What is Probate and Should you Avoid it? Part IV

February 28, 2019

Probate is what’s left over At the end of the day, there may be some things left over to go through probate, meaning they didn’t avoid the process by title or contract. What’s so bad about that? I don’t know that there’s anything so terrible about probate. It is a necessary process to transfer title of property if no other options have been exercised. People who I have worked with in the Probate Court are generally helpful and dedicated. The Court imposes deadlines which make the case move through the system. However, the two main reasons people want to avoid the probate court, or any other court process are money and time. I often here attorneys say that probate is not that bad in Maryland. Actually, I only hear attorneys say that. In Maryland there are various court costs, bonding fees, probate fees, and attorney’s fees as well as Personal Representative’s commissions. The highest of these fees are often attorney’s fees. What’s so bad about that? The allowable fees for attorneys and Personal Representatives are combined is about 3.6% of the assets. For example, suppose the deceased person has a house worth $300,000 and a mortgage of $250,000, which figure is used to calculate the allowable fees and commissions? The formula is based on the gross assets, not the net assets. The allowable commissions and fees for a $300,000 probate are $11,880. In this example, the allowable fees are 24% of the net value ($11,880/$50,000). I generally estimate 2% to 4% as the administrative expenses for most families in probate. Additionally, probates ordinarily take somewhere between 9 months and 18 months to complete. If assets are complicated in nature, the time could be much longer. For small Estates, meaning under $50,000, the process can be much shorter. An additional reason some of my clients want to avoid probate is that your Last Will and Testament is a public record. Someone going to the Courthouse can read your Will, see the values of all the assets passing through the court system, learn the timing of distributions, and find out who gets what and when to they get it. This is more information than some many of my clients want to share with the public.

Receiving Social Security? Beware of Scammers

February 27, 2019

Scammers work to create weaknesses, including fear. Scammers have increased targeting people who receive Social Security, to the extent that complaints have increased 1,000% over the past year, according to Fox 6 Now in “‘The people who are calling have some pretty good tricks up their sleeve:’ Social security scam calls spiking.” Ketti Bingen received a phone call telling her that someone had found a car by the side of the road somewhere in Texas that was registered in her name. They told her there was blood on the car, and when they went to the address the car was registered to, they found a massive number of illegal drugs. The caller had the last four digits of her Social Security number. They wanted her to divulge her name and date of birth. The caller advised her to file for a new Social Security number. Lucky for her, she knew enough to hang up. Not all Americans are that smart. In 2017, the Federal Trade Commission heard from 3,200 people who were taken hook, line, and sinker–to the tune of $210,000 each in this scam. In 2018, 35,000 people were fooled. The total loss: $10 million. The Wisconsin Consumer Protection agency and agencies across the country repeat the message: the Social Security Administration does not call and demand money from people. It never makes threats, warns of an impending arrest or demands that people send gift cards. If the Social Security Administration wants to reach out to people, they do so by mail. Another reason people fall prey to these phone scams is that the caller IDs on their phones appear to be coming from the government agencies. However, that’s also a scam. It is now relatively easy to “spoof” a phone number, or make it appear that the number the scammer is calling from has a different caller ID number. If you are worried about someone calling your home claiming to be from the Social Security Administration, you can call the Social Security Administration’s dedicated fraud bureau. Reference: Fox 6 Now (Jan. 27, 2019)“‘The people who are calling have some pretty good tricks up their sleeve:’ Social security scam calls spiking”

It Is Best to Plan for Possibility of Assisted Living

February 26, 2019

There is little time when an emergency arises, so perhaps it is best to plan ahead. I tell my new employees that if they just pay attention, they will see the best loves stories in the world walk through our doors. We have many couples who we work with where one spouse has diminishing capacities. The caretaking spouse is often making supreme sacrifices to keep their husband or wife at home. That it true love on display. Nicholas Sparks is a very popular author. He wrote, among other works, “The Notebook”. He is a former estate planning lawyer, and I am sure found the inspiration for that story with the kinds of couples we see on an ongoing basis. Unfortunately, sometimes the care needs are just too much. When a loved one is hospitalized and cannot return home, there is a lot of pressure because decisions have to be made quickly. The key to handling that problem, if it should arise, is to not wait for the emergency but plan ahead for it, according to Next Avenue in “Planning Ahead for Assisted Living.” Many people deal with assisted living this way. Adult children uproot their lives and relocate to be near their aging parents. Spouses feel helpless when their husbands or wives refuse to even consider moving to a facility, yet they are not safe at home. The senior often pushes back against leaving their home, which is understandable. However, when illness or aging takes a toll, it’s just a matter of time before they understand, usually the hard way. One woman was the very model of aging-in-place, until turning 85. Then illnesses and a chronic condition started making it hard for her to move around. When she was taken to the hospital, she had to take a clear look at her situation. It was distressing, but she realized she had to make a change. By 2030, the number of Americans age 65 and older is expected to increase dramatically, and for the first time in our country’s history, the number of older Americans will be higher than the number of children. We may not know what life has in store for us. However, we can plan ahead. Some people start looking at CCRCs–Continuing Care Retirement Communities. These are facilities that include independent living, assisted living and nursing home care, all on the same property. Some have secured memory care for those living with dementia. Research the costs, policies, and programs of the long-term facilities you may be considering. There are different services offered. Assisted living facilities are state-licensed housing communities that offer residents a range of services. They usually do not offer medical care. A skilled nursing facility/nursing home will have medical services. Services in assisted living communities vary. Some offer meals and help with bathing, dressing and mobility, medication management, education and social activities. They may be large or small, with residential homes, where three or four residents live with a paid caregiver. Those are known as “adult

Elder Abuse Is a Threat that Should Not Be Ignored

February 22, 2019

No matter how smart you are, you can still become a victim of elder abuse as you age. Who you trust to help you can have devastating consequences if you don’t choose wisely. Mary Weiss has endured the violent death of her son, four strokes and a heart attack. Now she is facing the loss of her home and retirement savings, because of suspected financial elder abuse, according to Fox 9 in “Woman, who helped change research protocols at U of M, allegedly loses savings to caregiver.” The person she depended on throughout it all, is the one who is suspected of taking advantage of her trusting nature. She says she was financially ruined and her nest egg of $150,000 is gone. Debt from credit cards and loans taken out in her name without her consent is mounting. Weiss gained international attention for her battle with the University of Minnesota researchers who ran a research study of a psychiatric drug. Her son took his own life, while enrolled in the study. Because of her fight, the University made a number of changes to its research programs. The man she believes has ripped her off stood by her during that battle, speaking to reporters on her behalf. However, now he has been charged with one count of theft by swindle by the Washington County Attorney, following an investigation by the Cottage Grove Police Department. Howard lived with Weiss, although they were not romantically involved, for 10 years and had become her caregiver. She had suffered a series of strokes and gave him power of attorney over her financial matters. Weiss knew that Howard had a record, including a theft by swindle conviction, but she never thought he would do something bad to her. It was Weiss’ niece who discovered the problem this past spring, when she was going through a year’s worth of bank statements. ATM withdrawals, lottery ticket purchases, loans and credit cards were all done in her name. Washington County Human Services did a separate investigation and notified Weiss that an allegation of financial exploitation had been substantiated. Howard denies taking anything without Weiss’ consent. Weiss is currently living in a nursing home and is recovering from a fall. She said that she would like to return to her townhome but is not sure she will be able to afford to do that. She wants others to understand that this can happen to anyone, even with full control of their senses and no dementia. Reference: Fox 9 (Oct. 22, 2018) “Woman, who helped change research protocols at U of M, allegedly loses savings to caregiver”

What is Probate and Should You Avoid It? Part III

February 21, 2019

Probate is what’s left over An alternative way to avoid the Probate process, or the frying pan, is by contract. Retirement plans, life insurances and investment accounts can have transfer-on-death (TOD) or Paid-on-death (POD) instructions. These are also called beneficiary designations. The same is true for US Savings Bonds, Certificates of Deposit, and most other financial instruments. I was recently meeting with a woman whose husband had died. He had a will that gave everything to her. Unfortunately for her, all of his retirement plans were still payable on death to his first wife, who ultimately received the money. Her husband may have been under the impression that the will would redirect the accounts. That is a common mistake. Companies administering the contracts don’t care what your Last Will and Testament says: they are bound by the contract terms only. Therefore, a significant consideration in creating an estate plan is to make sure that the beneficiary designations are coordinated correctly. This going to be especially true with retirement plans. One key aspect to providing that someone inherit your IRAs and 401 K plan is providing how long they can “stretch” the withdrawal. This allows the plan to continue to grow tax deferred and spreads you the income taxes on withdrawal. How the beneficiary designations are made plays a significant part of this. We often see people who have no beneficiary or no back up beneficiary on such a plan. This can cause significant accelerated income taxing of the account. How current are your beneficiaries? With a little effort you can check and update them. Years ago, I had a client who died at age 90. We discovered that his government life insurance had been left to his wife, who was already deceased. The contingent beneficiaries were his parents. That probably made sense when he signed the life insurance papers while his children were minors. One of the biggest difficulties in the case was proving that his parents were dead. Try locating a death certificate for someone who died in the 1940s. It can be difficult, even in our internet age. One final tip: if you have minor children and have created a trust for them in your will or a revocable trust, have that trust as a primary or contingent beneficiary. Many of my clients will name a trusted sibling instead. The problem is that if the sibling dies, their family may well end up with the money.

Breach of Social Security Accounts on the Increase

February 20, 2019

Since Social Security is a target, it is best to be prepared and to be protected. Unfortunately scammers are relentless and merciless. Theft from Social Security is increasing. One way to help prevent it, is to create your account now, according to Next Avenue in “Protect Yourself Against Social Security Identity Theft.” Opening your account can be considered as a preemptive strike against theft. The advice is relative, because everyone should go to the Social Security website and create an account, if they haven’t already. It’s a gateway to many online services from the Social Security Administration. If you don’t set up your account, there is a greater chance that someone can set one up using your name. One woman took this advice, since anyone who is older than 18 and has a Social Security number, and email and a mailing address, is allowed to open an account, even if they are decades away from claiming any benefits. However, within nine months of doing so, she received an email from the Social Security Administration saying they were deactivating her account. What happened? She hadn’t done anything. No one else, as far as she knew, had access to the account. Therefore, she called the Social Security Administration and requested a direct deposit block on her account. This did two things: it prevented changes to direct deposit information through a financial institution or through the Social Security website. It also stops anyone who might be trying to change a mailing address. Some further research resulted in information about what might have happened. The U.S. Public Interest Research Group website reports that with a name, birth date and Social Security number, a thief can try to open an account in your name and then change your direct deposit information to their checking account. It’s not that hard to gather that information online. A 2018 report from the Javelin Strategy and Research firm found that nearly 30% of Americans were notified of a breach of their accounts in 2017. That’s up from 12% in 2016 and cost $16.8 billion dollars. Scammers have shifted tactics. One consumer helpline reports that there have been fewer complaints about people impersonating IRS agents demanding money and an increase of complaints about people impersonating Social Security Administration representatives. How can you protect yourself? If you haven’t already done so, sign up for a “my Social Security” account. Check it on a regular basis to monitor your address information or date of birth. If you see any information that has changed or is wrong, contact the Social Security Administration immediately. If there’s any fraud or identity theft, you may also want to contact fraud hotlines at the Social Security Administration, Office of the Inspector General, the Federal Trade Commission and the Senate Select Committee on Aging. Reference: Next Avenue (Jan. 17, 2019) “Protect Yourself Against Social Security Identity Theft”

Taking a Couple’s Age Gap into Retirement Considerations

February 19, 2019

If you don’t marry someone close in age, your estate plan may require a closer look. When a couple has an age gap, there may be some special challenges ahead, when it comes to estate planning, according to The Washington Post in “How will a couple’s retirement look when there’s a big age gap?” Not only are men who have recently remarried more likely to have a spouse who is younger, said one researcher, in many cases they are marrying women who are much younger. Twenty percent of newly married men wed women who are at least 10 years younger than themselves and another 18% marry women who are six to nine years younger. By comparison, just 5% of men in their first marriage marry women who are 10 years younger. For women, the likelihood of having a far younger spouse is very low. That big age gap can be a big factor in decisions about when you retire, when spouses take Social Security and in planning how much money the couple needs to save and how to invest their savings. Since women tend to outlive men, it’s especially important for retirement savings to last longer, when the wife is much younger than her husband. When to retire is one of the big questions. Long-term care considerations, health insurance and other health costs become more significant, when there’s a younger spouse. Couples with big age gaps need to have a plan that accommodates the partner with the longest life expectancy. Therefore, a 70-year-old husband and a 56-year-old wife need to plan for their portfolio to last over the wife’s longer life span. That could be 30 years, especially if she has good health and a family history of longevity. If the older partner had a higher income level over his working career, delaying Social Security filing past full retirement age to age 70 could be extremely important. It will enlarge the higher-earning spouse’s benefit and it will also enhance the lifetime benefits for the surviving spouse. If there is a big age gap between you and your partner, you’ll need to have a lot of discussions about the issues that retirement and retirement planning brings. An estate planning attorney, coordinating with a financial advisor well versed in Social Security options, can advise you in creating an estate plan that fits your unique circumstances. Reference: The Washington Post (Oct. 22, 2018) “How will a couple’s retirement look when there’s a big age gap?”

What is Probate and Should You Avoid It? Part II

February 14, 2019

Probate is what’s left over I draw about ten frying pans a week on a legal pad. This is not due to my great artist ability. Last week I explained that Wills work through a process called Probate. When someone dies, property may be transferred by title, such as the transfer of a house to a spouse when the first spouse dies. It is easy and essentially automatic. If a person dies and the title doesn’t convey ownership, then a contract may do so instead. More about that next week. There are only three ways assets transfer at death: By Title, by Contract, or by Probate. If the title and contract don’t transfer ownership, then a probate estate does. If a decedent as a will, this is activated then: if not, then the law of the state of they lived in writes one for them. Since the dead person is not here to transfer title, that role is given to the Personal Representative. Once appointed, that person can sign contracts, deeds, tax returns, etc. All this is done with the oversight of the probate Court. Probate is not bad: it serves a necessary function. Many year ago, I was part of a bar association discussion years ago about probate and its avoidance. I was advocating the use of Revocable Living Trusts as reasonable alternatives to Court supervised transfers. I felt like a baby harp seal hunter at a PETA meeting. The outrage and venom directed at me for suggesting that Probate was to be avoided” were palpable. Most of the lawyers present, and the then Register of Wills, insisted as a strong refrain that “Probate is not that bad…” The only people I have heard insist that this is true are attorneys and Probate Court personnel. I pointed out the hypocrisy of this by position by asking “How many of you have your life insurance policies and/or retirement plans payable to their probate estates?” Of course, no one did so, because naming a beneficiary was simple and the probate Court could be avoided. If probate isn’t so bad, then why no? Maybe because of administrative fees, Court costs, Attorney fees, Personal Representative Commissions, which in Maryland can be 3.6% to 4%. Maybe because the court process can cause long delays before funds are available: from seven months to several years is not unusual. Finally Probate records are public, meaning that your neighbor can go to the Court, read your will, find out who is getting what, when they get it, and who is in control. For some of my clients, keeping this private is preferable. Is short, probate is time consuming, expensive and is completely public. The Court process provides supervision, which is some cases is badly needed. Most of my clients name people that they trust and don’t want supervised. To weigh out your options, its best to seek the advice of an estate planning attorney. Note: This is the Second of a Series of Five to be published

Why Review Your Estate Plan?

February 13, 2019

Life rarely remains the same and those changes mean it is time to take a fresh look at your estate plan. Time marches on and a person’s life changes. That creates the situation of there not being a doubt of whether an estate review is necessary but simply becomes a questions of when it will be reviewed, according to the New Hampshire Union Leader in “It’s important to periodically review your estate plan” Most people get their original wills and other documents from their estate planning attorney, put them into their safe deposit box or a fire-safe file drawer and forget about them. There are no laws governing when these documents should be reviewed, so whether or when to review the estate is completely up to the individual. That often leads to unintended consequences that can cause the wrong person to inherit, fracture the family and leave heirs with a large tax liability. A better idea: review the estate plan on a regular basis. For some people with complicated lives and assets, that means once a year. For others, every three or four years works. Some reviews are triggered by changes in life, including: Marriage or divorce Name Changes Death Large changes in the size of the estate A significant increase in debt The death of an executor, guardian or trustee Birth or adoption of children or grandchildren Change in career, good or bad Retirement Health crisis Changes in tax laws Changes in relationships to beneficiaries and heirs Moving to another state or purchasing property in another state Receiving a sizable inheritance Beneficiaries in need of protection due to Special Needs, creditors, or Tax Problems. What should you be thinking about, as you review your estate plan? Here are some suggestions: Have there been any changes to your relationships with family members? Are any family members facing challenges or does anyone have special needs? Are there children from a previous marriage and what do their lives look like? Are the people you named for various roles—power of attorney, executor, guardian and trustees—still the people you want making decisions and acting on your behalf? Does your estate plan include a durable power of attorney for healthcare, a valid living will, or if you want this, a DNR (Do Not Resuscitate) order? Has your estate plan addressed the possible need for Medicaid? Do you know who your beneficiary designations are for your accounts and are your beneficiary designations still correct? Your beneficiaries will receive assets outside of the will and nothing you put in the will can change the distribution of those assets. Have you aligned your assets with your estate plan? Do certain accounts pass directly to a spouse or an heir? Have you funded any trusts? Finally, have changes in the tax laws changed your estate plan? Your estate planning attorney should probably take a look at the impact of state law changes, as well as federal. Reference: New Hampshire Union Leader (Jan. 12, 2019) “It’s important to periodically review

Serving as an Executor or Trustee Can Be a Challenge

February 12, 2019

Administrating an estate or trust? Let’s take a look at just how hard it can be. People often name a family member or close friend as an executor or trustee. However, sometimes it is wise to think it through and consider the possibility of a professional administrator as a trustee, according to Kiplinger in “Why You May Need a Pro Trustee: Trust Administration is Not Just Common Sense.” The article details some of the problems that can arise despite good intentions. Let’s call our client Linda. She wants to identify a successor trustee. Linda’s parents had identical estate plans with trusts that were set up for Linda and her two siblings Jack and Diane. Linda was the family’s responsible one, so she received her share in each estate outright and served as the trustee for the other separate trusts, two for Jack and, two for Diane since the second of her parents died some 10 years ago. This is not unusual—parents will often give the responsible person in the family, the role of the trustee when their siblings are seen as less likely to perform the necessary tasks. These four trusts were close in value, with about $440,000 in each. They were identical in other ways: the trustee had the power to pay from income and principal each year for the beneficiary’s health, maintenance and support, but there was no requirement to distribute anything. Linda had done a great job, in keeping with her reputation. For 10 years she recorded every transaction. Because she knew her siblings resented her serving as trustee, she never paid herself a fee. Linda was tired, and she wanted to let someone else be in charge of the trusts. When the trusts were presented to an institutional trust officer, it was clear why the trusts had never been merged. Linda’s mom had executed an amendment to the estate plan after Linda’s dad died that ensured that when these siblings passed (that would be Jack and Diane), the trusts would pass to their descendants. Linda’s mom executed this amendment so that when Jack and Diane passed away, the trust from the mother would be divided among her surviving children. This meant that Linda would get another share, and Jack and Diane’s children would get less benefit from that trust. Linda’s mom thought she was doing a good thing. However, her decision put Linda in a bad position. She became an “interested” trustee, with the power to make decisions that would eventually put more funds into her pockets or diminish her share. Of course, that would only happen, if she outlived her siblings. Linda had been diligent and responsible, insuring that the trusts had the exact same asset allocation and investments, paying out income from the trust and when one called asking for money, giving both the same additional amount from the mother’s trust and the father’s trust, even though any distributions made from the mother’s trust make her less likely to receive a larger share in

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February 2019