Annapolis, Maryland Wills, Trusts & Estate Planning

The In-Between Stages of Competency - Annapolis Estate Planning

If you live far from your hometown, you may be used to seeing large changes in aging parents from year to year. However, if you are involved in their day to day life, you may not notice the changes or they may seem to come and go.

When you are close to your parents, it’s hard to judge their competency accurately. Your dad, who was the perfect driver, suddenly isn’t quite as good behind the wheel as he used to be. Or your mother, who never left the house without being perfectly groomed, seems to have become a little casual about her appearance. They aren’t big changes, but the change is rarely sudden.

Other examples can be if your father forget to pay a bill…. or forgot that you called him yesterday. You recognize all this and ask if he is okay. He doesn’t think there’s a problem.

Is there anything you can do? No one would ever say, at this time, that he is legally incompetent to make decisions, because he presents himself well. That’s the issue discussed in Forbes’ recent article, “Aging Parents At The In-Between Stage: Partially Competent and Partially Not.”

Here are some strategies to consider to help you to address this situation:

First, both the senior parent and the adult child must be in agreement that something has to change, and fast. Next, examine the parent’s legal documents, specifically the Durable Power of Attorney. In some cases, the daughter is appointed as the agent, and her power is unrestricted. She has legal authority to take over management of the father's accounts. Nevertheless, the daughter may not have discussed this with her father and, likely, she has not exercised any authority as agent. The daughter should review the Durable Power of Attorney with any siblings. She should then access her father's accounts, so she’d know if her father is giving away money or perhaps caught up in an elder fraud. If there’s a significant problem, she needs to approach her father.

The father might refuse any help in managing his finances. However, gentle and respectful persistence can win the day. The Durable Power of Attorney can be used to move most of his assets out of accounts where he had access. He still could give away money, but she then could restrict what he had available.

This shows the importance of doing estate planning and having at least one responsible person, the daughter, to act as the agent with power of attorney.

Be aware that even a slightly incompetent senior, who seems to be okay on the surface, may have lost their ability to make good decisions about their finances. You may have to step in to prevent themselves from doing damage, to protect their retirement and their finances. Speak with an estate planning attorney as soon as you can to make sure all the protections necessary are in place, including a Durable Power of Attorney. This is not a situation that can wait. If a plan is not already in place, start with a phone call today to start the process.

Reference: Forbes (December 3, 2018) “Aging Parents At The In-Between Stage: Partially Competent and Partially Not”

Holden & Campbell, LLC – Annapolis Estate Planning

Here’s Why Everyone Needs an Estate Plan - Annapolis Estate Planning

If you need to be convinced that estate planning is not just for the wealthy, here’s something to consider. Without a will, the state makes the decisions about who receives your assets when you die and who raises your child. With no medical directive in place, your loved ones won’t get to say what kind of end-of-life care you get.

There are many reasons to put an estate plan in place: your loved ones and your own wishes chief among them. As reported in Investopedia’s recent article, “4 Reasons Estate Planning Is So Important,” there are four key reasons why everyone needs an estate plan.

1. An Estate Plan Keeps Your Assets from Going to Unintended Beneficiaries. Families need to plan in the event something unfortunate happens to a family's breadwinner(s). A primary part of estate planning is choosing heirs for your assets. Without an estate plan, a judge will decide who gets your assets. This process can take years and can get heated. There’s no guarantee the judge will automatically rule that the surviving spouse gets everything.
2. An Estate Plan Protects Your Young Children. If you are the parent of minor children, you need to name their guardians, in the event that both parents die before the children turn 18. Without including this in your will (in most, but not all states), the courts will make this decision.
3. An Estate Plan Eliminates a Large Tax Burden for Your Heirs. Estate planning means protecting your loved ones—that also entails providing them with protection from the IRS. Your estate plan should transfer assets to your heirs and create the smallest tax burden as possible for them. Without a plan, the amount your heirs will owe the government could be substantial.
4. An Estate Plan Reduces Family Headaches After You’ve Passed. There are plenty of horror stories about how the family starts fighting after the death of a loved one. You can avoid this. One way is to carefully choose who controls your finances and assets, if you become mentally incapacitated or after you die. This goes a long way towards eliminating family strife and making certain that your assets are handled in the way you want.

The reasons to have an estate plan are really very simple. This is how you protect your family, your property and yourself. Think of it as another way to demonstrate how much you love your family. If you don’t have a family, think of it as a way to create a legacy for the causes or people who are important to you.

Reference: Investopedia (May 25, 2018) “4 Reasons Estate Planning Is So Important”

Holden & Campbell, LLC – Annapolis Estate Planning

Tax Cutting in Retirement - Annapolis Estate Planning

You’ve been making deposits in these retirement accounts for years, if not decades.  But do you really understand how they save you money in taxes?

Most of us are very responsible about making our regular contributions to 401(k), 403(b) or IRAs, but when it comes to really knowing why this is a good move for your retirement, most people can’t articulate it. A recent article from Forbes, “Want To Cut The Taxes In Your Retirement Money?” explains how this works.

We should begin by looking at how your money gets taxed if it’s not in a tax-deferred account. Investments like CDs that are held at a bank or brokerage firm are considered short-term investments.  These investments are taxed as a short-term gain at your marginal tax rate, which could be as high as 39.6%. If your gain is considered a long-term gain, then it is taxed at long-term capital gains rates, which could be as high as 20%.

For your retirement savings, you can use tax-deferred investments such as a 401(k) or an IRA. For these investments, the government doesn’t tax your savings when you deposit it, and you’re not immediately taxed on any gains you make. Instead, the money can accumulate much more quickly and grow to much larger account balances, since you’re not paying taxes on your investment (at least until you withdraw it). If you participate in a company-sponsored retirement plan, such as a 401(k) or 403(b), you may save up to $18,500 annually. If you’re over 50, you can put away an additional $6,000 annually as a “catch up” contribution. A traditional IRA only lets you contribute $5,500, with an additional $1,000 for the over 50 “catch-up” contribution.

Unlike a taxable account (such as a CD), where you have the possibility of short or long-term gains, all future earnings, (including the savings in a 401K or IRA that never got taxed) will be taxed at your future income tax rate, when the money is withdrawn. You must be mindful of the withdrawal rules or face some significant financial penalties. For 401(k) or IRA accounts, with limited exceptions, you cannot withdraw funds before age 59½, without triggering a 10% penalty. Later, at age 70½ you must begin withdrawing Required Minimum Distributions (RMDs), or pay a 50% penalty on the amount you should have taken. Note: you must pay income taxes on any amount you withdraw from these retirement accounts.

A Roth IRA or Roth 401(k) are different from their traditional cousins, because your contribution is taxed today. In other words, your contribution dollars are post-tax as opposed to pre-tax like 401(k) or IRA contributions. However, similar to a 401(k) and IRA, your investments earnings are not taxed, and neither are your withdrawals.

Roth IRAs and Roth 401(k)s allow you to withdraw your money without tax or penalty starting at 59½. However, unlike the 401(k) and traditional IRA, you don’t pay taxes on the gains (you paid taxes on your original savings when it was deposited into the Roth). There are penalties for withdrawals before age 59 ½, but if you don’t pull more out than you contributed, they don’t apply.

There are as many investing strategies for taxable or tax-deferred accounts, as there are mutual funds—countless numbers. Some investments are likely to lead to greater gains than other investments. However, whatever your investment earnings are, you will be paying taxes on them, at some point.

Be cautious and don’t act without good advice. Taking money out of tax-deferred accounts before age 59 ½ can become very expensive, very quickly, because of taxes and early withdrawal penalties. If your retirement plan includes retiring before 59 ½, good for you—but be careful. You could find yourself back at work, just to pay off your taxes!

Reference: Forbes (August 10, 2018) “Want To Cut The Taxes In Your Retirement Money?”

Holden & Campbell, LLC – Annapolis Estate Planning

Is an “Ethical Will” Another Version of a Legacy Letter? - Annapolis Estate Planning

Sharing values and family histories to younger generations is something that takes place over the course of a lifetime. However, it can also be put into an ethical will to create a more cohesive message.

For centuries, people have used ethical wills or legacy letters to share the values and belief systems of individuals and families to the next generation. While the form may change from oral traditions to videos, they are used to clarify the wisdom and lessons learned, says WTOP in the article, “What to know about ethical wills.”

An ethical will provides you with a sense of an individual’s personal life lessons shared as part of their legacy. They detail critical moments in a family’s history to inform and inspire generations to come. In contrast, a last will and testament gives instructions on how your financial assets are to be distributed.

An ethical will can complement a legal will with information you’d share if you were alive. Although ethical wills aren’t legally binding, they’re increasingly used to convey a person’s hopes and dreams for their family and to help explain decisions made in a legal will. When read with the will, an ethical will may help reduce potential conflict within the family.

Here are some situations when you might consider an ethical will:

• Parents can write a letter to a newborn or newly adopted child expressing their hopes and dreams for the child and the values they want to instill in the child’s life;
• When a child marries, parents can stress important family traditions to be carried on in their own family;
• Some families note the desire to preserve and pass down family photo albums or legacy writings;
• An ethical will can be used to explain the source of the family’s wealth or to communicate values concerning the use of that wealth;
• When an individual has a significant life event (particularly one that impacted the whole family), she may want to communicate how that event changed her life and perspective; and
• Parents may choose to write a letter thanking their children for the joyful memories and accomplishments they’ve shared as a family.

An ethical will is usually a handwritten letter addressed to children and grandchildren. Many begin writing an ethical will with notes about core beliefs and some of the events in the person’s life that led to those beliefs. You may also consider expressing gratitude for important people in your life, which may include family members and close friends.

An ethical will or legacy letter is a deeply personal communication and should not be done without thought. Sharing your personal life journey with family members will give them a greater sense of belonging to something larger than their own immediately family. Gather your thoughts and think about what is most important for you to share. The process of creating this document may be a more profound experience than you expect. Give yourself the time to do it right.

Reference: WTOP (November 28, 2018) “What to know about ethical wills”

Holden & Campbell, LLC – Annapolis Estate Planning

Talking About Future Care Needs with Parents - Annapolis Estate Planning

It’s great to take a trip home and catch up with family, especially when you live far away.  However, if this is the year that you arrive to find big changes in your aging parents, here’s some help about what your next steps might be.

When nostalgia doesn’t quite match up with reality, it’s time for some challenging conversations with aging parents and, if you have them, your siblings. It’s not an easy topic, according to the article, “Making the best care decisions for aging parents,” from KARE 11 in Minneapolis, but it is better to have the conversation and make the plans for what’s next than it is to bury your head in the sand and pretend that nothing’s wrong.

Many families find this out the hard way. When a parent requires immediate urgent care, the family must jump into “go” mode. It can be overwhelming. There are many options, which range from various levels of in-home care, to independent living, to assisted living and even to skilled nursing care. You should understand the level of care you need and what you can afford.

Unless you qualify for Medicaid, you’ll need to pay for assisted living out of your own pocket. For most of us, this could drain assets in short order. Many people also aren’t planning for long-term care in retirement.

It’s best to plan early. If you're going to buy a long-term care policy, the best time to apply is in your 40s or 50s, when your health is good and the cost is cheaper.

Sit down with an elder law attorney, regardless of your assets, because the laws concerning Medicare and Medicaid are confusing. Every situation is different.

Many people aren’t aware that Medicare doesn’t cover many long-term care services. In fact, that limited benefit is designed to get somebody back to independent living, not help them with basic activities of daily living. Therefore, if it becomes a situation where somebody is going to need help with such basics as dressing, bathing and other activities of daily life for the rest of their life, Medicare is not going to cover it.

If you believe gifting your estate away now will stop you from losing it in the future, remember that most states have a five-year look back period. Any gifts of money or property in the 60 months before applying for Medicaid can be taken back to pay for the program or the applicant will be penalized.

There’s very little about this that is easy for aging parents or adult children. However, planning in advance, in an intelligent and sensitive manner, is better than having to make hard choices in an emergency.

Reference: KARE 11 (Minneapolis) (November 27, 2018) “Making the best care decisions for aging parents”

Holden & Campbell, LLC – Annapolis Estate Planning

Caring for Aging Parents and Preserving Family Relationships - Annapolis Estate Planning

Join us on February 6, 2019 for a discussion on caring for aging parents and preserving family relationships

Among the most difficult issues facing our clients and their families is caring for parents as they age.   This can be an extremely stressful time for even the best families.  We have seen life savings lost and relationships broken.  

Carolyn Parr and Sig Cohen are authors of the soon to be released book: Love's Way: Living Peacefully With Your Family As Your Parents Age. They will be joining us to share their insights and experiences so that they can help other families successfully navigate caring for a loved one in a way that honors parents and caretakers a like. Also joining us for the discussion will be Jerren Pellicano, principal of Client First Health Solutions, and Melissa Pittman of Regent Healthcare.

Love's Way provides readers with a map through the weeds that spring up along the path as parents age and roles reverse. Using real-life examples from years of working with families in this season of life, the authors illustrate common issues that can send a family into serious issues: unhealed sibling rivalries, parental favoritism, greed, secrecy, and fear of initiating necessary conversations. Both adult children and their parents will gain tools to create their own win-win solutions that keep parents safe and autonomous and family love intact. Love's Way is both spiritual and practical and provides advice readers can immediately begin to apply, with stories from the authors' fifteen years as co-mediators, writers, speakers, and personal experiences as caregivers to their own aging parents.

Carolyn Miller Parr is a retired judge, mediator, writer, and public speaker. Since 2002, Judge Parr has practiced peacemaking through her mediation practice Beyond Dispute and Tough Conversations with Sig Cohen. Sig Cohen is a retired Foreign Service officer, fundraiser, and community organizer, and now serves as a mediator.

Hosted by Brightview Senior Living in Annapolis, Maryland, the presentation will be held on the evening of February 6, 2019 starting at 6:00PM. Light hors d'oeuvres & beverages will be provided.

Please RSVP to Taylor Patterson by January 23^rd at [email protected] or 410-263-1667.

We hope that this presentation can be helpful to our clients as we see all too often how difficult dealing with the aging of our parents and  caring for our loved ones can be.

We hope to see you all on February 6, 2019 at Brightview! 

Holden & Campbell, LLC – Annapolis Estate Planning

Tis the Season to Be Generous—Thanks to the IRS – Annapolis Estate Planning

An end-of-year decision from the IRS about the new tax law and gifting has given people with generous spirits and hefty bank accounts reasons to be cheerful about gifting.

Increases to basic estate and gift tax exemptions were welcomed by many when the new tax law details were unveiled. However, questions were raised: how long will those exemptions be in place? What happens when they expire?

The changes increased the exemption to $10 million per person from $5 million. When you account for inflation adjustments, that exemption is currently at $11,180,000 for 2018, increasing to $11,400,000 for 2019.

Financial Planning’s article, “IRS update will benefit clients making gifts to family members,” says that for a married couple, the exemption can be doubled to $22 .8 million for 2019.

The estate and gift tax exemption can be used for lifetime gifting. However, it’s set to revert back to the pre-law levels after the year 2025.

The annual gift exclusion amount is $15,000 for this year. That’s an increase from $14,000, where it had been since 2013. The federal estate and gift tax exemptions rise with inflation.

This leaves an open question: What if I make a large gift now and use up the current $11 million exemption, but then die after 2025 when the exemption goes back to the lower levels?

Is it possible that the IRS will claw back these gifts and tax them?

The IRS finally answered this lingering concern, in its newly issued-proposed regulations.

It says that making large gifts now, won’t create any issues for estates after 2025.

Now, you won’t have to worry about making large gifts under the current larger exemption levels.

In effect, it’s a “use it or lose it” proposition for taking advantage of the current exemption, before it expires.

It is best to make sure that the IRS’s generosity aligns with your estate plan. Meet with your estate planning attorney to talk about how gifting fits into your estate plan, now that the rules about the new exemptions have been clarified.

Reference: Financial Planning (November 21, 2018) “IRS update will benefit clients making gifts to family members”

Holden & Campbell, LLC – Annapolis Estate Planning

Challenge to Singer’s Will Ends for Campbell Kids – Annapolis Estate Planning

The battle between three of Glen Campbell’s eight children and his widow has ended with them agreeing to dismiss their pursuit of a portion of their father’s estate.

With the resolution of this outstanding claim, the estate of Glen Campbell can now be resolved, reports The Tennessean in “Glen Campbell’s children give up challenge to singer’s will.” The beloved singer died in the final stages of Alzheimer's disease this past August. He was 81.

Campbell's will left his estate to Kimberly, his wife of 34 years, and five of his eight adult children. However, he omitted three children from prior marriages—William Campbell, Kelli Campbell and Wesley Campbell.

The three siblings agreed to dismiss their fight for a portion of their father's estate. Their filing in Davidson County Probate Court didn’t provide any details. The three had contested the validity of the 2006 will, bringing into question their late father's capacity.

The legal dispute involving Glen Campbell's widow versus three of his children has delayed the final resolution of the singer's final affairs, including the question of who has the rights to future royalties on his music.

Campbell was known for songs such as "Gentle On My Mind," "Galveston," "Wichita Lineman" and "Rhinestone Cowboy." However, he was not the composer of any of his hits.

Kimberly Campbell issued a statement through her legal counsel that said she was glad to put the matter behind her.

"The filing of a will contest last January came as a shock to me," the statement said. "There was never any merit to these claims.”

"I am pleased to finally put this difficult experience behind me, so that I may focus on my family, my continued mission to educate, destigmatize and raise awareness for Alzheimer's disease—and to honor my husband and his amazing music legacy."

However, Kimberly's statement noted that there was no settlement made with the adult children, and the attorneys for the three adult children contesting Campbell's will could not immediately be reached.

There is some discrepancy in the estimates of the estate’s value. Recent estimates provided to the probate court list a value of $420,221. Initial estimates at the time of his passing were in the millions, but that was speculation. There are also future royalties that need to be added to the estate.

Reference: The Tennessean (November 22, 2018) “Glen Campbell’s children give up challenge to singer’s will”

Holden & Campbell, LLC – Annapolis Estate Planning

What is a Medical Directive, and Does It Expire? – Annapolis Estate Planning

Don’t have a medical directive, or don’t remember the last time you reviewed it? That means it’s time. We never know when an emergency or sudden onset illness will strike.

The biggest problem with medical directives, is getting people to confront the concept of being incapacitated or near death. Once you get past the emotional response, then a clear head and rational thinking make taking care of these important documents easier. However, they have to be updated, just like your will.

Your medical directive sets out what kind of care you want when you are near death. A health care power of attorney names a person who will be empowered to make medical decisions on your behalf, if you cannot. These are tough concepts to wrap your head around, but very necessary. Without them, family members and doctors won’t know what you want. However, is what you wanted at age 30 the same as what you want at age 80? Maybe not.

The Watertown Public Opinion’s recent article, “Keep medical directives up to date,” says that it’s not uncommon to find situations where medical directives that were valid when they were executed become potentially useless. A family member could choose to make end-of-life decisions but then fall victim to dementia, which impacted their competency to make those decisions.

If your medical directive names your spouse, you should also name an alternate since your spouse, who’s aging along with you, may not be the best person to make hard decisions when the time comes.

In addition, you should communicate your specific wishes to both your primary and alternate designees. Ask them if they think they’ll be able to carry out your wishes. These conversations aren’t easy, but they’re essential.

On one hand, it may not be really hard for a family member to consent to become the designated representative in a medical directive. However, if the agent named in a healthcare power of attorney is in good health, the need to make hard decisions is somewhere in the future and can feel almost theoretical. When a medical emergency or an extended final illness occurs, a family member who’s frightened, grieving, and exhausted may then find actually making those decisions to be the toughest thing they’ve ever had to do.

You should provide your family with clear directions to make end-of-life decisions for you. This means you need to do more than simply write their names into a document.

You’ll want to have a very frank conversation with the people you name to these roles. Are they able to follow your wishes, knowing clearly what you want to happen? Every now and then, have a follow up conversation to make sure they are still prepared to speak up on your behalf. You should also thank them for their willingness to take on this important responsibility.

Reference: Watertown Public Opinion (November 20, 2018) “Keep medical directives up to date”

Holden & Campbell, LLC – Annapolis Estate Planning

Spousal Impoverishment Rules Addressed by House Lawmakers – Annapolis Estate Planning

More than a dozen health care and provider organizations are working with law makers in an attempt to preserve financial protection for spouses of seniors, who are receiving long-term care at home or in community settings under Medicaid.

All the years of saving and planning for retirement, and now your spouse needs the kind of long-term care that you can’t afford, without losing everything you worked so hard to attain. Does that mean the healthier spouse has to live in poverty, even bankrupting themselves, so their loved one can receive Medicaid coverage? Laws were passed to address this in the late 1980s, but they are close to expiring.

Home Health Care News reports in a recent article, “Medicaid Bill Would Prevent Spousal Impoverishment as Route to Home Care Coverage,” that as of August 2018, more than 73 million people combined were enrolled in Medicaid and the Children’s Health Insurance Program (CHIP). Those numbers are from federal Medicaid data; more than 66 million individuals were enrolled in Medicaid, while about 6.5 million were enrolled in CHIP.

In order to prevent self-induced bankruptcy to keep a spouse eligible for Medicaid, Congress created spousal impoverishment rules in the late 1980s. Those rules originally required states to protect part of a married couple’s income and assets to give the “community spouse” adequate living expenses, when determining nursing home financial eligibility. However, states were also given the option to apply the rules to home and community-based services (HCBS) waivers.

Section 2404 of the Affordable Care Act (ACA) changed that and required the spousal impoverishment rules to treat Medicaid HCBS and institutional care the same way. That law is set to expire at the end of December. That means that individual states would once again be the decision-makers, when it comes to spousal impoverishment in home care.

In 2018, all 50 states were applying the spousal impoverishment rules to HCBS waivers, and five states (Arkansas, Illinois, Maine, Minnesota, and New Hampshire) plan to stop applying the spousal impoverishment rules to some or all of their HCBS waivers, if Section 2404 expires at the end of the year.

With support from LeadingAge, the National PACE Association, the National Council on Aging and several other groups, U.S. Representatives Debbie Dingell (D-Mich.) and Fred Upton (R-Mich.) on Friday introduced the Protecting Married Seniors from Impoverishment Act. If the bipartisan piece of legislation passes, it would permanently extend spousal impoverishment protections for Medicaid beneficiaries receiving long-term care in a home or community care setting.

“Our long-term care system is broken,” Rep. Dingell said in a statement. “Seniors and their families already face too many challenges when navigating long-term care, and they should not have to get divorced or go broke, just to be eligible for the care they need.”

It’s not known the level of Congressional support the Protecting Married Senior from Impoverishment Act will get, but the fact that most states plan to continue protections on an optional basis is encouraging, LeadingAge President and CEO Katie Smith Sloan said in a statement.

“As a national organization, LeadingAge has consistently supported federal law establishing protections against spousal impoverishment,” Sloan said. “We support the legislation to extend the current protection.”

LeadingAge in Washington, D.C is an industry association that represents more than 6,000 not-for-profit senior care providers. If the Dingell-Upton bill fails, LeadingAge members in states that don’t plan to continue impoverishment protections will likely be negatively affected.

For several years now, organizations that include NAELA (National Academy of Elder Law Attorneys), AARP and the National Association for Home Care & Hospice, have been working with representatives to keep this protection in place.

Reference: Home Health Care News (November 19, 2018) “Medicaid Bill Would Prevent Spousal Impoverishment as Route to Home Care Coverage”

Holden & Campbell, LLC – Annapolis Estate Planning