Estate Planning Bits

Understanding end of life decisions

There are many different terms or documents that may be used for end of life decisions. One could be a health proxy, another could be health care directive, another could be a living will, or a similar document. In any event, when considering life-sustaining measures, also known as life support, it is important to consider what should or should not be included in a document.

Some states also have documents called do not resuscitate (DNR) orders. Various health care professionals have different definitions and understandings of these types of documents. One could mean artificial nutrition and hydration that may be necessary for a person’s health and well being even if their life expectancy is not anticipated to be much longer. Hydration could be interpreted as meaning liquids by mouth or possibly intravenous (IV) hydration.

Mechanical ventilation may support a person’s breathing when they can no longer breathe on their own, and some people may wish this to be a device that is not used for end-of-life decision making at that time. Another option is CPR, which includes treatment such as mouth-to-mouth resuscitation, chest compressions, or possibly utilizing medication or electric shock used in order to bring a person back to life if their breathing has in fact stopped.

Sometimes a person also has a DNR order that they keep with them or possibly have on their refrigerator so for paramedics to see if they are called to the home. This technique will inform the paramedics to not initiate this type of treatment.

Dialysis is also an artificial process that allows the kidneys to continue to process waste products and excess water from the blood. If this process is not utilized, then the kidneys will shut down and the person will go into renal failure and possibly die sooner than otherwise.

In any event, it is important to consider which of these procedures you may want to include or exclude from your end-of-life decision making document. It is vitally important to have a written document that names someone, together with backups, to attend to these decisions when necessary. It is also important to discuss end-of-life decisions and alternative treatments with the proposed decision maker so he or she is aware of your desires, as well as discuss the matter with your primary physicians, so your intentions will be carried out.

By: Hyman G. Darling, Esq

Ways to make a bequest

There are generally eight accepted ways to make a bequest in your will or trust.

1. Specific Bequest: This is a gift of a specific item or cash amount to a specific beneficiary. For example, “I give my wooden baseball bat to my son, Jake.” If that specific bequest has been disposed of before death, the bequest fails and no claim can be make to any other property.
2. General Bequest: This is usually a gift of a stated sum of money payable out of the general assets of the estate. It will not fail, even if there is not sufficient cash to meet the bequest – even if other estate assets need to be sold. For example, “I give $30,000 to my daughter, Hannah.”
3. Contingent Bequest: This is a bequest made on condition that a certain event must occur before distribution to the beneficiary. For example, “I give $30,000 to my son Mark, provided that he enrolls in college before the age of 21.”
4. Residuary Bequest: This is a gift of all the “rest, residue and remainder” of your estate after all other bequests, debts and taxes have been paid. For example, let’s say that your estate is worth $600,000, and you intend to give a child $30,000 by specific bequest and the residuary estate to your spouse. If the debts, taxes and expenses are $100,000, there would only be $470,000 left for the surviving spouse. Most people prefer to divide their estates according to percentages of the residue rather than specifying dollar amounts to ensure that your beneficiaries receive the proportions you desire.
   
   The additional items below are optional considerations when the bequest is made to charity.
5. Unrestricted Bequest: This is a gift for our general purposes, to be used at the discretion of a governing body. Charitable organizations prefer this type of bequest because it allows the organization to determine the most pressing need for the funds at the time of receipt.
6. Restricted Bequest: This type of gift allows you to specify how the funds are to be used. It is advisable to consult with the charitable organization prior to making the bequest to confirm that your intent can be fulfilled.
7. Honorary or Memorial Bequest: This is a gift given “in honor” or “in memory of” someone.
8. Endowed Bequest: This bequest allows you to restrict the principal of your gift, requiring the charitable organization to hold the funds permanently and use only a small percentage or the income they generate. Creating an endowment in this manner means that your gift can continue giving indefinitely.

by: Todd C. Ratner, Esq.

Estate Planning is a process

Many clients do their planning at year end, which is not necessarily the best timing. Planning should carry through the entire year. Now that tax day has passed, it’s as good a time as any to review and update your estate plan. Like your annual physical, it is wise to also have a legal checkup. The following are a few areas that should be considered, although they may not all be appropriate for everybody:

Update Your Estate Plan

Are your Health Care Proxy, Power of Attorney and Will up to date? Are the individuals named within the documents still appropriate to serve as well as receive your assets? Are they healthy? Are their marriages also healthy? If not, perhaps your documents need to be reviewed to provide for preservation of assets for the beneficiaries so they don’t become their liabilities.

Plan For Retirement

Is it time for you to consider when you should collect Social Security? Have economic changes made it necessary for you to work longer but possibly still take Social Security benefits sooner? Is your health insurance in order, or do you need to purchase some other plan, such as a Medigap policy, to ensure you have the coverage you need until you’re able to obtain Medicare benefits? Naturally, if you are in your 20s through 40s, these issues seem way too remote to consider, but other issues should be considered such as saving for retirement and to attending to a child’s education expenses. In fact, if you are relatively young, perhaps you are worried about paying off your own college expenses.

Consider Long-Term Care Insurance

Most seniors are concerned about having their assets spent on long-term care expenses in the event they need institutionalized care or require 24/7 home care. A long-term care policy can help if you’re qualified to obtain the coverage and can afford it. If you can’t afford it, an elder law attorney can present alternatives, like using a reverse mortgage or having children share the cost, etc. It is an option that should not be overlooked, but it must be reviewed to determine whether it is an option for the client or not.

As with all life plans, just because documents are signed, does not mean the plan is good forever. It should be reviewed and revised as laws, finances, and family dynamics change.

by: Hyman G. Darling, Esq.

One child, two separated or divorced parents. Who gets the tax exemption?

In many cases situations involving divorce, or those where a child is born of two parents who are not married, there is a question about who is allowed to take the child as an exemption on their income tax return. With the exemption at $3,650, and a potential tax credit of up to $1,000 per child, this is an important consideration, as the net amount could mean a significant refund to the taxpayer. The issue of who takes the dependent is hopefully determined at the time that the divorce is granted, or by a separation agreement, or by a judgment of the court.

For tax years beginning after July 2, 2008, the IRS has finalized rules that determine the dependency requirements and clarify who is permitted to take the dependent. In most cases, the dependency will be awarded to the custodial parent unless the non-custodial parent obtains a signed waiver for that tax year and attaches it to their income tax return when filed. This rule applies regardless of what the divorce decree says, so it is important within the divorce decree to not only attend to the exemption allowance, but also to the requirement of the non-custodial spouse to sign the waiver.

In some situations, there is a joint custody agreement designating that each parent basically has the right to the child for an equal period of time. If it is not agreed upon, then detailed records should be maintained so that the person claiming the dependency exemption will be in a position to defend the taking of the exemption of dependency if audited. It is often suggested that a calendar be marked with the days and nights the child is living each the parent. It will probably be nearly impossible to reconstruct the calendar years later, when the IRS challenges the dependency.

When both parents claim the dependency, it is likely that the IRS will question both parents and review both tax returns. In normal cases, the parent with the most number of nights will win, but it is important to maintain accurate records, including vacations and times that the child may be with a grandparent so you’re in a position to count the specific number of nights. However, if a parent has a night shift and therefore is not available to watch the child at night, there is a different test that will be applied by the IRS as to the dependency.

For purposes of medical deductions, both parents may be able to take the deductions on their respective returns to the extent that they paid for medical expenses for the child, even if they are not the custodial parent and may not be the parent who is permitted to take the dependency exemptions. In the event that there is a divorce already granted but is in need of a modification for any terms, it is always important to review tax related issues when considering the net result relative to the tax effect.

By: Hyman G. Darling, Esq.