Congress has afforded all of us an unprecedented—and probably never to be seen again—opportunity to make significant gifts to our children (and grandchildren), thereby reducing the estate taxes which could hit our families when we die. For the remainder of 2012, each of us is permitted to make gifts totaling up to $5.0 million to our offspring without any federal gift taxes.  That amount will fall to $1.0 million for each of us on January 1, 2013.  On paper, it appears that making significant gifts this year makes sense, if we are concerned that our estates will exceed $1.0 million in 2013 and thereafter.  However, does such a strategy make sense for you and your family?

First, it is important to remember that you must keep enough assets in your name so that you can provide for yourself as you age.  In doing that, remember that a change in your health could dramatically increase your cost of living.  Relying on children to take care of you if you run out of money carries with it great risk.  Some children can barely afford their own living expenses; others simply don’t care about their parents.

Secondly, any gift can also affect your ability to have your nursing home costs paid by the state in which you live if you run out of money.  Ohio has a 5-year “look-back”rule, which provides that you are not eligible for Medicaid (the State funds which pay the nursing home costs for those who run out of money) if you make a gift within five years of applying for Medicaid.  The period of your ineligibility depends upon the size of the gift.  So, while making gifts to reduce your estate may seem like the right thing to do, it could have bad consequences for you if you end up in a nursing home.

The conclusion:  it is really important to get competent advice from an Estate Planning and Elderlaw attorney before beginning any type of gifting strategy.

Jack N. Alpern, Esq.

The Alpern Law Firm

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

Why is it that when you enter a hospital they always ask if you have a Living Will or Durable Power of Attorney for Health Care?  Those documents, referred to Advance Health Care Directives, give to the health care providers and your loved ones your wishes regarding the termination of life support under the proper circumstances. Those circumstances vary from state to state.  Under Ohio law, they may be executed if two physicians have indicated in writing that you are either (1) terminally ill (going to pass away soon) or (2) permanently unconscious (as in a coma).

The Living Will is self-executing:  if you sign it and the circumstances described above exist, your wishes will be carried out, without anyone else required to act (although the persons you designate will be notified by the providers).  The Power of Attorney for Health Care requires the decisions of both the two physicians plus the individual you select before your wishes may be carried out.  In the event that you have signed both of those documents, the Living Will trumps.

Which of those alternatives is right for you?  This should be carefully discussed with your
estate planning attorney.  However, failure to have either or both of those documents could result in you being kept alive when there is no hope of recovery.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

Parents often assume when creating an estate plan that their children will always remain healthy.  They leave all their assets directly to their children without restriction and without any holding back receipt of the inheritance by the child. However, parents rarely consider that a childmay become disabled after they create their estate plan, either because of an accident or illness.   A disabled child who is receiving some certain types of government benefits may become
ineligible for receiving those benefits if an inheritance is received outright
and without restriction.   Parents need to plan for this.

In a properly designed estate plan, provisions should be made so that if the child becomes disabled after the estate plan is created, they may receive their inheritance and yet still qualify for governmental benefits.   It is important to consult with a knowledgeable estate planning attorney when you are ready to address these issues.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

Etta James is best known for her classic At Last, but now at just 72 years old she is making news with the sad story of her family’s fight to control her money and her care.  Ms. James is suffering from Alzheimer’s disease with dementia and also has leukemia.  According to her doctor,  Ms. James can no longer perform any of the activities of daily living, such as eating, bathing or dressing.

To make matters worse, her mental incapacity has sparked a family fight that has led to a lawsuit.  Her husband of 41 years filed a court proceeding to take control of nearly one million dollars of bank accounts in her name.  He claims the money would be used to pay for her care and keep her at home, rather than in a nursing home. 

Etta James had a Durable Power of Attorney naming her son (from a previous relationship) as her attorney in fact in 2008, which granted her son the power to make her legal decisions in the event of her incapacity. Normally, this would trump her husband’s claim, but he claims that Etta was not mentally competent when this document was signed;  therefore, it should be declared invalid. 

The son claims that he, like the husband, wants Etta’s money to be used for her care and to keep her at home, rather than in a long-term care facility.  But the son wants someone independent to manage the money instead of Etta’s husband. 

Etta James is a resident of California, which is a community-property state, so the husband’s lawyer has filed asked for Etta’s money to be declared community property and to permit him to move the cash to a joint account with his name on it.

In February, 2011, a California judge froze the assets of Ms. James, authorizing a $30,000 withdrawal from Etta James’ accounts to cover her medical needs and ordered a medical evaluation to determine whether she is receiving the appropriate treatment. 

All of this could have been avoided if Ms. James’ documents had been updated. This sad case illustrates the need to have estate planning documents and incapacity planning completed well before the need arises.   Work with an estate planning attorney to make sure you have the documents you need to not only distribute your assets upon your passing, but to address situations that can come up later in life.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

As someone ages, he may not notice a diminishing capacity to handle financial matters or to make decisions about healthcare. If a durable power of attorney has been signed, the person holding the POA can simply exercise their authority, but if no such POA exists, then a probate court must appoint such a person.

When the court appoints a guardian of a person (in some states, called a conservator), it will first look to the person’s spouse or other family member before appointing an outsider. In many states, a spouse will not need a formal declaration of guardianship to make healthcare decisions for their spouse. If it is determined that a situation is too volatile or there is in-fighting over the appointment, the court may look to an attorney or some other such professional person to act as guardian. Proof of mental or physical incapacity of the person subject to guardianship must be presented to a judge at a hearing before guardianship is granted.

A guardian must keep strict records of all transactions and decisions made regarding the person, and reports must be given to the court from time to time on the state of affairs of the person’s accounts and well-being. Because of the time and paperwork investment needed on the part of the guardian, guardians are compensated for their care and reimbursed for expenses. A guardian who has control over a person’s finances must act in the best interest of the person and the assets they have. Investments must be managed, and retirement accounts monitored and maintained. The financial responsibility placed on a guardian can be overwhelming for someone not comfortable in handling financial matters. For this reason, a guardian should be able to demonstrate a good command of their own financial matters.

A guardianship ends when the person either passes away, their condition improves so they no longer need a guardian, or the guardian can no longer carry out the duties of guardianship (in which case a new guardian will be appointed).

For questions about guardianships, contact an estate planning attorney today.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

Many people count on social security to be part of their retirement income, but often don’t know the details or how much to expect.  Following are several frequently asked questions regarding this program:

What determines how much social security I’ll receive when I retire?

There are two main factors that determine the monthly benefit that you will receive:  you’re earnings throughout your working career and the age you begin receiving your benefits.  You are eligible to receive benefits at the age of 62, but they will be reduced according to your retirement age, which is based on your birth year, the earlier you begin to take retirement, the lower your benefit will be.

What is the best age to begin receiving social security benefits?

This is a decision that should be based on your personal situation.  It should be weighed carefully whether it would be better to receive benefits early with a smaller monthly amount or wait for the larger monthly benefit payment at a later date.  Some of the factors to consider in this decision are:

Other retirement income sources;

• Whether or not you plan to work part time or full time during your retirement.
• Your health;
• Your financial needs; and
• The amount of your benefits.

What is the difference between the monthly benefit at 62 and the monthly benefit at full retirement age?

The earliest you may begin collecting benefits is age 62.  If your estimated full benefit amount is $1,000, you would receive approximately $750 at age 62, $1,000 at your full retirement age (which differs based on the year of your birth) and approximately $1,300 at age 70.  These benefit amounts would not normally change throughout your retirement years, unless you are working during retirement.  In that case, after you reach full retirement age, social security reevaluates your benefit amount to give you credit for any months in which you did not receive your full benefit because of your earnings.

How can I find out how much my monthly benefits would be from social security when I retire?

The Social Security Administration mails this information annually.  In your Social Security statement is the estimated monthly benefit amounts you and your family may qualify for now and in the future.  This information is based on your earnings and years worked, and changes during your lifetime.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.

A Power of Attorney is a legal document that authorizes someone else to act on your behalf. Powers of Attorney are most commonly used in legal transactions, especially those where you elect to have your attorney represent you, such as in a real estate negotiation.

But this kind of POA is automatically revoked in the event you become disabled. If you want your Power of Attorney to protect you during disability, it must be “durable.”

To create a Durable Power of Attorney, the document must clearly state that it is durable. You can then use that document to act as a safety net in the event that you are incapacitated.

There are two basic types of Durable POAs: one for financial matters and one for healthcare.

The Financial Durable POA allows someone of your choosing to handle your financial affairs when you’re not able to do so yourself. They can pay your bills for example, transfer money to and from your checking and savings accounts, and discuss payment plans with your creditors.

A Healthcare Durable POA on the other hand, is designed to designate an agent to speak on your behalf regarding medical treatments. This person will have the authority to accept or decline medical procedures on your behalf when you can no longer speak for yourself.

This is important if you have opinions about using life support methods such as feedings tubes and respirators. Without a Healthcare Power of Attorney, also often called an Advanced Healthcare Directive, the decision will be left up to your family members and in their grief-stricken state, they may or may not make the choice you want.

To learn more about Powers of Attorney and incapacity planning, call our office today.

The Alpern Law Firm is a member of the American Academy of Estate Planning Attorneys.