by the new rules, then the new rules will apply. If the modification says nothing, however, the old rules will apply. The bottom line: People should be extremely cautious when modifying Divorce agreements in 2019 and beyond.

3. Children are no longer the tax deduction they used to be

The 2017 tax law eliminated the $4,050 exemption for each dependent, through 2025. The child tax credit, however, has doubled from $1,000 to $2,000. Remember, too, that the standard deduction has almost doubled because of the 2017 tax law. Single taxpayers in 2019 will see a standard deduction of $12,000; it was $6,350 in 2017.

4. Pre- and post-nuptial agreements may be affected by the tax changes

The new rules may nullify many of the items in such agreements, so all pre- and post-nuptial agreements should be reviewed by a financial consultant or legal specialist.

Additional tax strategies if Divorce is part of your 2019 plans

• Consider alternative investment/tax strategies. If you are the higher-income spouse, consider giving an Individual Retirement Account (IRA) to the lower income spouse, if applicable, because that shifts the tax burden to the receiver when that IRA is accessed. If you’re the lower-income spouse, you would inherit that burden when you cash out your IRA. Both parties should carefully consider their total tax equations and find the most comprehensive way to benefit financially over the short- and long-term.
• Tax-deferred strategies. Financial planners say some spouses may choose to forgo alimony payments and explore alternativessuch as lucrative real estate, larger shares in tax-deferred retirement accounts or some complex combination of the two that maximizes tax advantages. Options include a Qualified Domestic Relations Order (QDRO) that sets up future payments to a lower-earning spouse from a higher-earning spouse’s retirement account, taxed at the lower earner’s rate.
• Wait for your advisers to get up to speed on new laws and trends.This isn’t a contest; you don’t have to be the first couple to file for divorce in the new year. Your financial adviser will discover patterns and trends and be better prepared to advise you on financial issues if you wait a few months. Let someone else be the guinea pig!
• The benefits of cashing out. You might consider taking (or giving) a lump-sum Divorce payment instead of monthly payouts. This provides the opportunity to invest, pay for home repairs, or simply the ability to move on quickly and have a fresh start.

If your Divorce is uncontested, we can assist you and help you save a significant amount of money. Schedule an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

All Aboard the Canni-Bus!

Meet Shirley Avedon. At 90, she missed out on the summer of love, never smoked a joint or tripped out on hallucinogens. But her carpal tunnel syndrome was shooting pains into both of her hands, making it difficult to do even simple tasks. “It’s very painful, sometimes I can’t even open my hand,” Avedon said.

Time to try alternative treatments

Kaiser Health News profiles the story of Shirley and Bud and Bloom, a dispensary in Orange County. Shirley had trouble tolerating the steroids her doctor prescribed and had little faith in the surgery he was recommending. Ready to try alternative treatments, she’s been joining her friends on the free shuttle from her retirement community to a marijuana dispensary in Orange County.

Shirley managed an oncology office for 25 years, and she’s now seeking the same relief their cancer patients used to get from smoking marijuana many years ago. “At that time marijuana wasn’t legal, so they used to get it off their kids! I’m a believer. It was fantastic to see how much marijuana helped them.”

An interest in pain-relieving CBD rather than THC

Avedon’s interest is not about getting high, but on relieving pain. She’s tried a topical cream that is sold as a pain reliever. It contains cannabidiol (CBD), formulated without THC, or tetrahydrocannabinol, marijuana’s psychoactive ingredient. “It helped a little. Now I’m going back, hoping they have something that will provide more relief.”

The cannabis industry is booming—even as it remains illegal on the federal level

A total of 30 states have legalized marijuana for medical or recreational use. The cannabis industry is booming even as it remains illegal, according to federal law. Surprisingly, among the fastest growing group of users is those over 50, with steep increases among those 65 and older. Some dispensaries are tailoring their pitches to seniors like Avedon who are seeking alternative treatments for their aches, pains and other conditions.

The bus is paid for by Bud and Bloom, a licensed cannabis dispensary in Santa Ana—a half-hour drive to the dispensary. Half of the 35 seniors on board are repeat customers; the other half are cannabis newbies who’ve never tried it before, said Kandice Hawes, director of community outreach.

Many seniors are seeking more information

“Not everybody is coming to be a customer,” Hawes said. “A lot are just coming to be educated.” One 72-year old woman is using cannabis to help her sleep—a common problem for seniors. She was taking prescription drugs and still slept fitfully. She was hopeful that cannabis would help relieve her back pain and help her sleep.

For those seeking more information, Hawes invited the seniors into a large room with chairs and a table set up with free sandwiches and drinks. She gave a presentation focused on the potential benefits of cannabis as a reliever of anxiety, insomnia and chronic pain and the various ways people can consume it. Several vendors promoted their products that included edibles, vaporizers, tinctures and topical creams.

At Bud and Bloom, seniors make up the bulk of the dispensary’s new business

• Fear of getting high is senior consumers’ biggest concern. The dispensary’s job is education, assuring potential clients that they don’t have to get high to get relief.
• Cannabis remains illegal under federal law, making it harder to research

While cannabis is legal both medically and recreationally in California, it remains a Schedule 1 substance–meaning it’s illegal under federal law–making it harder to study.

• Limited research suggests that marijuana may be helpful in treating pain and nausea, according to research published by the National Academies of Sciences, Engineering and Medicine.
• Less conclusive research points to its helping with sleep problems and anxiety.
• A growing number of patients are interested in using it for anxiety, chronic pain and depression.

The need to proceed with caution

Products bought at marijuana dispensaries aren’t FDA-regulated, as prescription drugs are. Dose and consistency can vary. Cannabis can vary dramatically according to plant, location and growing conditions. It is vulnerable to pathogens and mold. For those who are frail and have weakened immune systems, not knowing the exact levels of THC and CBD can have serious consequences.

There’s a lot to be learned about packaging, identifying quality and setting standards. Experts believe that we’re a long way from being able to make sure that people are getting consistent, high-quality product.

Cannabis: Potential risks and side effects

Dr. Elinore McCance-Katz directs the Substance Abuse and Mental Health Services Administration. “When you have an industry that does nothing but blanket our society with messages about the medicinal value of marijuana, people get the idea this is a safe substance to use, and it’s not true.”

• Side effects can include increased heart rate, nausea and vomiting.
• Some studies show that with long-term use comes the potential for addiction.
• Research suggests that between 9-30% of those who use marijuana may develop some degree of marijuana use disorder.

Yet, if it gets patients off more addictive and potentially dangerous prescription drugs or opioids, that’s a good thing.

As a growing number of Americans turns to cannabis for health reasons, things to keep in mind

• Talk to your doctor, who may have some concerns, particularly for those already taking prescription drugs.
• Be aware of potential dosing issues. Older adults metabolize drugs differently than young people do. Start with the lowest possible dose. Be especially careful with edibles—it can take an hour or so to feel their effects, and there’s a tendency to take more when you don’t initially feel anything. Give edibles time.
• Elderly people are also more sensitive to side effects. If you start to feel unwell, talk to your doctor right away.
• Look for licensed providers. In some states like California, licensed dispensaries must test for contaminants—mold and other pathogens can be especially dangerous for the elderly.

An update on Shirley

She bought something they told her was wonderful for $90. She believes that if it helps ease her carpal tunnel pain it’ll be worth it.

An important part of end-of-life planning is creating a Living Trust

At California Document Preparers, many of our clients are seniors or those caring for seniors.  Our conversations cover a wide range of related topics, including healthcare, end-of-life-planning and the importance of creating a Living Trust. The high cost of medications comes up often, and cannabis as an alternative treatment is becoming an important discussion topic.

Is creating a Living Trust in 2019 on your to-do list? Jumpstart the process by scheduling an appointment today at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

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.