We’ve written often on this blog about the concerns that caregiver children have for their elderly parents, but that’s only one side of the story. Many families also have an adult child living far from home, and though the concerns of the long-distance child may be different from the one who lives down the street, they’re no less important. Here are some of the more common concerns we hear about in our office, and some suggestions for addressing them:

I worry that when I talk to my parents on the phone I’m not getting the whole truth about their health or situation. This is one of the most common concerns of long-distance children. The best thing to do is be up front with your parents. Tell them that you want—and need—to know the truth, even if they think it will worry you. If you still don’t think they’re being completely honest, enlist the help of a sibling or nearby friend or neighbor who can be your eyes and ears. You can also ask your parents to sign a waiver with their doctor giving him or her permission to share their medical details with you.

I’m afraid that my mom is losing the ability to manage her money and could end up broke. Seniors are the most common victims of financial fraud, and it’s hard to keep tabs on mom or dad if you live far away. The best way to prevent financial fraud is to talk about money with your parents early and often. It may go against the grain, but discuss your own finances with them if it will help them open up about theirs. Visit as often as you can and watch their mail for letters from promotion companies or shady looking “charities”; and put your parent’s phone number on the National Do Not Call registry (1.888.382.1222 or www.donotcall.gov)

I feel guilty that my sister (who lives in the same town as my parents) is shouldering the bulk of the burden. The sibling who lives closest does often end up being the physical caretaker of elderly parents, but that doesn’t mean those who live far away can’t help. The most common contribution from long-distance children is financial support—and that’s no small thing! Offer to pay for a housekeeper, in-home care assistant, taxi service, etc. And don’t forget to talk to your sister about what she needs. Helping your caregiver sibling is another way of helping your parents.

I love my parents; I want to do more to help than just give them money. A common complaint of seniors is loneliness and fear of being forgotten. One way to help your parent and help calm your own fears is to simply keep in touch. Make a point of calling your parent on a weekly or bi-weekly basis. Send frequent cards or e-mails. Plan a family vacation that your elderly parent can be a part of. You can help your parents with your expertise as well; try to be involved in “the big stuff” such as meetings with estate planners, financial planners, nursing staff, or geriatric care managers. And most importantly, work regular trips to visit your mom or dad into the budget. There’s really no substitute for face-to-face communication.

I think that my siblings close to mom and dad are making the wrong decisions for them, or are pressuring them to make decisions they don’t really want to make. Undue influence is a serious accusation, and if you truly think your siblings may be threatening or manipulating your parent you should seek the help of a professional. Before you take irreversible action you need to have a private conversation with your parent; ask if they are being coerced and try to determine if fear is a factor. If you still think your parent is being manipulated against their will contact an elder law attorney immediately.

I don’t want to miss out on what could be my last moments with my parent. There’s just no way around it, your parents won’t be here forever, and nobody wants to feel that there were things left unsaid. If you truly worry that your parent is facing his or her last days the best advice we can give is to go visit if at all possible, and make your visit matter. Look through old photos, talk about your memories, and say the things that need to be said. If you can’t visit in person make phone calls or send letters. Don’t save your best sentiments for the eulogy—tell your parents how important they are to you today.

Most people don’t think about visiting a financial planner until they’re old enough to have some money to manage, but if your child is a recent college graduate, or in his or her final year, you may want to consider a joint trip to your financial planner. A recent article in the Boston Globe lists a number of very compelling reasons why even young adults with little or no savings can benefit from a little bit of planning.

1. A visit to a financial planner can help young adults learn early the importance of budgeting: “If you are living on your own for the first time you haven’t had the responsibility yet of paying bills and learning to make your paycheck last until the next payday… One of the basic tenets of financial planning is to know where your money is going.”

2. Start planning for retirement while you’re still young. The earlier you start, the better off you’ll be. “A financial planner can go over the various fund choices in your 401(k) or other retirement plan and help you choose one or more funds that suit your needs.”

3. Learn how to turn big dreams for the future into a reality. Whether you plan to get married, buy a house, or start your own business, “A Certified Financial Planner® can figure out how much you need to save and create a plan to make saving painless.”

4. And finally, a financial planner can help young adults learn the basic tenets and terminology of borrowing, lending, saving smart and paying off loans with interest. “Learn about interest rates and how they work, whether they are for credit cards, auto loans, student loan or other borrowing. See how compound interest can help you reach goals faster.” An early trip to a knowledgeable professional can ensure that your child doesn’t get taken in by persuasive credit card companies.

It is common knowledge that 2010 is a great year for heirs. If you didn’t know about the 2010 estate tax repeal, all the media coverage of George Steinbrenner’s recent death (and his heirs’ lucky tax break) probably alerted you. Everybody is saying that 2010 is a good year to die… But what about those of us who plan to live through 2010?

According to the New York Times even hale and hearty individuals can save on their taxes in 2010—it just takes a little more planning. “A bigger issue [than the estate tax]… has become the gift tax, which is linked to the estate tax to prevent people from giving away their fortune in life to avoid taxes at death. It now stands at 35 percent, the lowest rate since the 1930s.” The gift tax is a tax on money or property that you give to another individual while you are still living. Currently an individual may give up to $13,000 per year (or up to $26,000 if you give as a married couple) without incurring gift tax.

If you’re a wealthy parent or grandparent trying to decrease your taxable estate through gift-giving, this is the year to do it for a number of reasons. First, of course, is the historically low 35% gift tax rate. Second, “in addition to the historically low rate, another reason to make sizable gifts this year is that the values of many assets are still depressed. Long-held stocks, real estate and shares in private businesses could all increase in value, and giving them away now will allow them to appreciate with your heirs and not in your estate.” A final reason to consider giving your large gifts before the year is over is that the 35% rate won’t last forever; the gift tax is expected to rise to 55% next year.

How can you take advantage of this lucky confluence of events? Well, as always when you’re dealing with large sums of money (not to mention dealing with the IRS), you’ll want to be careful. We do NOT recommend that you simply write a check for $13,000+. Contact your estate planner or your financial planner to find out how you can safely reduce your taxable estate while giving security to the people you love.

Caring for an aging relative is hard work. Many of the people who serve as caregivers admit that they often feel as if they have two jobs—their day job, and the part-to-full-time job of caregiver. If you consider that in our fast-paced society time is money, then most of these caregivers are not only giving up their time, but also their potential income. Caregivers need to know that it doesn’t have to be this way; caregivers can be compensated according to mutually agreed upon terms of a Caregiver Agreement, or Personal-Care Contract.

Elder law attorneys have known about Caregiver Agreements for a long time, but a recent article in the Wall Street Journal will hopefully raise caregiver awareness of this useful contract; especially, as the article mentions, given the “still-fragile” state of the economy. A Caregiver (or Employment) Agreement “should document a caregiver’s responsibilities and hours and set a rate of pay that’s in line with local practices. Both the caregiver and care recipient should sign the contract and disclose it to the rest of the family.”

An agreement of this sort can be useful not only for the care-giver and the cared-for; it also comes in handy if you think you may need to rely on Medicaid to cover nursing home costs sometime in the near future.

“Before Medicaid will pick up the tab for nursing-home costs, it requires applicants to recoup certain payments made to relatives over the previous five years — and use the money to pay the nursing home… But if payments to relatives are made under the terms of a written employment agreement, often called a personal-care contract, the law allows it.”

But remember, “to pass muster with Medicaid, it’s important to have such a contract in place before the services are rendered.”

This is why it is extremely important to talk to an attorney who is well-versed in elder law and Caregiver Agreements before any contracts are signed or money changes hands.

Owner George Steinbrenner built the New York Yankees from a team worth $10 million to a team worth $1.3 to $1.6 billion, one of the most valuable sport franchises in the world. Because Steinbrenner died in 2010 when there is no federal estate tax, it would apprear that his heirs can inherit the team without losing it to crushing federal estate taxes. Also, as a Florida resident, he may have avoided state estate taxes.

In contrast, when John Kent Cooke died as the owner of the Washington Redskins in 1997, under the then existing estate tax laws, half of his estate could have gone to pay federal and state estate taxes and would likely have resulted in the loss of the team.

But then, there is the small matter of planning……

THE COOKES AND THE REDSKINS

Cooke used charitable planning to avoid a huge estate tax bill in his $825 million estate. By leaving the Redskins and most of the other assets of his estate to a Family Foundation which he qualified as a charity, his estate was able to deduct from his estate taxes the gift to the charity and thereby avoid most of the estate taxes. He left the Redskins to the Foundation with instructions to sell the team. The Foundation put the Redskins up for sale to the highest bidder, but Cooke’s son lost the team because he was outbid by an investment team headed by Daniel Snyder, the current owner. The failure in Cooke’s plan was that he did buy a large enough life insurance policy to provide the tax free funds his son needed to be able to pay the unexpectedly high price for the team but he protected the value of the team through stategic planning.

If Cooke had had the good fortune to die in 2010 when there was no estate tax, he could have eliminated the Foundation and left the team to his son. He would not have had to use the John Kent Cooke Foundation to avoid estate taxes. Of course, the John Kent Cooke Foundation does provide many millions of dollars in scholarships to talented low income students, hardly a terrible thing!

THE STEINBRENNERS AND THE YANKEES

Fast forward to the present: it would seem that in the absence of estate tax in 2010, the Steinbrenner heirs could inherit the New York Yankees and other assets if allotted to them by Steinbrenner’s estate plan without paying federal estate tax. However, if Steinbrenner did not updated his estate plan to take advantage of the one year window of no federal estate taxes in 2010, then he too may have left the bulk of his estate to a foundation and his heirs could lose the Yankees due to such estate tax avoidance techniques. As the details of Steinbrenner estate plan become known, we will all have the opportunity to judge whether the plan anticipated the aberration that is the 2010 tax holiday.

THE LESSON FOR ALL

It goes without saying that most of us don’t own sports teams nor have multi-million/billon dollar estates to concern ourselves with but each of us does have important “legacy” assets, be they monetary or non-monetary, that we will want to pass on to the important people and/or causes in our lives when we are no longer living. Thorough and careful planning can insure that as many of those assets get to where we each of us wants to them to go with as little reduction for taxes and costs as possible.

Modified from “Losing your Business to the Estate Tax”, an article by Roger McClure, Washington Wealth Counselors (R) PC; Copyright, WealthCounsel LLC, 2010.

President George W. Bush signed into law the “Economic Growth and Tax Relief Reconciliation Act of 2001” on June 7, 2001. At that time Title V – the estate, gift and generation-skipping transfer tax provisions of EGTRRA – was heralded as the phase out of the “death tax.”

EGTRRA 2002 – 2009 (the phase out period)

The estate tax unified credit exclusion, which was $675,000 in 2001 but scheduled to incrementally increase to $1 million in 2006, was instead increased to $1 million in 2002, $1.5 million in 2004, $2 million in 2006, and $3.5 million in 2009. The maximum estate, gift, and generation-skipping transfer tax rate, which was 55% in 2001 (with an additional 5% for estates over $10 million in order to eliminate the benefit of the lower estate tax brackets) was reduced to 50% in 2002, with additional 1% reductions each year until 2007, when the top estate tax rate became 45%. Only $1 million of the unified credit exclusion could be applied to lifetime gifts despite the increases in the estate tax exclusion.

The state estate tax credit, a form of revenue share between the federal estate tax and state governments, was phased out between 2002 and 2005 and replaced by a deduction for state estate taxes in 2005.

EGTRRA 2010 (the repeal)

Under EGTRRA, the repeal of the federal estate tax and the generation-skipping transfer tax occurred in 2010. The gift tax was not repealed and the lifetime gift tax exclusion remains at $1 million, but the gift tax rate is reduced to 35% in 2010.

2011 – The Sunset on EGTRRA (the resurrection)

Following President Bush’s reelection in 2004 efforts were made to make the repeal of the estate tax scheduled for 2010 permanent, but those efforts failed. With the Democratic majority in Congress after the 2006 election, efforts for permanent repeal of the estate tax changed to efforts to avoid estate tax repeal in 2010. In 2009, efforts to avoid estate tax repeal in 2010 by establishing a permanent unified credit amount and estate tax rates at the 2009 EGTRRA levels of $3.5M unified credit and 45% estate tax and GSTT rate failed in the Senate, primarily for lack of bipartisan support.

At this time, with the budgetary restrictions of PAYGO requiring that reductions in revenue be offset by corresponding reductions in expenditures, it would require bipartisan support in the Senate to avoid a complete sunset of EGTRRA in 2011. This means that in all probability, 2011 will bring the return of a $1 million unified estate and gift tax credit, a $1.34 million GST exemption and maximum estate tax and GSTT rates of 55%.

What this means to you?

The need for estate tax motivated planning will increase dramatically. Even people with modest sized estates will now have to plan for the possibility of a significant estate tax hit at the time of death.

As estate-tax-motivated reasons for planning increase, clients and their estate planning attorneys will need to be careful not to let the estate tax “tail” wag the estate planning “dog.” During the last 8 years, when estate-tax-motivated reasons for estate planning decreased with the increasing exemption amounts under EGTRRA, successful estate planning attorneys learned that non-tax motivated reasons for planning were just as strong and in many cases more rewarding than the purely tax-motivated reasons. Clients and their estate planning attorneys will now need to be careful not to lapse back into the comfort of doing purely tax-motivated planning.

Continued Uncertainty

The estate tax will continue to be a hot political issue beyond 2010. There are just too many winners and not enough losers if EGTRRA is allowed to sunset:

Winners

Democrats – Increased revenues will help offset continued increasing budget deficits.
Republicans – Campaigning for a repeal of the estate tax continues to be an effective fundraising issue. A permanent resolution of the estate tax issue would “kill the Golden Goose.”
Insurance Companies – Use of Irrevocable Life Insurance Trusts (ILITs) funded by life insurance policies will again become a popular estate planning tool to pay for the estate tax and preserve the estate.
Charities – estate tax motivated charitable planning will again become popular.
States – a return of the state death tax credit will provide many states with much needed revenue.

Losers

Heirs – of those who fail to plan.

The political posturing of the estate tax issue has changed from the early Bush years of calls to repeal the “unfair and unjust death tax” to “not giving a tax break to the very wealthy.” It is unlikely that we will see bipartisan political agreement on any meaningful long-term “estate tax reform” in the near future.
This means that the uncertainty that existed during EGTRRA will continue.

Modified from “Preparing for 2011 – What Happens as the Sunsets on EGTRRA?”, an article by: Lewis W. Dymond, Jr., J.D., Principal, WealthCounsel Inc, Copyright, WealthCounsel LLC, 2010.

You’ve heard all the arguments in favor of estate planning, you know it’s the right thing to do, you want to get your planning done… you just aren’t sure how to get started. This is understandable; estate planning can feel like an overwhelming endeavor when you’re presented with everything at once. The trick to getting started with your planning is to take it one step at a time.

Write down your goals. You may have a number of intertwined goals for your estate plan (this is especially true for blended and multigenerational families), or one simple-but-important goal such as “ensure my minor children have a place to go” or “keep the family business intact.” Knowing your goals from the outset will make all subsequent decisions much easier.

Make a list of the people you trust. Throughout your estate plan you’ll be nominating people to take over financial, healthcare, and guardianship responsibilities if something happens to you. Have a rough list of people you would trust in these roles. Begin with your initial goal and go from there. For example, if your initial goal was guardianship of minors, make a list of people you would trust with the care your child, and move from there to financial decision-makers, etc.

Make a list of people you don’t trust. If you’re having trouble coming up with people for the list above, it sometimes helps to consider the people you would NOT want to be responsible for your child, your finances, or your healthcare. Write down those people and work backward from there. If your kids must be kept from crazy Uncle Joe at all costs, would your cousin Emily be an acceptable alternative, even if she does have a different parenting style?

Know your assets. Make a list of all your assets and their approximate values. This will help your estate planner determine what kind of asset protection you need in your plan. Assets include:

• Your Home
• Investment/Vacation Property
• Bank Accounts
• Savings/Investment Accounts
• Retirement Accounts
• Life Insurance
• Family Owned Business
• Etc.

Bring In the Professionals. Estate planning is a very technical process, and the laws may frequently change, so you’ll definitely want professional help with the details of the process. The good news is that now that you’ve completed the beginning steps, the follow-through with your chosen professional advisor will be a snap! If you already have a relationship with a trusted attorney, insurance agent, financial advisor or CPA you’ll want to start there. Let that person know your goals and that you’re ready to begin planning in earnest; he or she will be able to guide you onto the next steps, or give you the name of an estate planning professional who will help you build your ideal plan.

Although it looks overwhelming from the outset, estate planning is really just a series of small steps, each of which leads you to the achievement of your ultimate goal: Preserving your assets and protecting your loved ones. Now that you know it’s so easy… what are you waiting for?

Tougher economic times call for strategies tailored for new fiscal realities. Below are some tips to insure access to credit, protect short term cash flow and safeguard your business’s financial future.

1. Current lines of credit are in danger or are quickly drying up at many institutions. Banks want to see clear plans for cash flow, collections management and even marketing. They put customers to the four C’s test: character, capacity to repay, collateral and care or maintenance habits. In addition they want customers to maintain a high credit rating.
2. Widen your relationship with your bankers. Have a relationship not only with your loan officer but also a senior manager or a vice-president at your bank. This helps if the bank is involved in a merger situation and your contact is downsized.
3. The faster your clients and/or clients pay you, the more money you can make with the same resources. Review your receivables weekly or even daily to quickly identify those who are not paying – don’t wait 30 days.
4. Look at areas to reduce spending. Try to figure out how to have meetings without travel by using online web meeting services and consider moving some of your staff or storage to less expensive locations.
5. Be sure you have cash reserves on hand for the next 60 to 90 days.
6. Ask your bankers the status of your credit availability. Are you in compliance? Will the bank renew your line of credit with similar amounts, rates, and terms? If not, what will it take to qualify
7. Recognize that banks monitor average daily balances when analyzing loan requests. Strive to keep a high average balance if you wish to qualify.

Modified from “Financial Tips to Surviving Tough Financial Times”, an article by Mark Powers, Atticus Inc, Copyright, WealthCounsel LLC, 2010.

There are five common myths that frustrate all estate planners—particularly because we know that not only are they patently untrue, but also because their continued circulation can be harmful.

1. Estate Planning is only for rich people. This is probably the single most common estate planning myth there is—and it is a myth. During a normal year the first $1 million dollars of your estate would transfer to your beneficiaries tax-free. (This is also the expected exemption amount for 2011.) By this standard it certainly does seem that only “rich people” need estate planning, but when people add up the value of their home, their life insurance, savings, retirement account, etc., etc., etc. they often find that they are much closer to being a “rich person” than they thought. Not only this, but as we’ll get into in more detail below, estate planning is not only about saving on estate taxes, it’s also about controlling your wealth and protecting your own needs when the unexpected occurs.

2. “I have plenty of time.” AKA: Only old people need estate plans. First of all, just because you’re young doesn’t mean bad things can’t happen to you. But you know this, and anyway, this post is not about fear. Unexpected tragedies aside, an estate plan is useful even when you’re young because an estate plan is not just about death. A good estate plan will include not only a will, but also a healthcare directive and HIPAA Authorization (both of which are useful if you find yourself facing a surprise stay in the hospital), Power of Attorney documents (which you may need if you ever travel outside the country or are otherwise unable to sign for yourself on financial or legal documents), and legal documents relating to minor children (such as medical authorizations—an essential document if you leave your minor child with a babysitter for any extended period of time.)

3. Married people don’t need estate plans. While it is true that a married person with straightforward wishes for the distribution of their property has less need of estate planning, it does not necessarily follow that they can skip estate planning altogether. Under normal circumstances, any jointly held property will pass to the surviving spouse upon the death of the first spouse… But what happens if the surviving spouse gets re-married? What about the property you would specifically like to go to your children, or to your parents or siblings? And what if both you and your spouse die together? These are the reasons why even married people should consider drawing up a simple plan.

4. All I need is a quick will and I’m done. A quick will is certainly better than no will. And if you want to be technical, you don’t even need a quick will; after all, your state of residence has a plan already in place for you. The problem is that it may not be the plan you want. There is a saying that “anything worth doing is worth doing well.” This goes for wills (or any other legal document) as well. If you want the basics you can have the basics. But if you want the best, you’re going to need to spend a little more time on it.

5. Estate Planning is only about money. Although money is often one of the main motivating factors behind creating an estate plan, money is absolutely not what estate planning is all about. Estate planning is about people. It’s about your family and doing what’s right for them. Estate planning is not just about saving your family from estate taxes, or making sure Junior gets the house; it’s about leaving them peace of mind. A well thought-out will or trust saves them from a lengthy probate process, but also reassures siblings that they are doing what mom or dad really would have wanted. And a memorandum of intent gives you the opportunity to express the things that sometimes cannot be expressed during life. An estate plan is full of documents designed not just to save you or your heirs money, but to allow you to express your wishes and values even after your death. Estate Planning is about more than just money—it’s about family, legacy, and love.

When it comes to family matters, women are often the head (and sometimes the sole member) of the planning committee. Vacations, dinner parties, school activities and celebrations… many of these wouldn’t happen at all if the women of the family didn’t take the lead. Estate Planning tends to be no different: Many first phone calls, appointments, and attendance at estate planning or elder law seminars are initiated by women. However, studies suggest that this tendency in women to plan ahead may not apply to financial planning.

A recent article from CBS news suggests that although women are actively involved in family and household finances, they are less likely to be involved in long-term financial decisions. According to the article, although many women “know how to spend and get by on a short term basis… they have a time getting a grip on their long term saving and planning.” Of course this is a generalization, and won’t apply to everyone; but considering the importance of the topic, it is definitely a worthwhile subject for discussion.

Here are a few statistics to consider that impact women and their long-term financial decisions:

• Older women (65+) outnumber older men by 22.4 million to 16.5 million. (Administration on Aging)
• Poverty rates are higher among older women than older men by 20.4 to 13.1. (U.S. Census Bureau)
• The median weekly earnings of full-time wage-earning women is $657, or 80 percent of men’s $819. (U.S. Dept. of Labor)
• Not to mention that on average, it is the woman of the family who will end up putting her career on hold for caregiving duties at various times in her life (either to care for young children or aging parents.)

Put all of this together and it means that women need to take control of their finances, not the other way around! Luckily, this may not be as difficult as you think. The CBS news article mentioned above has some suggestions on how to take charge of your finances; but beyond that, planning your estate can be a huge step toward planning for your financial future as well, because any estate planning includes taking stock of of your financial assets—including savings accounts, retirement assets, individually owned assets as well as those owned jointly by a married couple.

We encourage women (and their families) to let their estate planning contribute to their financial future—it’s not just about how your assets will be distributed after your death, but also what steps you’d like to take to preserve those assets during your lifetime.