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CARING FOR LOVED ONES

More and more, as our population ages, many of us are taking care of aging spouses or parents. According to the Mayo Clinic, 33% of adults provide such care. Most caregivers feel an obligation to do so out of love.

However, caregivers often find that providing that care is emotionally and physically, and often financially, draining. It is essential that caregivers know their limits. The danger is that the everyday stresses and challenges of providing such care often lead caregivers to forget about themselves, which can lead to depression, social isolation, financial difficulties, stress, fatigue, loss of interest in activities, frequent pain or headaches, and other effects.

 

When we get on an airplane before we take off the flight attendants always instruct passengers that, if the oxygen masks drop down, be sure to place them on you before you help others. Why? If you pass out from lack of oxygen, you cannot help anyone else, so by taking care of yourself you are in a position to care for others. This is not selfishness – it is a necessity. 

 

When “Mary” first came to see us, her husband of over 40 years had advanced Alzheimer’s and other physical conditions, and qualified for skilled nursing level care. Caring for him was a 24-hour job – he would wander off at all hours of the day and night, and other behaviors and

Mary needed to dispense his medications throughout the day and evening. We immediately sensed that Mary was on the verge of a nervous breakdown, but this was her husband, her love, to whom she had pledged herself in sickness and in health. She could not imagine abandoning her “obligation” to him by placing him in a nursing home, and, sadly, they did not qualify for Medicaid Waiver for in-home care.

We worked hard to make her understand that caring for her husband was killing her. As we talked, it became ever clearer that she could not keep up her current pace. I asked Mary how caring for her husband was affecting her; she admitted that she was under constant stress, was depressed, didn’t have any social life, and was generally wearing down. I then asked her what would happen if she were to wear down so much that she died from overwork while caring for her husband. She was startled – she hadn’t considered that. The answer was, there would be no alternative – he would have to go to a nursing home.

 

It took a couple of meetings with her, but she finally came to realize that in the long run, she was not doing her husband any favors by keeping him at home; her best course of action would be to find a great nursing home for him, and visit him frequently and get stronger physically and emotionally herself so she could continue to play an important role in her husband’s life for a long time to come.

 

If you are going to care for a loved one in the twilight of his/her life, then there are things which you should do to maintain your physical and mental health, such as:

 

  • Seek and accept help from family and support groups, including online.
  • Keep connected with family, friends, even clergy.
  • Find out from your loved one’s medical staff, or others, what resources are available to you and your loved one.
  • Give yourself permission to spend “me time” to rejuvenate your physical and mental conditions – then do it! Even a short time for yourself each day can make a huge difference.
  • Maintain good, healthy habits.
  • Exercise – it improves your mood and reduces stress.

 

You should consider all of your options, but always consider your needs as well as your loved one’s. Remember, to be an effective resource for your loved one, you need to put the oxygen mask on first before you can help others!

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Tax Issues on the Family Home for Loved Ones

HouseNJ.com’s recent article, “Complex inheritance taxes on a home,” explains the valuation of a home based on its fair market value (FMV) on the date of death, when considering estate and inheritance taxes.

If you have a home valued at over $1 million, it may sell close to that amount. Let’s say that you’re single and are 80 years old. You live with your widowed sister. Your will instructs that your sister should have life ownership, when you pass and then it is left in trust for nieces and nephews. What would their tax bill be?

The home's value is generally determined through an appraisal that would establish the home's fair market value.

Fair market value, in these circumstances, is typically defined as "the amount at which the property would change hands between a willing buyer and a willing seller, when the former is not under any compulsion to buy, and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts."

The transfer of a life estate to the sister, followed by placing the home in a trust for the nieces and nephews, would mean they’d have an inheritance tax liability in New Jersey. The sister is a Class "C" beneficiary under the state’s inheritance tax laws, and the nieces and nephews are deemed to be Class "D" beneficiaries.

Generally, Class "C" beneficiaries have a $25,000 exemption and anything over that exemption is taxed at 11% on the next $1.075 million. The rates then go higher as the amount increases. Transfers to Class "D" beneficiaries are taxed at 15% on the first $700,000 and 16% on amounts exceeding $700,000.

This is unlike the situation where a beneficiary receives a readily determinable amount at death. In such cases, the tax can be calculated easily by reference to the beneficiary classes and applicable tax rates. But in this scenario, the value of the interests the beneficiaries will ultimately receive is uncertain.

However, state law provides a solution for this situation: the estate and the New Jersey Division of Taxation may use the "Compromise Tax" procedures to agree upon an inheritance tax liability. The calculation of the compromise tax is based upon actuarial factors according to the life expectancy of the current beneficiary, his or her beneficiary class and the relative probability of assets passing to the remainder beneficiaries and their respective beneficiary classes. In most cases, the taxpayer offers a proposed compromise on the inheritance tax return for consideration by the Division, based on the taxpayer's assessment of the most probable outcome.

Talk to an experienced estate planning attorney to make sure you understand and plan accordingly.

Reference: NJ.com (June 19, 2017) “Complex inheritance taxes on a home”

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Simple Estate Planning Tools

Old couple with computerWhen we look at the steps taken in our investing lives, the basics are simple. As working investors in the initial stages, the priority is accumulation and growth. Therefore, we participate in retirement plans such as IRA’s, 401-k plans, etc.

As Marco Eagle’s article, “Money Talks: Estate planning tools” explains, the next phase is the retirement stage, when the focus shifts from accumulation to preservation and maintenance of the nest egg.

Growth is a component of any retirement plan, but protecting your purchasing power during retirement is critical. You also want to generate a predictable stream of income during retirement, in order to avoid compromising your lifestyle.

The final stage of successful retirement planning is often overlooked: that’s the estate planning phase or the strategy of a succession plan to pass assets to your family. There are many estate planning tools that can be used to execute an estate plan. You can create a personal trust. Under this arrangement, your assets are transferred into a trust during your lifetime and then transferred by the trust at death. It’s important from both a tax standpoint and an allocation standpoint, regarding who receives what and how much. This is what your estate plan does for you and your family.

Work with an experienced estate and trusts attorney to establish your estate plan, so you can achieve your final objectives when passing assets to the next generation. Some individuals like the ability to exercise control with an effective plan to pass assets to their beneficiaries, without the need of trusts or probate.

There are many types of insured annuity strategies that will pass assets immediately to the beneficiaries, without the need of probate. Avoiding probate is frequently part of a strategy to make the assets available, immediately after the death certificate is issued.

Some see the foundation of their estate planning as the incorporation of life insurance. This lets the beneficiaries inherit assets, generally tax free. Avoiding a taxable event upon death is also appealing, based on both taxes as well as overall portfolio values. Talk to a professional about your situation.

Reference: Marco Eagle (June 11, 2017) “Money Talks: Estate planning tools”

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What is fair for a Family with a Child with Special Needs

Teacher with preschoolerAs parents, it’s hard to treat all children fairly, despite their different personalities and capabilities. Most try to ensure that one child never feels less loved than another. Some will carry that over into their estate planning. However, there are times when inequity may be a better choice. A recent Tickertape article is appropriately titled “Estate Planning for Special Needs Children: Trying to Be Even-Steven?” The article says that one instance when fair is not always equal, is when you’re planning the future for a special needs child after you die.

Children with special needs are typically eligible for state and federal benefits to provide them with assistance for their long-term support. Among the most common are Supplemental Security Income (SSI) and Medicaid. In many states, SSI may qualify children for Medicaid, or Medicaid comes automatically with SSI. These are need-based benefits that are means-tested. SSI recipients have a strict assets threshold of $2,000 for an individual. If a special needs child gets an inheritance, it might push him or her, above that ceiling.  This could result in ineligibility for the program benefits that might be used to cover medical, therapeutic, or housing needs.

When money is paid directly to the child as beneficiary, it can cut SSI benefits. The same is true, if the special-needs heir disclaims the inheritance.

Government benefits may be retained, if an inheritance is set up in a Special Needs Trust (SNT), which is designed to help a beneficiary with special needs and preserve government aid while protecting assets. The trust allocates inheritance assets to the child with special needs, but it’s via a third-party.

However, there might be tax implications. While the inheritance itself isn’t taxed, the income that it generates in a special trust is typically taxable at trust tax levels. Creating an SNT can be complicated, and the rules can vary from state to state. Speak to a qualified trust attorney to be sure that all income is reported properly and there are no deductions left on the table.

Treating children equally when one has special needs, may result in creating an inequality. Because of the government program eligibility requirements, you must consider the net tax implications when dividing your estate. Be straightforward with your children as to your intentions, especially if one child will be needing long-term care. Knowing the plans will help everyone prepare for the future.

Reference: Tickertape (June 14, 2017) “Estate Planning for Special Needs Children: Trying to Be Even-Steven?”

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Don’t Over-Think Your Estate Planning

Old couple having coffeeThe psychological issues in deciding how to leave your assets can be the hardest part of the process, says Wilmington Biz in the recent article, “Keep Mental Hang-Ups From Sabotaging Estate Planning.” The issues can range from an aversion to thinking about death to complicated feelings about children, in-laws and other relatives.

There are some people who have an issue with deciding how to allocate their assets after they pass away. A common issue is emotional or moral paralysis. After they worked with their attorney to draft the documents, they freeze when it’s time to sign on the dotted line.

Another issue arises when a person is estranged from his or her children.

And there are those who—believe it or not—fear that somehow if they make a will, they’d die. It is sort of like if they ignore the inevitable, it will never happen. Crazy, right? Do you think that if you don’t draft a will, then you could live indefinitely?

Another challenging issue is the decision of a parent that makes them feel like they’re favoring one child over others. And there may be good reason: perhaps one can manage money better than another, or a child is married to someone the parents don’t like or trust or maybe the child has an addiction issue.

Because the emotional challenges make it hard for some folks to think straight about much of this, the best approach is to work with an experienced estate planning attorney who can take some of the emotional baggage out of the equation.

These conversations may indeed have psychological ramifications, especially where there is substance abuse, fear of dying or a sense of entitlement.

An estate planning attorney can help to create an analytical and logical approach to estate planning and financial preparation that will help with discussions about heirs and allay fears of the unknown.

Reference: Wilmington Biz (June 6, 2017) “Keep Mental Hang-Ups From Sabotaging Estate Planning”

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