Wisconsin Estate Planning

Death & (Income) Taxes

Death and taxes may be equally inevitable, but the taxman demands the last word. Death does not excuse a final accounting with the IRS. In fact, taxes can further complicate the lives of survivors.

Of the two certainties in life – that is, of death and of taxes –the taxman always gets the grim last word. End-of-life taxes are, moreover, easily among the most onerous. For many loved ones, writing those last few checks to the IRS can be especially tough … and seem to never end. Enter the postmortem income tax return.

Death taxes are one thing, however, as a recent article in Kiplinger makes clear, there usually is one final income tax return to file for the decedent and possible income tax returns for the estate. I recommend the article, titled Death and Taxes, for your reading.

The burden of filing the final income tax return is something usually left for the executor or administrator to do, or failing that it falls upon a survivor. Regardless, do not neglect that duty if you occupy one of those roles. Why? Because it is just basic estate planning and administration.

If you are planning your estate or if you are administrating one, the burden of filing necessary income tax returns is not one to be taken lightly. To make matters worse, the fiduciary is on the hook for any sins of commission or omission. If ever there was a time to retain appropriate legal, accounting and tax advice, then this is one of them.

Bottom line: The income taxes likely are the least of your taxation concerns with the estate, inheritance, gift, and generation-skipping taxes all vying for attention. Unfortunately, that doesn’t diminish the importance of income taxes.

Even if an estate will not be subject to extra taxation, this last rite to the IRS has to be observed.

Reference: Kiplinger (March 2012) “Death and Taxes”

The Separation of Church … And Estate

For many people, estate planning isn't just about financial assets and other practical concerns. It's also about honoring their religious beliefs and passing those values on to family members. That can be very tricky ground.

Planning your estate may seem like a simple matter of deciding who gets your stuff when you’re gone. What if you are a person of great faith and religious conviction? How does a person of faith plan for his or her estate when life (and especially life beyond) is so much more than mere “stuff”?

The problem of mixing religion and estate planning – that is, the problem of doing it well – is an issue taken up by the Wall Street Journal in an article titled Joining Church and Estate.

If your decisions during life are guided by your faith, then likely your estate decisions will be too. For example, end-of-life, disposition of remains and even charitable giving decisions are oftentimes determined by one's religious beliefs. These are personal decisions that directly impact you and collaterally impact others.

However, entirely different matters, and ones that can be the source of much trouble, are the religiously motivated decisions you may make in regard to others.

Given the numerous alternative planning strategies and tools available to plan your estate, it is possible to make (or attempt to make) religious decisions for your heirs. In the extreme, you can move beyond encouraging to requiring the observance of certain religious principles, rituals, or lifelong membership in the given religion to secure any inheritance. As the Wall Street Journal article illustrates, this is where problems can arise. In short, requiring heirs to uphold religious principles they do not share can work to undermine them.

The article discusses some particularly poignant examples, and real life court battles, but as a general principle it may be worth avoiding this type of planning.

Reference: The Wall Street Journal (April 30, 2012) “Joining Church and Estate”

The Conversation: Mind Your Own Beeswax!

Have you ever tried to talk to your aging parent about finances and been told to take a hike? “Just mind your own business. I’ll be fine”.

Taking care of an elderly loved one can be difficult, especially when they are nervous about meeting their own future needs. It’s worse when the issue is money, either for current finances or future planning. Has your elderly loved one ever told you to butt out and not worry?

This is a position many adult children with aging parents will have to face. If you’re in this situation (or fear you may be one day) a recent article in Forbes titled Has Your Aging Parent Told You to "Mind Your Own Business"? is worth a read.

For many Depression-era survivors and baby-boomers, money is an important symbol of control. In addition, for elderly parents who don’t have “enough” money, talking to them about their financial futures can be troubling. In essence, it disempowers them. Ironically, this is all the more reason it should be discussed (especially if they will be in need of medical care).

As with every dark cloud, there is a silver lining. Discussions about assets can easily segue into revealing concerns over the meaning of money, and the proper disposition of family assets, or even a family business.  

In the end, there is a psychology to old age and money. I recommend the original article and the examples therein. Practically speaking, however, your parents might have a point – have you taken care of your own (estate planning) business yet? Perhaps if you have your own house in order, you will have more credibility when addressing these issues with your parents.  

For more information on Wisconsin estate planning and long term care planning, visit my website, sign up for my free e-newsletter, and contact my office to schedule an appointment.

Reference: Forbes (April 17, 2012) “Has Your Aging Parent Told You to "Mind Your Own Business"?”

Charitable IRA Distributions In Play

Congress hasn't reauthorized the law allowing people to give required minimum distributions from IRAs tax-free to charity but may by the end of the year.

Are you taking Required Minimum Distributions (RMD) from your IRA? Perhaps you would rather contribute your RMD to the charity (or charities) of your own choosing rather than to the IRS. Do you have a RMD to take from your traditional IRA and don’t know what to do with it?

If yes, then it may be best to wait until the end of the year as illustrated in a recent article in Kiplinger titled Don't Transfer IRA Distributions to Charity Yet.

Ironically, RMDs can be a hassle when you don’t need them. Why? Because they can trigger some unfortunate income taxes and they are only “required” for the sake of taxation.

In the past there was the possible saving grace of distributing your RMD directly to charity, as an alternative to the IRS. Unfortunately, the laws that allowed direct distributions from your IRA to charity expired in 2011 and have yet to be written for this year. Accordingly, it may be wise to wait until later in the year to take your RMD (assuming you don’t need it now).

Regardless, it is possible that the “freedom of choice” approach to charitable distributions will be resurrected. It is a small comfort, at least, that this is a taxation matter that even Congress might heartily approve, assuming they get the chance.

Reference: Kiplinger (March 12, 2012) “Don't Transfer IRA Distributions to Charity Yet”

Will Writing Fundamentals

The bottom line is  if you love and cherish your family, you MUST take the time to write your will. It ensures your assets are given to your family or other beneficiaries based on your wishes.

Writing your Last Will and Testament is the most basic act of estate planning. Nevertheless, preparing one’s Last Will has been deferred or ignored by the majority of the adult American population. In fact, some 70% of Americans have no Last Will.

Against this backdrop, the excuses for not having a Last Will typically include the “I’ve got plenty of time” excuse. As reported in a recent article in Forbes, Tell Your Family You Love Them -- Write Your Will, there are certain fundamentals only you can control when it comes to your estate.

In reality, there isn’t a single moment in your life when you’re ready to plan your estate. You don’t just reach some magical “pause button” where everything stops and there’s nothing new happening in your life, your business, your investments, or with your loved ones. Likewise, there is no time to stop planning, and for the same reasons.

Estate planning is not an event, but rather a lifetime process. Beginning today, you can put a plan in place with enough flexibility to cover many of life’s twists and turns. And, of course, you should always update your plan to reflect major changes – whether in the law, your life, your assets or the lives of your loved ones. 

To get more information on Wisconsin estate planning and creating your Will, visit my website, sign up for my free e-newsletter, and contact my office to schedule an appointment.

Reference: Forbes (March 30, 2011) “Tell Your Family You Love Them -- Write Your Will”

Planning Today For Dementia In Your Tomorrow

Advancements in medical science and care may enable us to live fuller, longer lives. The flip side is that more of us, like Mike Wallace, are likely to suffer from a diminished mental state–a harsh reality that’s difficult to accept.

Recently Mike Wallace passed away. It is in the life and death of Mike Wallace, however, that there is a lesson to learn for all those planning for old age and, perhaps more so, for those planning for their estates.

The estate planning lesson of Mike Wallace’s life was the subject of a recent article in Forbes by Deborah Jacobs. Titled “Mike Wallace Death Underlines Need To Prepare Financially For Risk Of Dementia,” the article is a wakeup call for making proper estate plans while you are physically and mentally able.

Apparently, Wallace suffered from dementia late in life. In fact, developing that condition will be an increasingly prevalent fact of life for baby boomers. According to recent projections, one in eight baby boomers will develop Alzheimer’s after they turn 65.

The problem, as pointed out in the Forbes article, is that once dementia or Alzheimer’s strikes, it is too late to make plans. Simply put, you are no longer, “of sound body and mind” as per the classic Last Will and Testament language. Furthermore, even if you are in control “most of the time,” any legal document or change you may make to a legal document may become suspect or could be argued to be outright inadmissible. 

Just as old age is not the time to be planning your retirement finances, it is not the best time to make your estate plans either. The lesson learned is to engage appropriate financial and legal counsel sooner rather than later.

For more information on Wisconsin estate planning and long term care planning, visit my website, sign up for my free e-newsletter, and contact my office to schedule an appointment.

Reference: Forbes (April 8, 2012) “Mike Wallace Death Underlines Need To Prepare Financially For Risk Of Dementia”

Estate Planning For Couples Can Be Complicated

How married couples and domestic partners structure their estate plans can make the difference between whether a family stays connected or gets blown apart after the first spouse or partner passes away. Things can be even more complicated and volatile in blended families – when there are step and half siblings and stepparents in the mix.

One thing about life in the new millennium … it is complex. Whether it is finances, taxes, gadgets or relationships, nothing is as it was in the “good old days” (whenever that was, if ever). So it is with estate planning for the modern family, how ever you define “family.”

For example, how should married couples plan for their estates? Separately or together? This issue was explored recently by Forbes in an article titled “Estate Planning For Couples: Should It Be A Solo Or A Duet?” Indeed, this question is one worthy of your consideration if you are married.

On the surface, married couples would seem to face fewer challenges when it comes to estate planning. Nevertheless, the applicable laws make a great number of assumptions that may not be applicable to you, your spouse, and your family. For instance, the interests of married persons might not so neatly dovetail as their love lives, as in the case of blended families.

In the blended family context, couples may disagree about how to distribute their assets, and even to whom assets should be distributed. To make matters even more difficult, in the absence of a clear-cut premarital agreement, there can be considerable rancor regarding ownership of the separate (let alone marital) assets.

One fundamental consideration at the outset is the question of separate representation. In other words, are the latent difficulties or possible misunderstandings so substantial that each spouse ought to secure independent legal counsel? While this may, at first blush, invite confrontation, it need not.

In the main, a single attorney representing both parties after full disclosure of potential conflicts of interest and written waivers may be the most appropriate solution for a couple. As the article highlights, however, each case (just like each couple) is different and there is no one-size-fits-all solution.

For more information on Wisconsin estate planning, visit my website, sign up for my free e-newsletter, or contact my office to schedule an appointment.

Reference: Forbes (April 10, 2012) “Estate Planning For Couples: Should It Be A Solo Or A Duet?”

Art Therapy for Alzheimer’s Patients

“Art offers [patients with dementia] a way of communication that doesn’t rely on their verbal skills and allows them to contribute in a way that they don’t often get to do,” said Nancy Lee Hendley, dementia care trainer for the New York City chapter of the Alzheimer’s Association.

Caring for an elderly loved one with dementia or Alzheimer’s is a difficult thing, often both for the caregiver and the patient. This is especially true when it comes to effective communication. Enter “art therapy.”

According to a recent article in The New York Times (The New Old Age Blog) titled Art Therapy For Alzheimer's Patients, art helps to comfort and often even invigorate a patient by giving them “something” with which to associate that does not require verbal interaction. As a result, various museums have begun programs with care professionals to provide guided tours for patients. These tours through exhibits offer patients the opportunity to associate with and discuss the art on display.

According to the article, the experience also has proven to be a pleasurable activity for the caregivers, even if neither the caregiver nor the patient was an art-buff beforehand.

So, if you have a loved one who has Alzheimer’s or dementia, then you might check with your local art museum and inquire about an art therapy program. Who knows, perhaps your suggestion just might initiate a similar program in your hometown.

Reference: The New York Times – The New Old Age Blog (April 13, 2012) “Reconnecting Through Art”

Family Business Mistakes Matter

Running a family business is the most natural thing in the world--and the most unnatural. Handle it well, and it can make you rich, capitalize on bonds no ordinary colleagues could share, and keep your family employed for generations. Handle it badly, and it can instead keep lawyers employed for generations.

If you have a family business, then a recent article in Inc. magazine is a must read to avoid unaffordable mistakes. In short, these mistakes can kill your family business.

The Inc. article is titled the “4 Worst Legal Mistakes a Family Business Can Make.” While I commend the entire article to your reading, here is some of the wisdom offered by the author:

1. Do not mix your family finances with those of the business.
2. Do not muddle along without employment agreements.
3. Do not forget to get (and remain) street legal with appropriate licenses and filings.
4. Do not fail to have a succession plan.

Remember, large or small, your business is just that – a “business.”

If you treat the company accounts like your personal checkbook, hire and fire employees on a handshake (if that), ignore “legal formalities” attending the creation and operation of the business and take the “get-around-to-it” approach to the succession of the business, then do not be surprised when the business crashes and burns.

Teaching point: Take time right now to engage competent legal, accounting and financial counsel to help you stay out of trouble … before it is too late.

Reference: Inc. (April 9, 2012) “4 Worst Legal Mistakes a Family Business Can Make”

Elder Depression – Preventative Assistance

Depressed people are more likely to receive diagnoses and be treated in primary-care settings than elsewhere. Research shows that elderly people, in fact, prefer to deal with their primary-care provider on mental health issues. In that context, coverage of depression screening may help more Medicare beneficiaries get the help they need.

As of last October, Medicare began coverage for a host of preventative services as part of the new healthcare law. One such service for the elderly is depression screening.

This subject was recently addressed in a Kaiser Health News article, and it’s worth reading to learn more.

The mind/body relationship is a complex one. It is hard to deny the overall health effects of depression, perhaps even more so among the elderly.  However, contrary to popular opinion, the elderly are not statistically more prone to depression than the general population.

On the other hand, the elderly are more prone to types of system-wide health difficulties that may be exacerbated by depression. To make matters worse, people of the elder generations are generally less trusting of psychology and associate a social stigma with mental illness or any admission thereof. The combination of these two factors often, and unfortunately, complicates the lives of elderly persons and their families.

Medicare now covers the cost of annual depression screening in primary-care settings with no cost sharing for beneficiaries. Medicare also covers 60 percent of the treatment for mental health problems, including depression. (Under a 2008 law, that figure is scheduled to rise to 80 percent in 2014.) If you or an elderly loved one may be suffering from depression, taking advantage of Medicare’s annual screening benefit may be a good idea and can greatly improve quality of life.

Reference: The Kaiser Health News (April 3, 2012) “Medicare Now Covers Annual Screening For Depression”