Apr 26, 2016

This Prince was no pauper

Update 5/2/2016: The Carver County, Minnesota District Court today appointed Bremer Trust as Special Administrator of Prince's estate. 

I never really listened to Prince's music - it's not really my era. But the superstar's untimely death sure has us estate planning lawyers paying attention. With all the usual combustible elements in place - celebrity, money, and a somewhat unconventional family situation - there's fierce speculation as to just what was in Prince's estate plan. Or even if he had one. 

At this writing, no one knows for sure if he did. Prince's one full sibling, Tyka Nelson, has requested that the court appoint an administrator to handle the estate, indicating she has no knowledge that a will exists. But others who knew Prince doubt he would have neglected making one, given how detail-oriented he was in other areas of his life. He was also reported to be a highly private person - as much as a superstar can be, anyway. If that's the case, then he probably would have created a trust rather than a will, in order to keep his dispositions private. A will or trust may yet turn up. 

Current estimates put Prince's estate at $300 million, but that does not count its post-mortem value. As-yet-unreleased music, future royalties and the like mean that his estate, like the estates of Elvis and Michael Jackson, may be worth more than the artist was when he was alive. 

If Prince did in fact die intestate, there obviously would have been no tax planning. That would allow Uncle Sam to take 40% of the value of his estate in excess of $5.45 million. The State of Minnesota would grab its own 16% tax. 

Prince was not married at the time of his death. Nor did he have children. In addition to his sister, he has several half-siblings. Some of his original siblings and half-siblings have died, who themselves had children.  (I do not know the law in Minnesota, but in many states, a step-sibling is entitled to half of what a full sibling would receive.) 

With all these circumstances in play, you can bet we'll be hearing more about Prince's estate over the next weeks, months, and yes, even years.

Apr 18, 2016

Better visit your aging parents if you live in China. (It's a good idea here, too)

China has a long history of respect for the elderly. An adult child who fails to care for his parents violates a key teaching of Confuciansim. And soon, inattentive children may face more than moral reprobation: their credit scores may be downgraded.

The Financial Times reports that Shanghai has introduced a new ordinance, Regulations Safeguarding the Interests of the Elderly in Shanghai, enabling a parent to sue an adult child who fails to visit regularlyIf the parent prevails, the court can order the child to look in on his/her parent. If the child does not comply, his/her credit rating can be downgraded, making it more difficult to get loans, open bank accounts, even secure a library card. The ordinance goes into effect May 1. 

Beyond the moral considerations, Shanghai has practical reasons to be concerned with the welfare of its elderly residents: Those 60 and older now comprise 30% of the city's population, and that percentage is expected to increase. After decades of China's one-child policy, most elderly citizens have only one child to rely upon. And rapid industrialization has resulted in increasing numbers of adult children living far from their parents' homes. Like their Western counterparts, China's adult children often find they are just too darned busy to visit. 

Clearly, Shanghai is not buying the "I'm too busy" routine. It's putting the legal screws to the kids in hopes of forcing them to take more responsibility for their parents' welfare. In fact, the official China Daily newspaper recently equated the inattentiveness of adult children to the reckless disregard of hit-and-run drivers.

If it goes as planned, many of those too-busy adult children will be forced to find the time to look in on Mom and Dad.

Apr 17, 2016

Don't sign the nursing home's mandatory arbitration clause

Admitting a loved one to a nursing home can be a deeply  emotional, troubling experience, but it is important to keep your wits about you. In prior posts (read more here and here) I advised you to read the fine print when completing the admissions paperwork, and to avoid signing as the "responsible party." Signing as the responsible party can put you on the financial hook.

There is another item on many nursing home admission forms that requires your close attention: the mandatory arbitration clause.  If you sign that clause, you forfeit the right to bring a lawsuit if your loved one is injured as a result of mistreatment or neglect in the nursing home. Instead, you will be required to rely on a private arbitrator to settle the dispute. Since the nursing home drafts the clause, it gets to select the arbitrator, and naturally, the one selected is often the one the nursing home believes is most likely to decide the case in its favor. 

A 2015 New York Times article cites the case of Roberta Powers, an 83-year-old woman with dementia who resided in an Alabama nursing home.  During a visit, her family found her unresponsive in her bed. A day later, she passed away. An autopsy revealed she had had been given 20 times the prescribed dose of insulin. But, because her family had signed the mandatory arbitration clause, they could not take the case to court. Instead, the case went to an arbitration panel - that ruled in favor of the nursing home.

Another incident was reported by Kaiser Health News in 2012. John Mitchell, just 69, was admitted to a nursing home after suffering a stroke. His longtime friend and legal guardian, Paul Ormond, accompanied him when he entered the facility, signing his name on the paperwork as directed by staff. Days later, staff dropped Mitchell on the floor while transferring him from bed to chair. A call was made for an ambulance, but the call was cancelled when Mitchell's vital signs appeared to improve. A few days later Mitchell died as a result of extensive bleeding in his brain. When his sons investigated, they discovered that Ormond had signed a forced arbitration agreement during the admissions process, severely limiting their legal recourse.

Critics of forced arbitration agreements say that when the nursing home is protected from financial fallout arising from abuse or neglect, patient care suffers. Also, the nursing home gets to protect its reputation because, unlike in a civil suit, arbitration is a private matter.

On the other hand, defenders say that in an environment of rapidly rising costs, arbitration agreements help to tamp down the cost of care, benefiting patients and families. They also argue that disputes can often be resolved more quickly and cost-effectively for families via arbitration than a lawsuit. Currently, the Centers for Medicare and Medicaid Services is grappling with this issue, trying to determine whether federal funding should be denied to nursing homes that impose mandatory arbitration agreements.

My advice is to read all the fine print on the nursing home admissions paperwork. If you find there is a mandatory arbitration clause, cross it out and don't sign that portion. Your loved one cannot be denied admission if you refuse to sign.

You can read more about this important issue in a 2015 report issued by the organization Public Justice. Click here

Apr 13, 2016

Are you a married couple with an old AB Trust?

Setting up an estate plan requires making some of life's most serious decisions. Little wonder so many people procrastinate over doing it. But as you can imagine, it's the biggest procrastinators who feel the greatest relief when they finally get it done!

Don't procrastinate after you get it done, either. Every plan must be reviewed periodically. As circumstances change, your plan may require fine-tuning to continue to provide all the protections you want for yourself, your family and your hard-earned assets. A crackerjack plan you established a decade or two ago may not be optimal now, because of changes in your family situation, your finances, your health, or new laws. Here's a timely example:  

Back in 2001, the federal lifetime estate tax exemption was $675,000. At that time, for spouses who wanted to utilize both of their exemptions - i.e., to pass on twice that amount, estate tax free - the AB Trust was the go-to strategy. Also known as a credit shelter trust, it called for two trusts to be created upon the death of the first spouse: one trust for the spouse, and the other, a credit shelter.

Today, the tax law is different. Currently, an individual can pass on a total of $5.45 million during his/her lifetime, free of federal estate and gift tax. A married couple can pass twice that amount. Also, the IRS now permits portability, whereby a surviving spouse can elect to use any unused portion of the deceased spouse's exemption.

As a result of these developments, most couples today do not have taxable estates, and thus, the AB Trust provides them no benefit in this respect. For these couples, the AB Trust imposes an unnecessary burden and expense: When the first spouse passes away, two trusts will have to be maintained, incurring additional paperwork, expense and monitoring.

If you are a married couple with an AB trust, consult your estate planning/elder law attorney to discuss this issue. You may want to consider replacing your AB Trust with a disclaimer trust (also known as a spousal option trust). The disclaimer trust is a more flexible strategy, giving the survivor the option of maintaining two trusts, depending on the tax climate at the time of the first death. Of course, a couple with a taxable estate will probably want to hang on to their AB Trust. It may also be advisable to retain the AB Trust if there is a significant chance that the survivor will be a resident of a state with its own estate tax at the time of his/her death. All of this should be discussed with your attorney.  

Regardless of your marital and financial status, it is always wise to review your estate plan periodically, even if it appears nothing has changed. Our Florida estate planning lawyers stay up-to-date on changes in state and federal laws and will know what impact, if any, those changes could have on your plan's effectiveness. My law firm provides clients with a free review consultation every three years, or sooner if a client has a significant change in health, family or financial circumstances.

Some lawyers who say they do estate planning will simply provide you with a stack of papers. After the ink is dry, you are pretty much on your own. That's not the way The Karp Law Firm does things. I urge readers who are not in my firm's geographic area to retain a qualified lawyer who will continue to be there for them as circumstances change. Because change is one thing you can always count on.

Apr 9, 2016

Department of Labor issues guide for families who employ caregivers

In earlier posts I informed you that the Fair Labor Standards Act now applies to many at-home caregivers. (See my prior posts here and here.)  If you employed a caregiver in the past you considered to be an "independent contractor," you may find you are now required to pay at least minimum wage, plus overtime.  

The U.S. Department of Labor has just issued a consumer's guide to the new regulations. Paying Minimum Wage and Overtime to Home Care Workers: A Guide for Consumers and Their Families to the Fair Labor Standards Act helps you determine how to comply with the new compensation rules and provides advice on keeping track of hours and other practical issues. Click here for the guide.

Apr 8, 2016

Nominate a senior volunteer for a Prime Time Award

Senior volunteers do so much for our community! If you know an outstanding volunteer, consider nominating him/her for the 2016 Prime Time Awards. The individual must be 55 or older and a resident of Palm Beach, Martin, St. Lucie, Indian River or Okeechobee county. Nominations must be submitted by Thursday, April 21. There are a variety of awards recognizing volunteers in different categories, including foster grandparents, those who have assisted in law enforcement, volunteered in the schools, etc.

The Area Agency on Aging will present the awards at the Annual Prime Time Awards Breakfast on May 26 at the Palm Beach Gardens Marriott.

To learn more and access a nomination form, click here.

Apr 6, 2016

Planning for your adult child with autism

April has arrived and with it, Autism Awareness Month. The Centers for Disease Control reports that the incidence of autism among school-age children is now one in 68, (up from 1 in 150 in the year 2000).

Educational support for children on the autism spectrum has greatly improved over the past decades. With early detection and interventions, many children will blossom into fully functioning, independent adults. Others will not, and will require lifetime support. Unfortunately, once a child turns 18, support systems for housing, vocational training and the like are frequently inadequate and difficult to obtain. Therefore, while concerned parents have ample reason to hope for the best, careful planning is prudent. The sooner a thoughtful plan for the child's future is put in place, the more peace of mind parents will have, knowing they are ready for whatever unfolds. 

For disabled adults unable to independently support themselves, there are two main sources of governmental assistance: Social Security Income and Medicaid. Both are means-tested programs. In order to qualify, an individual may not have assets in excess of $2,000. Thus, the central question for my clients who have children or grandchildren  diagnosed with autism is, how to help their loved one financially without providing money that would jeopardize their loved one's continuing eligibility for essential (albeit meager) government benefits?

One option that strikes many parents as logical is to leave money to another child or relative, with the expectation that that the monies will be made available for the disabled child. However, that is almost always a bad idea. Even if the individual you entrust with the funds is devoted to his disabled relative and completely trustworthy, the money could be imperiled if he/she divorces or is sued.

For most parents and grandparents, the best solution to this dilemma is to establish a Special Needs Trust (also known as a Supplemental Needs Trust), with the disabled child as the beneficiary. The trust's funds are not considered the child's available assets and therefore, will not impact negatively on the child's eligibility for government benefits. The funds may then be used for expenses over and above the basics for which the government pays

You don't need to wait until you actually have the money to fund the trust. The trust can be the beneficiary of retirement funds or life insurance. Once the legal structure is set up, anyone can contribute to it.

Choosing a trustee for the special needs trust can be a challenge. Although a sibling may seem the most logical choice, remember that administering a special needs trust requires a fair level of sophistication about finances and government benefits. It can be time-consuming, too. Parents often forget that even well-meaning siblings devoted to a brother or sister will eventually have their own lives and careers, and thus, administering a trust can be quite burdensome. A better option may be to appoint a third party trustee, such as a bank, accountant or brokerage firm. The sibling could then be named co-trustee and provide oversight.

If your funds are limited, you might want to look into a pooled trust. A pooled trust is a kind of communal special needs trust run by a non-profit organization. Fees to set it up are generally lower, but there is a downside: unlike a third-party special needs trust, any monies left over in a pooled trust when the beneficiary passes away will generally revert to the state, and cannot be distributed to your family. Read more about pooled trusts in Florida.

Read more about autism, including legal and financial consideration in planning, at Autism Speaks.

Mar 21, 2016

Caregiver compensation under the new federal regulations, explained

In a prior post I alerted you that effective October 2015, certain caregivers are no longer exempt from the Fair Labor Standards Act. Therefore, employers must pay such caregivers minimum wage and overtime. Since that post, we have received numerous calls from clients who rely on caregivers, inquiring about what, if anything, they must do to comply with the new regulations. 

To provide clarification, we have asked Ford Harrison, LLP, a West Palm Beach, Florida law firm specializing in employment law, to address these issues. Below, Attorney Laura Mall provides information that will help you determine what your obligations are under the new law. Her contact information also appears below if you have additional questions.

Companion or Caregiver:

A Distinction with a Costly Difference

By Attorney Laura Mall
Ford Harrison, LLP
1450 Centerpark Blvd., Suite 325 
West Palm Beach, FL 33401
561-345-7504   lmall@fordharrison.com

For over 50 years, household employees who provided “fellowship, care and protection” to the elderly or disabled were exempt and therefore did not have to comply with the Fair Labor Standards Act (“FLSA”) – the federal law requiring the payment of minimum wages and overtime.  Those days are mostly over – as a result of new regulations which took effect last year. Depending on exactly how much caregiving services are being rendered, household employers may need to revisit how they are paying these kinds of employees. Notably, live-in caregivers privately employed by the household remain exempt - but for all others (including agency employees), the kinds of services have been neatly defined so that an employee providing “fellowship and protection” remains exempt only if not delivering “care” more than 20% of the time: 

Exempt Services: Fellowship” means to engage the person in social, physical, and mental activities. Exempt “protection” means to be present with the person in their home or to accompany the person outside of the home to monitor his/her safety and well-being. Examples include conversation; reading; games; crafts; going along on walks, errands, appointments, and social events. 

Non-Exempt Services: Care” on the other hand is defined as assistance with activities of daily living (such as dressing, grooming, feeding, bathing, toileting, and transferring) and tasks that enable a person to live independently at home (such as meal preparation, driving, light housework, managing finances, assistance with the physical taking of medications, and arranging medical care).

As a practical matter, most companions will no longer be exempt – which means they will have to comply with the FLSA’s minimum wage and overtime pay requirements. Failure to do so could result in the payment of double the amount of back wages owed, plus attorneys’ fees on both sides (yours and your employee’s).  

Laura L. Mall practices Employment Law in the West Palm Beach office of Ford Harrison, LLP.  She represents employers only and often defends wage and hour claims such as those implicated here.  

Mar 20, 2016

Getting remarried? Be sure to protect your children from your prior marriage

If you're remarrying later in life, you may gain more than a new spouse. You may also gain a new, bigger family: your spouse's children. You may have your own grown children, too. Hopefully, everyone will get along beautifully. But even under the best of circumstances, remarriage almost always presents unique estate planning concerns. Addressing those concerns wisely and proactively is essential to ensure that your new, bigger family continues to get along after you're gone.

If you're like most of my clients in these circumstances, you probably want to provide some security for your new spouse in the event you predecease him/her. At the same time, you probably want your own children - not your spouse's children -  to ultimately inherit your hard-earned assets. To achieve those goals and avoid family disputes, you must make thoughtful and precise legal plans. You can't be casual about this issue, because Florida certainly isn't casual about it: In the absence of a valid pre- or post-nuptial agreement, Florida law entitles your spouse to (1) a minimum of 30% of your assets (the "elective share"), and (2) a life estate in the homestead property, or a 50% ownership share in it.

As you look forward to this promising new chapter of life, you may be tempted to just leave everything to your new spouse. Perhaps he/she has promised to leave all the assets that originated with you, to your kids, you know your spouse is trustworthy, and you have complete confidence that the promise will be kept. But guess what: circumstances beyond your spouse's control may arise that may make it impossible for your spouse to fulfill that promise, notwithstanding his/her good intentions. Consider these possible scenarios that could arise if your new spouse outlives you:
  • Your spouse may come under pressure from his/her children to keep your assets instead of pass them on to your children. Trust me when I say it happens, and frequently. I recently heard this story from one family: "Mrs. K" spent six years caring for her second husband who had Alzheimer's. After he passed away, her children told her she was "morally entitled" to keep everything he'd left her, given how selflessly she'd cared for him. They took it one step further, too:  Since they were caring for their mother in her own declining years, they felt the house should be left to them. After several years of resisting their pressure, she relented and modified her estate plan to pass her second husband's money, and house, to her own children.   
  • Your new spouse is only human and presumably, a loving parent. Suppose one of his/her own children falls on hard times or becomes ill and needs money?  Your spouse might be hard-pressed to deny funds to that child - even if that includes funds that were promised to your kids. It doesn't matter if your spouse has a will saying certain assets go to your kids, because a will can be changed at any time, so long as the will-maker is competent. Besides, a will is a death instrument; it has no control over what your spouse can do with the money during his/her lifetime. This also goes for any assets on which you've made your spouse co-owner. There's nothing to prevent a surviving spouse from naming his/her own kids as co-owners or death beneficiaries. 
  • Don't assume that if your new spouse outlives you, the balance of his/her years will be healthy ones. Your spouse could become mentally incompetent, and then any "promises" that have been made could become meaningless. Conceivably, your savings could be squandered with bad financial decision-making. And if your spouse's children get control of his/her assets through a durable power of attorney, they will be able to manage the assets, even spending assets that are payable on death to your children.
So, with all these possible twists and turns, what can you do to ensure your kids get their inheritance? There are several possible approaches:
  • Create a trust that gives your spouse access to the interest from your estate, and to a portion of the principal under certain circumstances. Once your spouse dies, the principal then gets distributed to your own children. I caution against making your spouse and your own children co-trustees. An arrangement like that can be a tinderbox, providing fertile ground for serious friction between the parties. Instead, I recommend selecting an independent, third-party trustee.
  • Enter into a pre-nuptial agreement, or if you've already married, a post-nuptial agreement in which both of you waive your right to an elective share and/or homestead rights. You can agree on what you must leave to each other, if anything. Otherwise, under Florida law, your spouse has the right to the homestead for the balance of his/her life (either to live in it or to rent it out), or to force the sale of the property and take one-half of the proceeds. If you want your children to inherit the house, this issue requires careful consideration.
  • Depending on your financial condition and health, consider purchasing life insurance on your life, naming as beneficiary your spouse and/or your children from your first marriage, and leaving some of the proceeds to each. Another possibility if you purchase life insurance is to set up a trust for the insurance that will distribute a specific amount of your choice to your spouse for the balance of his/her life, with the remainder going to your children upon your spouse's death.

The takeaway: Enjoy your new relationship. You are fortunate to find companionship and love again. But please, take the necessary steps to ensure that your money ends up in the right hands.

Mar 13, 2016

Veterans Administration says no, again, to Blue Water Veterans

In April 2015 the U.S. Court of Appeals for Veterans Claims ordered the Department of Veterans Affairs to review its policy with regard to "Blue Water Veterans." As noted in my 2011 post, Blue Water veterans are navy personnel who served off the coast of Vietnam during the Vietnam War, but whose boots did not touch the ground or who worked on ships that did not enter inland waterways. For years, Blue Water veterans have been denied benefits under the Agent Orange Act of 1991, despite their contention that they were exposed to the herbicide via sea water used aboard ships for cooking, drinking, laundering, etc. Agent Orange has been associated with a variety of ailments, including cancer, heart disease, birth defects and neurological problems.

In February 2016, citing a lack of conclusive evidence linking ailments among Blue Water Veterans to Agent Orange, the V.A. said it was standing by its existing policy. You can read the V.A.'s newest fact sheet as it related to Blue Water Veterans and Agent Orange here.

Senator Richard Blumenthal (D-Conn) has backed the Blue Water Navy Vietnam Veterans Act that would give these veterans access to benefits. "Young sailors risked their lives during the Vietnam War, unaware that decades later, they and their children and grandchildren would still feel the toxic effects of exposure," he said in response to the recent ruling. "Veterans who served offshore and in the harbors of Vietnam were exposed and deserve the presumption of service connection for Agent Orange-related disease."

Despite this most recent setback, Blue Water Veterans and their advocates say they will continue to push for benefits under the Agent Orange Act of 1991.
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