Avoiding so-called “Fiscal Cliff” and Estate Planning: What of Estate Tax Exemption?

One of many good reasons people consult with me on their Estate Planning is to try figure out a way to avoid “death taxes.”

By death taxes, what they usually mean is Estate, Inheritance, and or Gift taxes.

There are no “inheritance” taxes in Virginia (there is a very modest “probate” tax though)

For some time now, thanks to Bush-era tax cuts, there has been a very high exemption on Estate taxes and Gift taxes. As of December 2012, the exemption on estates was $5.2 million. In other words, if you estate was not worth that much, you didn’t pay any estate or gift taxes (if you inherited). And if you did have that much, the marginal tax rate was 35%.

That all changed last night. What changed? First and foremost, the exemption was apparently made PERMANENT.

<snip> “The Association for Advanced Life Underwriting is very pleased that the agreement brings permanence and certainty to the estate tax regime — which we have been advocating for over the last decade,” said David Stertzer, AALU president and CEO.

Under the agreement, U.S. estate tax law will provide a $5.12 million per-person exemption. The deal raises the highest tax rate from 35 to 40 percent but continues the current policy of reunifying the estate and gift taxes. All other current policies related to the estate tax will also remain in place.

“This provides a key tool for business succession planning, and helping preserve jobs and economic investment in the process,” Sterzer said. <bold emphasis added, dwg more at the link>

Since the House signed off on the deal as passed by the Senate in the wee hours of New Years day, and Obama has said he will sign it, looks like its a done deal.

So something’s more certain…. death and estate taxes. For now.


New Years Resolutions – Redux: Wills, Advance Medical Directives and Powers of Attorney

Estate Planning
Who Needs a Will? YOU DO.

As a new year approaches, I am reminded by a friend in Massachusetts that this is a very good time to consider some basic legal documents all adults should have, A Will or Living Trust, a General Durable Power of Attorney and at a bare minimum,  I really hope that you will consider having an Advance Medical Directive and Healthcare Power of Attorney drawn up.  And if you already have them, please consider revisting them at least once every five years.  When’s the last time you looked at yours?

Advanced Medical Directive with Healthcare Power of Attorney is what we call them in Virginia. In other places they might be called Living Wills and Healthcare Proxy.

Why do you need one?  Two word explanation: Terry. Schiavo.  You can read the linked story to refresh your memory if you like. Basically, Terry Schiavo lay in a “persistent vegetative state” from 1998 to 2005 while her husband and her parents repeatedly sued one another on the national stage – all the way to the Supreme Court. Schiavo’s parents demanded life support continue, her husband insisted that he knew that his wife would not like to continue in the state she was in and demanded that it be removed.   Lacking legal documentation to tell anyone what she herself would have wanted, the courts ultimately sided with her husband and she was finally taken off life support and allowed to die. Except insofar as she lived on in the media circus and continuing court battles. Terry Schiavo was just 36 years old.

An Advanced Medical Directive and Health Care Power of Attorney tells your healthcare team and your loved ones:
a) what kind of care you would like in the event you’re nearing death;

b) what kind of care you would like in the event you’ve lost your ability to interact meaningfully and it is unlikely you are to recover;

c) in the event you cannot make healthcare decisions for yourself, who you would like to make them for you.

I tell my clients that an Advanced Medical Directive is the legal document that tells people what to do with your “person” – admit or release you from a hospital or other facilities, hire & fire doctors, decide what treatments are going to be used and the like

The other pieces are a General Durable Power of Attorney and a Last Will and Testatment. These are the legal documentation that tells people what’s to be done with your “stuff” — your property.

Its my view that it is as important to have a General Durable Power of Attorney to deal with your “stuff” in the event you are not able to do it yourself as it is to have a Medical Directive. A Durable General Power of Attorney (DGPOA) gives someone you pick the power to transact your personal business when you cannot.  Here’s one example:

Lets say you have a stroke. You’re admitted to the hospital and after a few days there, you must go to a Rehab facility where you will be for an extended period. Your dominant hand has been impacted and your ability to speak is severely limited. You ask your friend to have the cable TV and some other services at your house cut off to save some money. Too bad. Without a power of attorney, your friend cannot even do something as simple as cut off your cable bill. You may also need someone to pay write checks for you and conduct other personal business.

The last piece is dealing with your “stuff” once you’re done with it….. after you die.  Of course I mean your Will.  Many of you don’t think it matters much; after all, you’ll be gone so who cares?  Well its true that you probably won’t care by then (but who knows? maybe there’s an IRS on the other side? That would be Hell I suppose)  Anyway, people often don’t realize that by failing to make a Last Will and Testament they can leave their families in a heck of a mess. There may be no clear path to pay for your burial and other liabilities (like taxes and other creditors). People that you can’t stand and would never have left anything to may lay claim to your money and property.

There are many ways to pass property after you die, and it bears talking to a lawyer to consider the best options to maximize your property and minimize taxes and annoyance to your family.  Generally when I write Wills for people, we take a pretty holistic view of their entire estate – investments, real property, personal property etc. and consider all the options of avoiding both taxes and probate complications.  This does not have to be a complicated undertaking, but it should be done thoroughly and carefully.

Its a New Year. Put this on your list of resolutions — if not for yourself, for your family. They’ll thank you for it – I promise you.



You Have a Right to Make Health Provider Choices

It’s Christmas eve and I’ve just been catching up on some back reading, including our local weekly papers, The Hook and Cville Weekly.   In the latter publication, there was a reference to an article in the November 27 issue regarding hospice. I noted in the Letter to the Editor that only Hospice of the Piedmont was mentioned. The article, Long journey home: A family’s experience with hospice care, is quite lengthy. And it is perhaps one of the best articles I’ve ever read on Hospice care. *

There is no doubt that hospice does wonderful work. What concerned me about the article was that they limited themselves to people having experience with only a single hospice agency – Piedmont. They interviewed workers from Piedmont, doctors from Piedmont and families served by Piedmont. One begins to wonder if this were a paid advertisement or editorial content!

In fact there are several hospice agencies in this area that patients and their families might choose from. In addition to Piedmont, Legacy Hospice is a dedicated hospicae agency. In the Waynesboro/Staunton area, Augusta Medical offers hospice service.  Also, most home health agencies, Asera, Interim, Medi-home health and others all offer hospice care. Some nursing facilities have their own hospice care units.

My beef is not with Piedmont. Not at all. My problem is that the article perpetrates a a different problem. That is, that many patients and families do not realize that they have choices regarding care providers. More importantly, they have the RIGHT to be informed of the choices available.  So for example, if you are a patient at Augusta Medical Center, and you are preparing to be discharged home and need home health care, AMC is required to advise you that you have choices among several home health agencies – which may include AMC’s own home health care (or hospice) agency but AMC may not limit a patients’ choices by failing to inform them of the available providers.  Typically, hospitals simply provide a bewilderingly long printed  list of healthcare providers. Either overtly or covertly, discharge planners and social workers are instructed to direct patients to a particular agency – usually one affiliated with the same hospital or its corporate entity.

This is wrong.

Patients have the right to make choices in their care planning. There are costs to think of and social issues that may impact one’s choices. For example, lets say you live in Stuart’s Draft (“over the mountain”) and your father has been transported to UVa. Medical Center after a serious stroke. After the initial crisis is over, UVa begins to make plans to discharge your father to a rehab center since he has lost the ability to walk and his speech and ability to swallow are severely impaired from the stroke. The discharge planner tells you that the first available bed is at Trinity Mission in Charlottesville. Very likely, you are unfamiliar with Trinity Mission and don’t even know where it is. But you expect the discharge planner – who seems very nice and caring – to take care of things for you. No doubt they have the best of intentions.  However, Trinity Mission is a nursing home north of Charlottesville and not easily accessible to you, since you will have to drive 40 minutes each way or more to see your father.

There are plenty of nursing and rehab facilities in the Waynesboro/Staunton area that would be closer and far more accessible to you. Placement in one of those facilities means you could drive yourself and your mother to see dad on a daily basis and you could both help encourage him to do his therapy, eat, talk, visit, walk and just generally spend time with him to keep his spirits up.  However, if you don’t know that you have choices in your care providers, you will simply assume that the UVa discharge planner “knows best” and simply acquiesce.

Soon, your father is in a nursing home that you, your mother, friends and other family cannot easily get to; father is alone most of the time; gets dispirited, lonely and depressed; he begins to refuse food, only reluctantly participates in any activities including physical, occupational and speech therapy. After a time, father has deteriorated to the point where he is unlikely to ever come home since he requires 24/7 care.

The story doesn’t have to end that way. You have choices. You can insist that the discharge planner find a bed in a facility closer to home. You, your mother, church members, co-workers and others can visit your dad regularly. His spirits are buoyed by the interaction, encouragement and good wishes he receives. He works hard to go home and ultimately regains much of the ability he lost due to the stroke so that he can go home even if it means having some additional care in the home.

Again, you have choices. The hospitals and healthcare providers are required to tell you what they are. But you should also ask. Don’t rely on others to help you make informed choices.


*In the interest of full disclosure, I have to disclose that my partner is a Nurse-Case-Manager for another hospice agency here in town (not Piedmont). She has no ownership or profit interest however, she is a salaried employee.


Hospice Care – And Now a Widow

For the past three years, I’ve watched my father struggle with age and debilitating disease.

Henry Rosenberg Gelbman
July 31 1934 – November 29, 2012

My mother, his primary caregiver, also declined over this period, the emotional and physical strain causing her to age and struggle more than she might have otherwise.

We were blessed to have the assistance of several paid caregivers who not only took care of my parents, they loved them, sang to them, prayed for them.

In early September, my father was diagnosed with stage 5 kidney disease – e.g. kidney failure.  Because he was not a good candidate for dialysis and certainly not for a transplant, my father decided that the quality of life he was enduring was not something he wished to prolong, we arranged for hospice to come in. With his diagnosis, he finally met the criterion: a terminal diagnosis (kidney failure) and the likelihood of dying within 6 months.

Many people don’t know that hospice – a different but additional layer of care – is completely covered by Medicare & Medicaid.  (not room & board, but all the care). That meant that Dad received additional visits from and RN, a social worker, CNAs to help bath, feed, massage, dress him, change his colostomy bag and more.  All care that my mother could be relieved of on a pretty regular basis.

Another thing people don’t seem to know about hospice is that even though the certification indicates that the patient is likely to die within 6 months, they may have longer. At the end of six months, the hospice agency can simply recertify them for another 6 months.  Art Buchwald, the bestselling author and columnist was on hospice for over 2 years and was ultimately DISCHARGED from hospice because he got better.

Like Art Buchwald, my father also got better when admitted to hospice. There were no more arduous trips to doctor’s offices. They took him off many medications (many of which had deleterious side effects) and the increased hands-on personal care was terrific for his mental and physical health. Hospice paid for a hospital bed in the home. And to avoid pressure ulcers, it also paid for a special inflating mattress to alternate the pressure spots. It paid for pain medication & administration; it paid for medication to manage symptoms (like nausea, itching and others).

My father passed away after a sudden sharp decline on November 29th.  Hospice was there to pronounce him and their social workers and CNA’s were there to help us with the emotional and practical issues.

My mother is now a widow. And she has many practical and emotional hurdles to overcome.

Now, the hospice bereavement counselors are staying in touch with my mother who finds herself, after 56 years, suddenly alone. After all those years, she finds herself with no one to take care of; and not sure how to take care of herself. A host of financial, practical and life questions lay before her.

Like many adult children, and not just an elder attorney, I find myself in a position where the roles are reversed – the children are now parenting the parents.

I’m honored to take on that role (with my siblings). I’m grateful for the assistance of the professional caregivers – both private and professional – who have assisted us in these long months of transition.

Rest in Peace Dad, your wife will be well cared for.


Wills & Trusts Program at Charlottesville Senior Center

Here’s one of the few ways we had to publicize things before we had blogs and social networking sites to post things on:

Sr. Center Marquis

Honored to be invited to speak at Senior Center on the third Tuesday of EVERY month.  This month we are doing a closer look at Wills & Trusts.   Hope you’ll come and bring a friend.

BTW: I have a friend that lives nearby the Senior Center. He calls that area — Greenbrier Dr., Pepsi Place and Hillsdale Drive “death valley” because of all the companies and agencies located there for old folks (my friend is 90, he can call it whatever he wants). Just to name a few of the agencies in that vicinity: JABA, JABA Care Advantage Home Health, Branchlands (independent living) Our Lady Of Peace retirement community, Rosewood Village Assisted Living, The Laurel (nursing/rehab), The Alzheimer’s Association. And of course, the Senior Center. But it is FAR from folks waiting for the inevitable. It is a vibrant, active community where it’s possible to watch the deer and wild birds outside your window and then take an easy walk over to the mall.

 Charlottesville is a GREAT place to retire!



One thing certain…. Death withTaxes! Estate Planning

The time is nigh! No, no, no…. not time to die yet.

Beware the grim reaper
One thing you can be sure of — death and taxes. But death taxes are changing on December 31, 2012

But it is just about time for that fun political war over “death taxes”Actually, there’s really no such thing as a “death tax”  Usually what is meant by “death tax” is actually estate or inheritance taxes.

Estate tax is an amount that a deceased person’s estate is taxed based on the net value of that estate.

We’ve been enjoying a very high exemption from Federal estate taxes over the past several years, peaking this year at $5,120,000 (that’s right, five MILLION, one hundred twenty thousand). So if your estate was worth less than that amount, you needn’t worry about paying Federal EstateTax. Virginia matched that exemption.  The top tax rate for estates valued above the $5.120M exemption is 35%

I don’t have many….uh, any…. clients who have an estate that even approaches that value. But I would welcome you if you if you want to call!

Anyway, that’s all about to change as we roll to the edge of the “Fiscal Cliff” at the end of the year. Yes, the ‘death tax’ exemption is one of those that will sunset on December 31st 2012.

So then what happens? (if congress does nothing)  Very simple: we revert to the tax rates/exemptions that were in place in 2001/02.  And THAT exemption is a mere $1 million. But the top rate for taxable estates skyrockets back to 55%.

Most of my clients have estates valued at well under 1 million dollars. So their death and taxes concerns are pretty minimal.

If your estate plan was done during the period that these changes have been made, and you calculate that your assets – home, investments, cash, automobiles, antiques, art, guns etc. etc. might be greater than $1M, you may want to have a new look at your estate plan.  Indeed, you should (generally speaking) revisit your estate plan every 5 years or so.

Want to learn more about Wills and Trusts? Come to the FREE “More on Wills & Trusts” program at the Charlottesville Senior Center on Tuesday, November 20, 10-11 a.m. All ages welcome and open to the public.  Charlottesville Senior Center is located at the corner of Greenbrier and Pepsi Place.


11/20/12– More on Wills, Trusts and Probate

You asked for it, you got it. A more in depth discussion on estate planning and the probate process.

Why would you want to “avoid probate?”

Do you need a trust? Why?

What are some other strategies for settling my estate?

What if I don’t have very many assets? Do I need a will at all?

Do I need a lawyer to write my Will?

All those questions and much more will be answered!

Free! Open to the Public


Family Values – Includes Multi-generational families

I don’t know about you, but I’ve been hearing about the “sandwich generation” for some time now.

In my life as an advertising executive (eons ago) we identified the “sandwich generation” as a distinct demographic (or “psychographic”) — one worthy of our attention in our ever present quest to identify and nail “market segments.”

What is the Sandwich Generation? No, not PB & J. It’s adults, with small children they are responsible for AND their own aging parents for whom they are caring for as well. Get it? Adults “sandwiched” between their kids and their parents.

Back then, the idea was mostly that older parents needed assistance — with doctors visits, trips to the pharmacy, visits (at their home or nursing homes). The idea was not that they necessarily where living under the same roof with their now-adult children.

Apparently that trend, which is the HISTORIC way American families took care of their elders – is on the come back.

With the cost of long term care so incredibly high (and the quality of care so questionable!) more and more families are looking at the option of bringing Mom & Dad (or one or the other) to live with them.

This solution, while certainly cost effective, is fraught with other problems of its own.  Who pays for what?  How is mom’s Social Security income integrated into the family budget? Who pays for the babysitter and who gets babysat (kids or grandma?) If grandma takes on child care duties – does she receive a wage for it?

No one really wants to consider these questions. Or negotiate the answers. But assuming that you are all on the same page is not really an option either. Not if you plan to succeed in living together with multi-generational families all under one roof.

The Farmer’s Almanac posted a story I found very thought provoking on this very subject. You can read it here.

Another interesting and thought provoking source is a book I’ve been reading titled, Someday, All This Will Be Yours — essentially one way that financial deals between families were negotiated (or not) in the time when multi-generational families in one home were common in the U.S. (up until the mid-1950’s or so).

If you’re thinking about bringing Mom or Dad into you home, you might want to read these two sources for some insight and/or  talk to someone outside your emotional circle who can objectively help you decide if that is the right financial and practical move for you and your aging parent.  And help you negotiate the boundaries and practical arrangments between you and the other members of your family.


Long Term Care — Planned For It?

Typically, the first time someone calls me it is because they need a Will or other estate planning documents.

In the course of our initial consultation, I ask lots of questions, some of which is intended to draw out what their plans are for making sure their care needs are taken into consideration as they age – no matter where that may be — at home, with family or in a facility.

The second situation in which I’m usually called is when there is already a medical emergency or event and it is basically to late to do any planning for long term care – it’s a matter of stanching the flow of money and resources and that is sometimes just not possible.

Recently, the New York Times published a great piece on Long Term Care Insurance and you should read it whether you have Long Term Care Insurance or not.  This is relevant if you are yourself reaching an age when you are concerned about your care, if you are a “planner” and need some insight into how these things work, or if you have aging parents and are trying to figure out how you are going to finance their care.

One shortcoming in the NYTimes piece is that it doesn’t cover the role that an attorney can play in planning for long term care. For that, you will have to call me.


Will? or Trust?

I’m often asked by people of all social strata about the need for a Trust.  Why would someone need a trust rather than a will?

Like Jeff Foxworthy of “you might be a redneck if….” fame,  my short answer is:

You might need a trust if you have:

appropriate for trust?
  • a very large estate (right now > 5 million, subject to change by the end of 2012)
  •  complicated tax issue
  •  business succession issues as part of your estate
  •  a child or adult dependent with special needs
  • a need to protect a “spendthrift” from themselves
  • a need to plan for long term care

Inevitably, when I ask why my client thinks they need a Trust, I’m told that she wished to “Avoid Probate” (a phrase forever captured in the title of that perennially bestselling book: “How to Avoid Probate!” )

But very few people seem to understand why they might wish to avoid Probate at all.

The fact is, most states now offer a means of by-passing probate for small estates (in Virginia, currently < $15,000)   Often that can be accomplished without need for drawing up a Trust through the use of joint ownership of property and accounts, named beneficiaries, creation of life estates, pay on death accounts and the like.

When I discuss Trusts with a client, I try to explain that basically, from an estate planning perspective, Trusts and Wills are just two different approaches toward accomplishing the same thing. Both are intended to pass property to someone else. The former – a Trust – does it during your lifetime; the other – a Will – does it when you die.   Perhaps the most important thing to know (and one many people never do figure out until it’s too late) are the tax consequences of one method over the other.  Also, creating a trust during your lifetime tends to require both some sophistication in administering a trust and/or paying someone who can administer it for you.

I tell people to imagine that both a Trust and a Will can be thought of as “buckets.” That is, buckets which hold your stuff – property, accounts, stocks, assets, jewelry – whatever you decide to put in it.

With a trust, you transfer that stuff “into” the bucket during your lifetime and effectively, you no longer “own” or hold title to it, the Trust does. You can name yourself as Trustee and still control the assets in some cases. You can also be the “beneficiary” of the Trust which means that if you have assets – for example, rental properties – that produce income, you may be receiving that income as the named beneficiary. (as another example, you could have income from investments in stocks that may be paid to you while the stocks are an asset of the Trust).

On the other hand, with a Will, you only fill your “bucket” with your stuff when you kick it. The bucket that is.  You create a “probate estate” only after you die, and your executor (or personal representative) presents your Will for probate.  During your lifetime you maintain full ownership and control of everything. If you sell or otherwise use up those things before you die, the bucket just doesn’t get filled up.

There are many and varied ways to set up Trusts – from relatively simple to extremely complicated. I have very few clients for whom it pays to set up a Trust.

Wills too can be complicated, but generally it is a pretty straightforward document to draft. Sometimes the hardest part is determining who you trust enough to carry out your wishes as executor.  What I spend more time doing is making sure that I keep as many assets out of the “probate bucket” as I can so that the Will is not the vehicle used to pass the property at all. For example, between husbands and wives it is common to hold real property “by the entireties” with survivorship. That means that whoever remains alive, keeps the whole ball of wax.  You can set up property ownership between people who are NOT married as “joint tenants” with rights of survivorship which basically would work the same way. This is extremely important for people who for whatever reason, are not, or cannot get married but who wish to leave real property to another.  In this way, the property passes OUTSIDE the Will (or “probate bucket”) and it passes immediately. This is also true for automobiles and other “titled” property.

There are many goals when planning your estate. One of them is making sure your LIFETIME needs are met.  Most people don’t think of it that way. But when I talk to people about their current financial status, I want to make sure they are comfortable and well taken care of through their entire life. That often means planning for long term care. This is another whole post which I’ll write about another day.  But simply “avoiding probate” is not enough. In fact, that’s relatively easy.

Another goal is making sure that gifts you wish to make, get to your loved ones. And that both you and they pay the least amount over to the government along the way.

It’s true that both death and taxes are certain. How and how much is still an open question.