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.

Estate Rage: Inheritance Disputes Are on the Rise

James and Virginia Null were always fair, dividing everything equally among their three daughters. They worked hard at avoiding any hint of favoritism—going so far as to buy three sets of everything—china, crystal and jewelry—so there would be one to pass on to each daughter.

But fairness took a nosedive when Virginia Null died in 2000 at the age of 62. Within weeks of her death, her husband changed his financial arrangements.

• He designated his middle daughter Amy as a joint tenant on his financial accounts with the sole right of survivorship.
• He added Amy to the title to his house.
• Upon his death in June 2002, almost all of Mr. Null’s assets, estimated at several hundred thousand dollars, went directly to Amy. Her two sisters received next to nothing.

This article in The New York Times, Personal Business; A Legacy of Rancor: Estate Fights Rising, illustrates a battle that’s becoming increasingly frequent.

Mr. Null’s Will, written in the early 1980s, stated that his estate was to be divided equally among his three daughters, but “the right-of-survivorship clause and joint tenancy upstaged the will completely,” said Adam Gaslowitz, an Atlanta lawyer who is representing the two other sisters who are contesting the estate.

Litigation more common as family strife over inheritances increases

Lawyers say this is typical of suits contesting Wills, often filed by baby boomers whose parents are now in their 70s and 80s. Mr. Gaslowitz has written on this topic for law journals, and he has seen a steady increase in estate fights among the children.

“A lot of people are living off the parental dole. As their parents near the end, these children grab as much as they can and are far less willing to share it with their siblings.” An uneven economy, layoffs and shrunken retirement plans have hurt many. A huge number of baby boomers have done nothing to prepare for retirement, and accumulated assets from their more frugal parents become a critical part of their retirement planning. When things go badly, people realize that they need their inheritances.

The huge transfer of wealth was misstated

”There had been some papers in the early 1990s that suggested there would be this large transfer of wealth from the current retirees to the baby boomers,” said John Gist, the associate director of the AARP’s Public Policy Institute. ”But we concluded that this was not going to be the huge windfall that everybody had thought.”

Amy stepped in after her mother died

In the case of the Null estate, the two sisters argue that Amy Osborne–who lived ten minutes away from their father and handled many of his financial affairs after their mother died–persuaded him to change his financial arrangements. The sisters believe he had no idea what he had done, that he was vulnerable and dependent, recovering from complicated heart surgery.

Amy’s lawyer assures us that he knew exactly what he was doing

“If elderly parents favor one child over others because of that child’s contribution to the parents’ wellbeing”, they have every right to leave their estate to those who are most deserving.

As the family planned the funeral, the other sisters began to realize that something was wrong. Shortly thereafter, Amy served them with papers—they had ten days to contest the distribution of the estate. Blindsided by the turn of events, the sisters contacted a lawyer. Said one sister, “I thought this would never happen in my family. I was so naïve.” The bottom line: When there’s money involved, funny things happen in even the closest families.

It’s important to note that even with a Living Trust, assets that have a named beneficiary, such as a life insurance policy, an IRA or a 401(k), assets held in joint tenancy, and those that are Payable or Transferable on Death fall outside a Living Trust.

Is a Living Trust something you keep putting off? Make an appointment today by contacting us at one of our three Bay Area offices. Our dedicated team is helpful, compassionate and affordable.

9 Things That May Surprise You About Probate

John’s father died unexpectedly in 2012, and he never quite got around to creating a Will or documenting his assets and their locations. The result? Five years later, John, our client, is still trying to finish probating his father’s estate. It has required a monumental detective effort to identify his father’s assets and their locations. As John unraveled the puzzle, he discovered that his father’s assets spanned countries and continents—each requiring a separate Probate procedure.

When someone dies without a Living Trust that identifies how his/her estate will be distributed, the estate goes into the court-supervised process of Probate. It can seem daunting, but thankfully, it is rarely as complicated as John’s father’s estate. Probate is actually a very methodical process, and California Document Preparers assists our clients through every step of the process.

Here are 9 frequent questions and misperceptions about Probate that you may not know:

1. An estimated 50% of estates in the U.S. go through Probate

If you’re facing Probate, you’ve got lots of company. More than 50% of Americans do not create a Living Trust, and their families are left to deal with Probate at what is already a very difficult time of loss and mourning. The Probate process can be time consuming and expensive.

2. Not all assets are subject to Probate

Assets that have a named beneficiary, such as a life insurance policy, an IRA or a 401(k), assets held in joint tenancy, and those that are Payable or Transferable on Death are not subject to Probate.

3. Probate typically takes 9-12 months

Probate allocates a four-month waiting period for creditors to file outstanding claims. In Contra Costa County, for instance, the Probate process generally cannot be administered in fewer than nine months. The times can vary by county, and the complexity of the estate can have a significant impact. If the deceased has made large gifts/donations during his/her lifetime, is a beneficiary of a Trust, owned a business and/or a significant amount of real property—especially if it’s in another state or country, as is the case with John’s father—the process will take much longer.

4. There is a time limit for creditors to file claims

One of the primary responsibilities of the Administrator is to properly notify all creditors of the estate. Once properly noticed, creditors must issue their claims to the court within the creditor claim period, generally four months.

5. The estate’s personal representative manages the Probate process

A decedent names an Executor in a Will. When there is a Will and an Executor, the court likely will name that person the Administrator of the estate for the Probate process. If there is no Will, or the Executor is unable to act, the court appoints an Administrator. It’s important that this role is filled by someone who is able to deal with sometimes complex financial matters.

6. Property owned outside California is a separate Probate

If the decedent owned real property outside the home state, a separate Probate must be opened in that state, called Ancillary Probate.

7. The Administrator may collect fees

In addition to out-of-pocket expenses for managing and settling the estate, Administrators may earn fees for their services, typically from 2-4% of the estate’s value. Probate can be very time consuming, especially for complex estates.

8. The Administrator can be held liable

The Administrator can be held personally liable for improper management of the estate. The Administrator also can be removed if an action is brought by a beneficiary or other person that clearly demonstrates mismanagement.

9. Heirs must be notified about proposed actions

California law requires that heirs and beneficiaries be properly notified when the Administrator desires to take certain actions, such as sale of real property, occur. Failure to properly notice or handle issues regarding the estate may result in legal action from beneficiaries.

While the Probate process is fairly straightforward, it can quickly become complex when there are multiple beneficiaries and complicated assets. We assist our clients through each step of the process.

Probate is a growing service for us

We are now featuring Probate at one fixed price: $4,500. No surprises. Contact California Document Preparers at one of our three Bay Area offices to schedule an appointment or find out how we work with our clients.

Baby Boomers: Learning Lessons in Estate Planning from Their Parents

While many baby boomers have made alarmingly few plans for retirement, others are immersed in a kind of geriatric boot camp as they help their parents navigate their final years. One adviser recommends using your parents’ experience as a training manual: Healthcare considerations, life insurance, Living Trusts and funerals are the building blocks of end-of-life planning.

Learning the hard way: A Living Trust means that your family will avoid Probate

The long-term implications of not having a Living Trust are significant. Without a Trust, your estate will need to go through the expensive and time-consuming Probate process. Baby boomers who have been left to Probate their parents’ estates have vowed to leave their own children better prepared.

Something to think about: Prepaid funerals or burial expenses

While the estate can be used to pay for funeral expenses, you will need liquid assets to pay for funeral expenses. If a parent has been in hospice, nursing care or assisted living for the last few months of his/her life, there likely will be bills from a wide range of healthcare providers that will need to be paid.

It’s not unusual that assets are tied up in Probate or otherwise inaccessible. Not all baby boomers can front the money needed to pay for their parent’s burial expenses and the inevitable healthcare bills that trickle in. As part of long-term planning, many families set aside money or prepay for at least a portion of these inevitable expenses.

Planning for health complications

Many seniors look forward to their retirement as time to pursue second careers, volunteer, travel and enjoy their friends and families. Unfortunately, unexpected health issues and their related costs can completely derail plans for a blissful retirement.

Boomers learn from their parents that health care is an important part of retirement planning

• An estimated 70% of Americans can expect to use some form of long-term care at some time in their lives.
• Statistics for 2018 show that 5.7 million Americans are living with some form of dementia.
• More alarming, 200,000 people under the age 65 have early-onset Alzheimer’s. At this time, there is no treatment or cure for this insidious disease.

Escalating insurance costs

Today’s medical advances mean that we can make smarter decisions about our healthcare needs. We’re living longer, but depending on our health, that may not mean that we’re living better. If life or disability insurance is part of your plan, it’s important to know that rates increase as you get older. Many life insurance policies bundle long-term care into their plans. Researching family history for heart disease, diabetes, dementia, cancer or other hereditary illnesses may help you make informed healthcare decisions.

Learning from our parents: Plan for the worst and hope for the best

Don’t wait until there is a crisis; figure this out while you’re healthy and able to make thoughtful, informed decisions. Everyone who’s had to cope with the loss of a parent knows the importance of careful estate planning and the benefits to surviving family members. Baby boomers whose own parents have left them with a poorly planned estate are learning from this experience and leaving their own families better prepared.

There’s still time to create your Living Trust in 2018. Our comprehensive Living Trust package includes a Power of Attorney and Advanced Healthcare Directive. Contact us at one of our three Bay Area offices to schedule an appointment. Our dedicated team is helpful, compassionate and affordable.

Divorce and the New Tax Laws: What You Need to Know

As if Divorce weren’t stressful enough, the GOP Tax Cuts and Jobs Act that was signed into law last December may be creating additional anxiety for divorcing couples. If you’re getting divorced or thinking about Divorce, you should absolutely be paying attention to these changes. Not understanding how they will affect your Divorce can be a very expensive mistake.

 1. Tax rates got lowered and the standard deduction got higher

• The new tax law lowered the tax rate for most taxpayers–generally good news, right? It also doubled the standard deduction that every taxpayer who didn’t itemize deductions used to get. That may make you think your income taxes will drop in 2018, but like everything this Congress does, there’s more to the story, and it’s rarely good news.
• Fewer people are likely to itemize next year because the standard deduction–what you can subtract from your income before figuring out how much taxes you owe–is nearly doubling to $12,000 for single filers, $18,000 for heads of households and $24,000 for married couples that file jointly.
• Despite lower tax rates, some filers who usually itemize could see their taxes rise because many popular deductions are being reduced or eliminated. State and local income taxes, sales taxes and property taxes were fully deductible under the old tax law. Now they are capped at a combined $10,000 annually. There are also limits on how much interesthomeowners can deduct on new mortgages.

2. Personal exemptions

• In the past, when you filed your taxes, you claimed yourself and each of your kids as dependents on your taxes. Known as “personal exemptions” or “dependency exemptions,” these tax breaks allowed you to subtract a certain amount of money from your taxable income for every dependent you claimed. The more dependents you claimed, the more money you could subtract.
• When couples divorced, they often argued over who got to claim the kids as dependents on their taxes. The new tax law has eliminated all of these personal exemptions. Beginning in 2018, and continuing through 2025, no one will get a tax exemption for claiming the kids as dependents.

3. Child tax credit

• Before 2018, the child tax credit lowered the amount of taxes that parents paid by $1,000.00 per “qualifying child.” In the new tax law, Congressincreased the amount of the child tax credit to $2,000. They also dramatically increased the amount of money that parents could make before the child tax credit gets phased out. That’s the good news.
• A child only qualifies for the child tax credit for the parent who can claim him/her as a dependent. In your Divorce settlement you still need to negotiate which parent can claim each child as a dependent. If you don’t identify who can claim the child as a dependent, you risk losing the child tax credit. That can be a big deal because the child tax credit directly reduces the amount of income tax you pay. It doesn’t just reduce your taxable income. It reduces your taxes. And really, who wouldn’t want to pay $2,000 less in taxes per year?

4. Education expenses (529 Plans)

529 Plans are special tax-advantaged savings accounts that parents could create to save money for college educational expenses.

• In the past, 529 Plans could only be used to fund “Qualified Higher Education Costs”–college tuition and certain other college expenses.
• Now, if your kids are going to private school, you or your spouse could use the kids’ college money to pay for it. That will save you from having to pay the private-school tuition yourselves.
• Under the new tax laws, parents can take up to $10,000 per year out of a child’s 529 Plan and use it to pay for that child’s elementary or secondary school tuition.
• Deciding what to do with your kids’ 529 Plans is now one more thing you can negotiate in your Divorce.

5. Moving expenses

When a couple divorces, someone has to move out. In many cases, the person who moved out also gets a new job.

• Before this year, if you were moving because of a new job, you could deduct your moving expenses from your taxable income.
• Now, you can’t, and moving can be expensive—this may be something you negotiate in your Divorce settlement.

6. Mortgage interest and HELOC payments

Under the current tax law, you can deduct the interest you pay on your home mortgage. You could deduct that interest if it was on any kind of a mortgage or home equity loan. It didn’t matter if you actually used the money to pay for your home or pay off your credit cards.

• That’s all changed now. The new tax law limits the mortgage interest deduction to interest paid on the first $750,000 of your loan—not $1,000,000.
• To be deductible, the loan must also be used to buy, build, or substantially improve the home that secures the loan. That also applies to home equity loans and lines of credit.
• The IRS has now closed a potential means of cash flow that often made settling your Divorce easier.

7. Medical expenses

The changes to the medical expense deduction are positive. Before, you could only deduct medical expenses that exceeded 10% of your adjusted gross income. Now you can deduct medical expenses that exceed 7.5% of your income. There’s a bigger chance that you’ll be able to deduct medical expenses on your taxes. Congress made this change retroactive to 2017 so that you can take advantage of this tax deduction immediately. But before you get too excited about this, be aware that there’s an insidious component to this tax change.

• From 2019 on, the deduction threshold goes back up to 10%. But get this: Congress just gave us a two-year reprieve on the medical expense deduction.
• In order to deduct medical expenses at all, you must itemize your deductions. Since fewer people will be able to itemize their deductions in 2018, fewer people will be eligible to use this deduction.

8. A repeal of the deduction for alimony payments

In a previous article, we discussed the repeal of a deduction for alimony payments, effective 2019. Potential divorcees have the rest of 2018 to use the alimony deduction as a bargaining chip in their negotiations with estranged spouses. Many believe that removing this deduction will make Divorces more acrimonious, that people won’t be willing to pay as much alimony. Since it is women who tend to earn less and are most often the recipients of alimony, many believe this tax change could disproportionately hurt women.

Consulting a tax professional

Even if you are just thinking about Divorce, it’s wise to consult an accountant or financial planner who can identify problems and opportunities for deductions that may not be apparent to you.

We’ve assisted hundreds of couples with their uncontested Divorces

If you and your spouse are in agreement about your Divorce—including division of property and a parenting plan–we can assist you and help you save a significant amount of money. Contact us at one of our three Bay Area offices to schedule an appointment. Our dedicated team is helpful, compassionate and affordable.