If something should happen to you, whether its an illness, injury, accident or death, who will care for your horse or other pet if you cannot make decisions on your own?
You need to consider if your beneficiaries, spouse, children or other heirs are willing and also knowledgeable enough to manage these decisions.

The article Estate Planning for Your Horse by the editors of Practical Horseman magazine offer these steps to ensure your pet is provided for.

*Line up two friends or relatives who agree to serve as emergency and/or long-term caretakers. Provide them with your veterinarian’s name, discuss your wishes of what should happen to your horse (whether he should be sold, retired, etc.) and provide contacts for each other. Discuss up front how expenses will be covered.

*Stay in touch with your potential caretakers because circumstances can change over time. People move and have children, or situations may arise that impact their physical and financial ability to help manage your affairs. Name alternates.

*Carry a wallet card with emergency contact information related to your animals.

And what about the ongoing costs for the care of your pet? Having a trust or power of attorney in place clarifying available resources can help. They recommend these options:

*A living trust is a popular choice because it can be accessed immediately and is private (without probate court delays). It can be used if you become ill or incapacitated. You set aside money for care, and a named trustee has control. A trust is more flexible than a will, which takes ­effect only at death and can be a slow process.

*A pet trust may be included in a living trust, or as a stand-alone trust. The named trustee is given funds and guidelines/mandates as to how to administer funds for your horse and how to distribute any remaining funds when your horse dies. Find out if a pet trust is valid in your state by contacting an experienced trust/estate ­lawyer licensed to practice law in your state.

*Power of attorney is used in the event of physical or mental incapacity, with provisions outlined for expenses, but terminates when the owner dies, unlike a trust or will. Powers of attorney are chosen when a person is alive and competent and should be part of any comprehensive estate plan. Otherwise, a disability event can result in the need for a guardian to be appointed, taking time with no guarantee your horses will be covered. Name alternates in case the initial agent is ­unable or unwilling to serve.

*Life insurance is useful if you do not have sufficient property to support your horse’s care. Life insurance “creates” property when you die, which can be used to fund your pet trust. Attorney Peggy R. Hoyt, author of All My Children Wear Fur Coats: How to Leave a Legacy for Your Pet, advises people to use life insurance, if they can get it, as the most cost-effective way to fund long-term care costs for pets. It can be taken just to fund a pet trust, or you can direct a portion of an existing policy payable to your pet trust. Consult a lawyer or life-insurance agent about the correct way to name the pet trustee or trust as a beneficiary.

Resource: www.legacyforyourpet.com
This article originally appeared in the July 2008 issue of Practical Horseman magazine.

Advance Health Care Directives (legal documents which include a nomination of your health care agent, and your preferences for end-of-life care) saw a lot of press in 2009 when the Obama administration sought to include end-of-life planning in the new healthcare overhaul. The option was dropped after a media firestorm about “death panels,” but according to this article in the New York Times Medicare-funded end-of-life discussions may be back.

According to the new regulation, Medicare will pay for “voluntary advance care planning” as part of patients’ annual visits with their doctor. “Under the new policy, outlined in a Medicare regulation, the government will pay doctors who advise patients on options for end-of-life care, which may include advance directives to forgo aggressive life-sustaining treatment.”

The reasoning behind the new regulation is simple, and something estate planning lawyers have known for a long time; “research [has] shown the value of end-of-life planning. ‘Advance care planning improves end-of-life care and patient and family satisfaction and reduces stress, anxiety and depression in surviving relatives.’” Additionally, “end-of-life discussions between doctor and patient help ensure that one gets the care one wants.”

So why does end-of-life planning make so many people uncomfortable when research has shown just how beneficial it can be? Paula Span, author of this post on the New Old Age blog thinks it might simply be a matter of semantics, especially when it involved the term “Do Not Resuscitate.” Ms. Span argues that a more friendly term such as “Allow Natural Death” could make all the difference in the world.

“The phrase “do not resuscitate” signals an intent to withhold or refuse… ‘It says you’re not going to do something.’ To “allow natural death,” on the other hand, connotes permission. ‘It doesn’t sound so overwhelming or scary.’”

Whatever term you use, or however you choose to talk about it, the important thing is that you DO talk about it—with your family and loved ones, with the person you choose as your agent, with your doctor… and even with your lawyer. End-of-life planning is about personal and medical preferences, but the document itself is a legal one; your lawyer can help ensure that your Advance Health Care Directive will hold up in a court of law as well as in the hospital.

There is a common complaint among Baby Boomers when it comes to aging parents and grandparents: It’s hard to keep in touch with them. Most communication among the middle and younger generations now takes place on the computer—e-mail, Facebook, electronic photo-sharing and more. Very rarely do we pick up the phone for a good old-fashioned chat; and when we do it’s usually on the go, in the form of a quick call or text message from our cell phones. Unfortunately, where all this technology helps us to be more connected to friends and family in our own cohort, it ends up leaving our elderly loved ones out of the conversation.

Karen Stabiner, in her article “Elder Tech: What’s Important” argues that it doesn’t have to be this way. Stabiner states that the key to getting elderly relatives involved in high-tech communication is to get out of our own heads and look at it from their point of view. “For technology to become ‘sticky’ with the older generation, we have to get into their heads and understand what would make them think this is fun… The bells and whistles that might attract us are too often counterintuitive [for them.]”

The younger, tech-savvy generations tend to look for high-tech devices that do everything, but that’s not necessarily what’s going to be appealing to grandma or grandpa. This article in GrayTimes.com suggests that single-purpose gadgets—devices designed only for e-mail or only for sharing photos—are more intuitive for elderly users.

New high-tech devices may be harder for parents or grandparents to use, but being able to connect with their loved ones can be a huge motivating factor. Being able to communicate with family makes our elderly parents and grandparents happy, but it also helps keep them safe. Adult children who communicate with their parents on a regular basis are better able to recognize and respond when mom or dad suddenly have trouble caring for themselves.

It has been a long and uncertain year for anybody interested in the future of the estate tax, filled with a few ups, a few downs, and a lot of speculation.  But after the recent passage of the new bipartisan tax bill all of the confusion and speculation is finally at an end, and it’s very close to what we anticipated early last week.  The bill is good news for most taxpayers; the Wall Street Journal says there are “many winners, a few losers,” and according to the New York Times “Almost no one will have to worry about paying the estate tax under the tax legislation just approved by Congress.”

Here is a brief overview of what you can expect in 2011:

New Estate Tax Exemptions and Rates: The new bill sets the estate tax exemption at $5 million per individual ($10 million per married couple), with amounts over the exemption taxed at a 35% rate.  This is opposed to the $3.5 million exemption and 45% rate some lawmakers were hoping for.

Tax Election Option for 2010 Estates: As mentioned in a previous post, this is one of the biggest parts of the new bill. There may have been no estate tax in 2010, but there was also no “step up in basis,” meaning that heirs selling inherited assets were taxed based on the original acquisition cost of the assets, not on their value as of the date of the taxpayer’s death, as is usually the case.  This led to a higher tax paid on the assets if and when they were sold, in spite of the lack of estate tax. Tax election gives 2010 estates the choice of whether to use 2010 or 2011 tax rules—a happy option for 2010 heirs.

Estate, Gift, and Generation-Skipping Taxes: In recent years these three levies have had varying exemption levels, making gift giving and succession planning and challenging exercise at best. The unification of all three makes tax planning and giving gifts to grandchildren much easier than it used to be.

Individual Income and Payroll Taxes: The new bill wasn’t just about estate taxes; it also extends the Bush-era income tax rates; this is good news as it prevents a rise for nearly all taxpayers.

How Long Will It Last? We’re all glad that the waiting is over and we finally know what to expect, but the new law is only effective through 2012, at which point the provisions will “sunset.” This new tax package sets our minds at ease now, but the estate tax issue is far from over.  It looks as if we may have to revisit the issue in 2012-2013.

With the threat of high estate taxes out of the way does any reason remain to create (or update) your estate plan? Absolutely!

Estate planning is about more than just planning for taxes, it’s about taking control of your assets and choosing how your estate will be distributed.  Divorce, second marriages, planning for college, charitable gifts—these are just a few of the reasons why estate planning is essential regardless of the state of the estate tax.

At the very least, the recent fluctuation of the law means that you’ll want to call our office and make an appointment to have your existing plan reviewed and updated to ensure you don’t have any outdated clauses that could negatively affect your heirs.

It looks as if the long and weary road to estate tax clarity may soon be at an end. Especially if Washington lawmakers vote to approve the tax package negotiated between President Obama and Republican leaders without making too many changes.

Laura Saunders of the Wall Street Journal claims in her recent article that everything looks to be coming up roses, “it seems estate planners got everything they wanted and nothing they didn’t.” Good news for estate planners translates into good news for our clients. We recommend you read the entire article for the full story, but here are some of the highlights of what estate taxes may have in store for us in 2011:

Tax Election for 2010 Estates: This is one of the biggest parts of the deal. “The bill gives 2010 estates the choice of whether to use 2010 or 2011 tax rules.” This is good news because “the tax on heirs who sell assets of those who died in 2010 is based on the original acquisition cost of the assets, not on their value as of the date of the taxpayer’s death, as is usually the case,” meaning that “taxes were higher if they died in 2010 than 2009 or 2011.”

Unification of the Estate, Gift, and Generation-Skipping Taxes: “In recent years the exemptions for the three levies have been out of synch, complicating succession planning for family businesses and other matters.” With the new deal, however, there would be a simple $5 million per-individual exemption for all three.

And of course we can’t have a conversation about estate taxes without discussing Effective Date and Duration: The effective date of the new provisions is set to be January 1, 2011. As for duration, “The Senate’s bill makes this regime effective only for 2011 and 2012, at that point the provisions ‘sunset.’” What this means is that the new tax package may be only a temporary reprieve, and we could be going through all of this again in 2012-2013.

The idea of adult children caring for aging parents or grandparents is not a new one. In fact, with the aging Baby-Boomer population, adult children giving up free time or extra hours at work to care for relatives is a growing trend. But recently families have begun creating “caregiver compensation agreements,” something which can end up benefiting both parties in a number of ways.

According to a recent article in the Wall Street Journal, “the high unemployment rate, the rising cost of nursing-home care, an aging population, and a 2006 change in Medicaid law that makes it harder for people who wish to qualify to give away assets” are all contributing factors to the growing trend of these compensation agreements among family members.

How can it help you?

If you’re a caregiver the benefits of a caregiver compensation agreement are fairly self explanatory. “Some 37% of caregivers surveyed by the NAC in 2007 said they had quit a job or reduced their hours to accommodate their responsibilities,” some kind of compensation seems only fair. And if you feel uncomfortable taking “wages” from your parents, there are other ways to arrange for compensation. “Attorneys say many families pay an hourly wage. As an estate-planning tactic, others opt for annual gifts or a lump-sum payment designed to cover services over an extended period. Some arrange for the caregiver to receive a larger inheritance.” It will all depend on what works best for your family.

If you’re the one receiving the care, compensation agreements can benefit you as well. Paying a family caregiver can help you deplete your savings and qualify for Medicaid, it can also help you reduce your taxable estate, as well as give a gift of sorts to younger family members who may be in need. Remember that Medicaid rules vary from state to state, so enlist the help of your attorney before signing any contracts.

However you may decide to structure your compensation agreement, disclosure can be of the utmost importance. Make other family members aware of the agreement up front to avoid suspicion or hurt feelings later on.

Many modern families have members living all over the country—and all over the world. Which means that the holiday season provides one of the only times to all get together in person, celebrate, catch up… and talk about caregiving strategies for aging parents. Unfortunately, this kind of conversation can be a difficult one, especially if not all siblings agree about mom or dad’s needs, or if one sibling feels that he or she shoulders an unfair amount of responsibility. In spite of the difficulty, having the conversation can be of the utmost importance.

In this article in Time Magazine author Francine Russo describes the consequences that can follow when lines of communication break down. “It wasn’t until my mom’s funeral, watching my dad and sister cling to each other and weep, that I got a hint of their long ordeal — and how badly I’d screwed up.”

Russo makes the point in her article that much of the tension and disagreement among siblings can come from inaccurate or conflicting information. “Friction often stems from parents giving their children different information about how they’re doing. Mom may put on a good show for the out-of-towner, who then discounts what the local sibling says.” This is all the more reason for siblings to communicate with each other, not just through mom or dad.

If you aren’t sure how to get the conversation started, Paula Spencer, senior editor for Caring.com wrote this article for Third Age which gives some helpful strategies on how to ease into the difficult topic of caring for aging parents this holiday season.

Fruit baskets, kitchen gadgets, and Kindles aren’t the only gifts you can give loved ones this year (although you’ll see below that video game systems still make the cut.) Instead, why not give something unique that will leave a lasting impression and help protect your loved one? Here are a few non-traditional ideas for friends and family of every age.

Young Adults: What do you get the kid who already has all the video games he could want? How about a meeting with a financial planner? It may not sound exciting, but young adults are leaving home with less financial experience than ever, making it difficult for them to know how to budget for their own household, plan to eventually buy a house, or even stick to a strategy to pay of credit debt or student loans.

Parents of Young Children: A nomination of guardians drafted by a qualified estate planning attorney is an excellent gift for young parents. So also are advanced healthcare directives and a last will and testament. All of these will help protect the young family as well as provide peace of mind.

Baby-Boomer Friends and Family: The big concern among Baby-Boomers right now is long-term care. After paying for their elderly parents to grow old Boomers are now turning a concerned eye to their own futures.

Elderly Parents and Grandparents: Forget your teenage nephew; your elderly grandparent is the person who could benefit from having a video game. According to this story in the New York Times game systems such as the Xbox Kinect and Nintendo Wii Fit help get the elderly up and moving and can significantly improve their balance.

This year, forget about the impersonal gift cards or scented candles; instead give a gift that will leave a legacy.

Planning for retirement can be tricky business. When we discuss our clients’ estate plans and assets with them we can’t help touching on retirement plans, so we hear a lot about the worries that go along with preparing for an uncertain future. There are many variables and unknowns that can crop up between starting out in your 20s or 30s and your eventual retirement at 60 or 70; and there are a lot of myths about retirement which are daunting, discouraging, or just plain misleading.

U.S. News and World Report recently published an article which attempts to address some of these myths and set readers back on the right track to retirement. We hope that all of our readers are already saving for retirement, but because we know just how important it is to save early and save often we’d like to list some of the myths here for our readers:

#1 You don’t make enough money to save for retirement.

#6 You need to be debt free before you can invest for retirement.

#8 Social Security benefits will be enough to retire on.

#9 You have to retire at age ___.

These are only 4 of the 10 myths covered in the article. Click on the link above for a full list of commonly-held assumptions about retirement that may be preventing you from making the most of your retirement savings.

At our office we help our clients protect and plan for the future, retirement is often a part of that future. If you have any questions about how to protect your retirement investments, or how to ensure that they transfer properly to your heirs if anything should happen to you, please call our office.

Over the next several months, we will be writing on the topic of “self-directed” IRAs – from the basic formation process to the complex tax and legal ramifications involved when investing using these structures

To start with, what is a “self-directed” IRA?

The vast majority of people that have a retirement plan, whether it’s in the form of an IRA, 401(k), 403(b), etc. have their money invested in “traditional” types of investments, e.g. stocks, bonds, mutual funds. However, the general rules governing an IRA allow for any type of investment except for investments into “life insurance contracts” and “collectibles” (e.g. rare coins, antiques, wine, etc.). The most common investments for self-directed IRAs include: real estate; loans; tax liens; and privately-held companies. That sounds great in theory, but in order for you to actually invest retirement funds into assets outside of the stock market you will need your retirement plan custodian to allow this type of investment. In other words, the financial institution that holds your retirement account must be able to facilitate the investment or you are out of luck. The reality is that most large investment institutions (e.g. Charles Schwab, Fidelity, etc.) have traditionally not allowed investments outside of publicly-traded securities. Thus, one of the first steps in the process of forming a self-directed IRA is generally to “roll” or “transfer” some (or all) of the retirement account to a new IRA custodian. But before we get to that issue, a few other steps will need to occur.

Can the funds be moved?: Prior to selecting a new IRA custodian (discussed further in The new custodian below), the retirement account owner needs to determine whether his or her retirement account is even eligible to be moved out of its current location. For example, many 401(k) plans significantly restrict the movement of money while the retirement account owner is still working for the company that sponsors the plan. In other words, if the 401(k)’s underlying “plan documents” will not allow the account owner to move their money, transferring funds into a self-directed IRA might not be possible. This is an issue that the IRA owner needs to resolve with their current plan administrator. In general, if the retirement account that is owned by the retirement plan holder is structured as an IRA (or a 401(k) from a previous employer), it can be moved (in whole or in part) to a new custodian without incurring current tax consequences.

The new custodian: Once the retirement plan holder determines that they are eligible to move some (or all) of their retirement funds, they need to select a self-directed IRA custodian. Often times, an experienced attorney will help in this selection process. Although there are an increasing number of IRA custodians that are willing to hold “alternative” IRA assets, there are dramatic differences between these custodians. Some custodians offer very minimal customer service, but have lower fees. Other custodians claim to offer the opposite. Another issue to consider is whether the custodian will allow the IRA to purchase a Limited Liability Company, (in basic terms, a separate corporate entity) which is important if the retirement plan holder wishes to have maximum control over the structure (see IRA or IRA/LLC? below).

Rollover or transfer?: After setting up a new self-directed IRA, it needs to be “funded”, which can be done in one of two ways.
. The retirement plan holder can request a “rollover” – meaning that the old retirement plan administrator sends a check to the retirement plan holder that is made out to the new IRA custodian. The retirement plan holder then must deposit the check into the new IRA within 60 days. If the retirement plan holder fails to deposit the check in time, the entire amount will generally be treated as a taxable distribution.
. The retirement plan holder requests a “trustee-to-trustee” transfer – in which the funds move from the old custodian to the new custodian without the client coming into physical possession of the funds. When possible, the latter method is preferable.

IRA or IRA/LLC: Let’s assume for a moment that the retirement plan holder’s goal is to invest into a piece of residential rental real estate. Once the new self-directed IRA is funded, the retirement plan holder, working together experienced legal counsel, needs to decide whether he or she is going to invest the money directly out of the IRA (i.e. the IRA custodian buys the property on behalf of the IRA) or whether the IRA is going to set up a Limited Liability Company (“LLC”) to purchase and hold the property. With the retirement plan holder serving as the “Manager” of the LLC, the latter option allows the purchase of property using a check from the LLC’s checking account, which depending on the custodian’s ability to move quickly, will likely speed up the property purchase. Also, the IRA/LLC model will reduce the future costs due to reduced custodian involvement (meaning lower fees). For tax purposes, because the LLC is a “flow-through” tax entity, investments made using either method are normally tax-deferred*. However, the control / flexibility allowed by the IRA/LLC creates problems if the retirement plan holder does not operate the structure in a legal fashion**.

More to come….

*there are major exceptions which I will discuss in future articles
**also something I  will discuss more extensively in future articles.

Adapted from “the ‘Self Directed’ IRA – Formation, Part One”, by Warren Baker, Esq,  Amicus Law Group, PC, published December 2, 2010