Helping Families Navigate the Financial Challenges of Age Transitions

Month: September 2019 (Page 1 of 2)

Daughter of woman whose partner predeceased her mother by 12 days, in court fight over inheritance.

A woman fighting for her multi-million dollar inheritance might have to forfeit the entire fortune to charity thanks to a poorly-written will — a case that has raised questions about the rights of unmarried gay couples and their children.

Jill Morris, died of breast cancer in 2016 at age 84 and left a multi-million dollar estate to her long-time partner, Joan Anderson, with whom she had an 18 year relationship. Anderson died of a stroke just 12 days after Morris, and, according to Morris’ last will and testament, her estate was to be divided among three charities if Anderson did not survive her by thirty days.

A Manhattan Surrogate Court Judge has ruled that the estate belongs to the charities. Emlie Anderson, Joan Anderson’s daughter claims the judge should have known that Morris would not have included such “harsh wording in her will.”

It’s upsetting to me. It’s like they’re trying to negate my mother and her relationship with Jill, she told the Daily News. That’s what they’re saying, that their relationship wasn’t important.

Source: Woman fighting for late mother’s inheritance plans to appeal after Manhattan judge decides multi-million dollar fortune should go to charity – New York Daily News

Prior Correspondence: A Key Tool in Preparing Your Estate Dispute Case for Trial | Estate Conflicts

Attorney Brett Hebert, with the national law firm, Gordon Rees, recently wrote an article on the firm’s blog regarding the admissibility of certain correspondence in estate litigation cases.

A typical situation we see involves an elderly person who begins to show signs of losing mental capacity. Then an unscrupulous person “enters” the life of the elderly person, begins to take “care” of the elderly person, and begins to “help” the elderly person with their finances and medical care. Then the elderly person’s estate plan (trust, will, power of attorney) “changes” dramatically to the benefit of the unscrupulous person (and to the detriment of former beneficiaries). As a result, the former beneficiaries of the elderly person begin to ask the unscrupulous person about the changes. The unscrupulous person may send correspondence in return. The elderly person may correspond with the former beneficiaries, too.

These communications typically come in the form of emails, texts, and letters. Sometimes, people post on social media about the disputes. There may even be voicemails or handwritten notes. All of these items are potentially relevant to the dispute and subsequent litigation.

If you suspect that a loved one may have been influenced by someone with ulterior motives, retention of any correspondence with that person or with the possible victim could be beneficial to your case.

Source: Prior Correspondence: A Key Tool in Preparing Your Estate Dispute Case for Trial | Estate Conflicts

5 Indicted in Identity Theft Scheme That Bilked Millions From Veterans 

Representing a new low in criminal identity theft, five people were indicted in a scheme that targeted older and disabled veterans. For a period of five years, the criminals used personal information to “withdraw or reroute millions of dollars in disability benefits and other payments made to veterans. The stolen funds were later wired to the bank accounts of so-called money mules and laundered so that they could not be traced.”

Click image for full text of the article.

What is your honor code?

Sometimes hearing a familiar principle from a different cultural context makes it seem more interesting, less banal; the same way that eating pizza prepared by a street vendor in Rome would taste better than my local delivery pizza simply because it was made in Rome. Most westerners are familiar with the fifth commandment in the Bible:

Honor your father and your mother, as the LORD your God has commanded you, so that your days may be long and that it may go well with you in the land the LORD your God is giving you.

Deuteronomy 5:16

However, other cultures and traditions also incorporate the concept of honoring elders into their belief systems as well.

Take also the concept of Filial Piety – one of the eight virtues of Confucianism. Scholars attribute the Eight Virtues to a line in the Sage Emperor Guan’s Book of Enlightenment:

“It is through Filial Piety, Sibling Harmony, Dedication, Trustworthiness, Propriety, Sacrifice, Honour, and Sense of Shame that we become fully human.” 

Filial Piety means to be good to one’s parents; to take care of one’s parents; to engage in good conduct not just towards parents but also outside the home so as to bring a good name to one’s parents and ancestors. The Fung Loy Kok Institute of Taoism expounds on this general definition:

  • What is filial piety? There are many aspects of filial piety. The most important of them is to honor your father and mother and attend to their needs.
  • By “honor” it is meant that you should maintain good conduct and never do things which will shame your parents or make them unhappy.
  • You should be hard working in family affairs.
  • You should be frugal in spending and not waste family resources.
  • Siblings should live in harmony.
  • In your interactions with other people you should be honest and sincere. Do not be deceitful. In all your actions be humble, be courteous and considerate of others, be proprietous and refrain from shameful thoughts and actions.
  • You should also attend to your parents’ well-being. There are three basic needs you must provide for your parents. First, you should provide for their food and clothing. Second, when they are ill, you must take responsibility for nursing them back to health. Third, when they die, you must provide them with proper burial and care for their graves.
  • As a son or daughter, whether you are rich or poor, whatever profession you are engaged in, whether you are married or not, whether you have children or not, if you can perform these three deeds with sincerity and dedication, your parents will be happy while they are alive and rest in peace when they are deceased. Your parents cared for you without selfish interests. Your mother carried you in her womb for ten lunar months and nursed you for three years. Your parents constantly tended to your needs while you were growing up. You should show your gratitude to them by fulfilling the virtue of filial piety. Filial piety has many aspects. As long as each is performed with all your heart, this virtue is fulfilled. Whatever you do for your parents, do it with goodwill and sincerity.

I think we can all agree that the world could use a little more Filial Piety.

Estate Planning Pitfalls for Older Couples Living Together.

An increasing number of Americans ages 50 and older are in cohabiting relationships, according to a new Pew Research Center analysis of the Current Population Survey. In fact, cohabiters ages 50 and older represented about a quarter (23%) of all cohabiting adults in 2016. One reason could be the adult children’s rejection to their older parent’s marriage, especially if the relationship formed soon after the death of the other parent. Approximately 23% of cohabiters over age 65 are widowed.

However, as with many things in life, what seems simple — living together — is often quite complex. Unmarried couples, of all sexual orientations, can face a variety of problematic and emotionally difficult issues because estate planning laws are written to favor married couples.

Unmarried partners need to consider the following issues related to estate planning and living together:

  1. Medical incapacity: In the absence of a durable power of attorney for healthcare, non-married individuals may be treated as “legal strangers” and unable to make healthcare decisions on behalf of their partner.
  2. Living arrangements: If the wealthier partner dies or becomes incapacitated with no provision for the other partner to remain in the home (by a will or title) the other partner can be forced from the home by blood kin.
  3. Dying without a will: Intestacy laws (state laws that determine where a deceased’s property goes when there is no will) are not favorable to unmarried partners.
  4. Employer Retirement Plans: Plans like 401k’s, profit sharing, and pension plans, as well as group life insurance plans are governed by a federal law known as ERISA. This law requires that a spouse be the beneficiary of these plans in the event of the employee’s death unless waived by the spouse. No such protection is afforded unmarried partners unless the partner is listed on the Plan’s beneficiary form.

For more, see Brad Wiewel, The Legal Dangers of Living Together, Next Avenue, August 28, 2019.

Older Investors Also Want to Know the Impact of Impact Investing

Contrary to popular belief, older investors have as much of an appetite for impact investing as their younger counterparts.

Articulating social impact is not only about measuring an investment’s good in the near term but showing (particularly older) investors how their capital can leave its mark long after they’re gone. Fund managers who may be used to younger investors forking over their cash for social impact will have to increasingly gear their pitches toward an aging generation that, already in retirement, has less willingness to take on risk, less time to make investment decisions and more skepticism about social impact.

Source: Investors Want to Know the Impact of Impact Investing

Life Insurance Options for the Terminally Ill

The emotional stress of dealing with one’s impending death due to a terminal illness like cancer, AIDS, etc., is further compounded by the customary increase in medical bills and a likely reduction in earning capacity.

A person owning life insurance policies may have several options for reducing some of his or her financial concerns.

Methods of Reducing Financial Concerns

  • Borrow against cash values: Permanent type policies such as whole life, variable life, universal life, etc., build up cash values over the years. The owner of the policy is usually able to borrow money from the cash value, often at favorable interest rates. When death occurs, the policy loans and any interest will be subtracted from the face amount of the policy before payment is made to the beneficiary. If there is also a “waiver of premium” provision the insured may be relieved of the monthly premium payments, in certain circumstances.
  • Surrender the policy: Policies with accumulated cash values can be surrendered to the life insurance company. However, this would generally not be desirable, since the face amount of the policy is usually much higher than the surrender value and the time of death is close. There may also be income tax consequences.
  • Borrow funds from a third party: Other friends, family members, and possibly the beneficiary of the policy may be willing to lend money to the person who is terminally ill and then receive repayment from the insurance proceeds.
  • Accelerated death benefits: Some life policies provide for payment of a portion of the face amount if the insured becomes terminally ill. This is generally called a “living benefit” or an “accelerated death benefit.” Even if it is not mentioned in the policy the company may have extended the right to the policy owner; the availability of such benefits should be investigated. Some companies require the owner to have a life expectancy of from six to nine months or less. Terminally ill persons (diagnosed by a physician as expected to die within 24 months) may receive accelerated death benefits free of federal income taxes. Chronically ill individuals may also exclude from income accelerated death benefits which are used to pay the actual costs of qualified, long-term care. See IRC Sec. 101(g) for more detail.
  • Viatical settlements: Another option is to sell one’s life policy to a third party[1] in exchange for a percentage of the face amount. This is called a viatical settlement. It comes from the Latin word “viaticum” which means “supplies for a difficult journey.” These settlements may also be available with contracts that have no cash value such as individual or group term life insurance policies. Factors which will determine the amount of the settlement include:
    • The insured’s life expectancy is a factor. In general, the shorter the period, the more a viatical settlement company will pay. Some companies will accept up to a five year life expectancy, but many prefer a shorter term of years.
    • The period in which the company can contest the existence of a valid contract must have passed, as well as the “suicide provision” (typically two years after issue). This period may begin again for policies that have been reinstated after a lapse for nonpayment of premium.
    • The financial rating of the company that issued the policy is important. A lower rating can result in a smaller settlement.
    • The dollar amount of the premiums is a factor. The buyer of the policy is likely to be required to continue making the payments for the remainder of the insured’s lifetime.
    • The size of the policy is a factor. Most settlement companies have upper and lower limits; for example, a top limit of $1,000,000 down to a low-end limit of $10,000.
    • The current prime interest rate is important, since the buyer will compare the settlement agreement to other types of investments.

After examining the above factors, a settlement company will generally offer the owner of the policy between 25% and 85% of the policy’s face amount. The settlement amount may be received free of federal income tax under conditions similar to those described above under “accelerated death benefits.”

Other Considerations

  • If the terminally ill person is presently receiving benefits that are dependent upon his or her “means” (income or assets), like Medicaid, food stamps, etc., he or she must weigh the effect of a viatical settlement on these benefits. Benefits may be terminated or reduced until the settlement amount is “spent down.”
  • If the policy also has an accidental death or dismemberment rider, those rights should be specifically retained by the insured in the viatical settlement agreement. The time between applying for a viatical settlement and having the cash is generally three to eight weeks. However, this will depend on how quickly the medical information and beneficiary release forms are in the hands of the settlement company.
  • Most viatical settlement companies stress the confidential nature of the transaction but they require the named beneficiary to release any possible claim to the proceeds. If the insured does not want the beneficiary to know of the illness, he or she may change beneficiaries just prior to completing the settlement. If the estate were named as beneficiary, the insured (owner) would be the only one who would need to sign the release forms.
  • If death occurs before the viatical settlement is completed, with the insured’s estate as the beneficiary, the life insurance proceeds would be paid to the estate and may be subject to probate administration.
  • Viatical settlement of group insurance policies will usually require that one’s employer be notified.
  • Confidentiality may also be lost if the policy is sold by the settlement company in the “secondary market” to individual investors, since a new investor would want to know the health status of the insured.
  • An escrow account is generally used to make certain that the payment of the agreed upon amount is made to the insured shortly after the insurance company notifies the escrow company that the ownership of the policy has been transferred to the viatical settlement company.
  • Several viatical settlement companies should be investigated in order to negotiate the best offer.

Typical Uses for the Cash Received Include

  • Cover out of pocket medical expenses.
  • Finance alternative treatments not covered by existing medical insurance.
  • Purchase of a new car or finance a dream vacation.
  • To be able to personally distribute cash to loved ones.
  • Ease financial stress to perhaps further extend life expectancy.
  • Maintain one’s dignity by not dying destitute.
  • Pay off loans.

The sale of one’s life insurance policies can have far reaching effects and should be done only after consulting with one’s attorney, certified public accountant or other advisors.

[1] Effective January 1, 2018, the Tax Cuts and Jobs Act of 2017 established a new requirement to report certain information when a life insurance policy is acquired in a “reportable policy sale.” A reportable policy sale refers to the acquisition of an interest in a life insurance contract, directly or indirectly, if the acquirer has no substantial family, business, or financial relationship with the insured, apart from the acquirer’s interest in the life insurance contract.

I’m Trustee For My Parents’ Trust – Now What?

So, your parents have a trust, and you’ve just found out that you are the trustee. Do you thank them or did they reward you with the booby prize? A trustee is held to a high standard of accountability and must act in accordance with an established standard of care as outlined below. To fail in one or more of these – called a breach of fiduciary duty – is to invite litigation and sometimes results in broken family relationships where a family member is also the trustee. Professional trustees, like banks with trust departments, or corporate trustees will be given very little leeway if they fail in any of these duties, but untrained family members or individuals who find themselves in this unenviable position are often not excused for lack of knowledge either.

frustrated man
  1. Duty of loyalty. A trustee has a fundamental duty to administer a trust solely in the interests of the beneficiaries. A trustee must not engage in acts of self‐dealing.
  2. Duty of administration. The trustee must administer the trust in accordance with its terms, purposes, and the interests of the beneficiaries. A trustee must act prudently in the administration of a trust and exercise reasonable care, skill, and caution, as well as properly account for receipts and disbursements between principal and income.
  3. Duty to control and protect trust property. The trustee must take reasonable steps to take control of and protect the trust property.
  4. Duty to keep property separate and maintain adequate records. A trustee must keep trust property separate from the trustee’s property and keep and render clear and accurate records with respect to the administration of the trust.
  5. Duty of impartiality. If a trust has two or more beneficiaries, the trustee must act impartially in investing, managing, and distributing the trust property, giving due regard to the beneficiaries’ respective interests.
  6. Duty to enforce and defend claims. A trustee must take reasonable steps to enforce claims of the trust and to defend claims against the trust.
  7. Duly to inform and report. A trustee must keep qualified trust beneficiaries reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.
  8. Duty of prudent investment. A trustee who invests and manages trust property has a duty to “invest and manage trust property as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust.

Much like the position of Executor, the role of Trustee is not to be accepted lightly and can often be a lifetime of responsibility. If you are not comfortable serving in this capacity, discuss this with your parents now so that alternate plans can be made.

Trusts are excellent vehicles for protecting an estate from creditors, transfer taxes, or misbehaving heirs. Their operation may be simple or complex, but it is incumbent upon you to talk to your parents about their trusts, and especially who the parties are if you are in the role of financial caregiver.

Source: American Bankers’ Association.

Why Aren’t More Women Working? They’re Caring for Parents 

A recent New York Times article profiles the lives of women who have no other option than to drop out of the work-force to care for an aging parent, at significant cost to the economy.

The burden of care for aging relatives is reshaping the lives of millions of others. About 15 percent of women and 13 percent of men 25 to 54 years old spend time caring for an older relative, according to the Labor Department. Among those 55 to 64, the share rises to one in five Americans. And 20 percent of these caregivers also have children at home.

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