Should your gifts to your heirs have strings attached?

The story of Robert Morin will resonate with you if you're mulling over the most effective way to leave assets to your loved ones (or organizations) in your estate plan.

A University of New Hampshire alumnus who worked as a cataloguer in the school's Dimond Library for five decades, Morin was a popular figure on campus. Unmarried and without children, by all accounts he led a simple, contented life. He rarely went out. He did not patronize fancy restaurants. He drove a '92 Plymouth. His spare time was spent reading and watching videos.  

In 2013-2014, his last year of employment at the school, Morin earned $102,000. He died in 2015 at age 77. When his will went to probate, many were stunned to learn that the unassuming Morin was a classic example of  "The Millionaire Next Door," as described in the book of the same name: Someone you would never guess had accumulated significant wealth through a combination of frugal living and prudent investing. Morin's estate came to $4 million. 

Morin's will specified that $100,000 was to go to the school library, where he had worked for so many years. But that was the only gift earmarked for a specific purpose. Morin placed no restrictions on how the university was to use the bulk of the money. As his longtime financial advisor told the Boston Globe, Morin trusted the university to spend the money appropriately.

However, the way the university has opted to spend some of the funds is rankling many at the school and in the wider community. A video scoreboard is being installed at the university's new football stadium paid for with $1,000,000 of the bequest. Critics allege that using Morin's money for this purpose does not do justice to Morin's bookish life, and that the money would be more appropriately used for scholarships, books, computers, research grants, etc. One UNH alumnus blogged: "As a Wildcat, I feel deeply saddened and honestly completely ashamed of my alma mater for this." Of course, we will never know what Morin himself would have to say about all this.

This is where Morin's story has implications for your own estate planning. If you are not concerned with what your beneficiaries ultimately do with your funds when they inherit them, or if you have faith that the money will be used in ways consistent with your desires, then giving your beneficiaries unfettered control is totally appropriate. That is what Morin did. But if you are worried that your hard-earned assets may be used in ways you find unacceptable, you will want to draft your documents accordingly, putting appropriate restrictions in place. For example, you may want to ensure that the funds you leave your child pass to your own children and grandchildren and not end up out of your own bloodline. Many of my clients with this concern elect to leave money in a trust, such as a Heritage Trust or IRA Stretchout Trust. 

Contact the lawyers at The Karp Law Firm to explore how you can most effectively leave an inheritance to your loved ones - and ensure your own peace of mind.

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.

Incentive trusts: Kindness and concern, or ruling from the grave?

Toddlers get gold stars when they clean  their rooms. Teens are allowed to use the car if they get good grades. So why shouldn't your estate plan reward your heirs for good behavior? If this is what you would like to do, you will need to establish a trust, and think carefully about what provisions to include that can nudge your heirs in the direction you want them to go. Common provisions include requiring a beneficiary to complete college or hold a full-time job before receiving an inheritance. One of my clients, concerned about her grandson's history of drug abuse, made his inheritance contingent on his being drug-free for ten consecutive years.  No sobriety, no money.

All kinds of carrots and sticks can be built into a trust to encourage certain choices and discourage others. But moderation is the key. Too many carrots and sticks can be oppressive for the loved ones you leave behind.

Consider the estate plan of real estate magnate Maurice Laboz. Laboz died recently, leaving behind two daughters, ages 17 and 21. They are set to inherit $10 million each when they attain age 35, but Laboz put many contingencies into his trust that are designed to keep his kids on a certain path - so many, in fact, that some in the media have dubbed him "Daddy Dearest."  Among the provisions:

• If either daughter is a stay-at-home mom, she will receive 3% of the trust's value each year. But if she has a child out of wedlock? Nothing.

• Each daughter is to receive three times her annual salary when she begins working, to encourage each of them to establish lucrative careers. If one of them has a passion for a less lucrative, otherwise honorable profession? Too bad.

• One daughter gets $750,000 when she graduates from an accredited university. But first she'll also have to write an essay, to be reviewed and approved by the trustees, explaining how she intends to use the money.

It would be very interesting to know how these young women have reacted to their deceased father's carrots and sticks. Do they see his plan as a reflection of his love and concern? Will they work towards achieving the standards he espoused? Or do they see him as a control freak, trying to keep them on a short leash and manipulating them from the grave?

There is a fine line between encouraging positive behavior, and attaching so many strings to an inheritance that it embitters your loved ones. Only you can decide how much control you wish to build into your estate plan, and the impact - good or bad - it might have on your loved ones.

Philip Seymour Hoffman's will goes public

What a loss. Philip Seymour Hoffman, the amazingly talented Oscar-winning actor, died of an apparent heroin overdose on February 2. He had accumulated considerable wealth, with an estate rumored at $35 million. He was father to three young children. And according to reports, Hoffman anticipated his life might be cut short by the longtime drug addiction he battled, not fully successfully.

Hoffman's will went public this week when it was filed in New York surrogate court. His estate plan reveals something of his values and personality, requesting that his son - the only one of his three children born when the will was drafted in 2004 - be raised in Manhattan, or if not possible, in Chicago or San Francisco. "It is my strong desire that my son, Cooper Hoffman, be raised and reside in or near the borough of Manhattan... so that my son will be exposed to the culture, arts and architecture that such cities offer," the will states.

From a legal point of view, Hoffman's estate plan is somewhat confounding. He never revised his will in the ten years during which his two other children were born. His will does not reference his "children," instead referencing by name just his one son, Cooper. Although estate laws in New York will undoubtedly protect the two daughters born since the signing of the will, that is going to add additional complexity, delays and cost to the probate process. I always urge clients to revisit their estate plan whenever any significant life event occurs. Death, illness, a change in financial fortune - certainly a birth - fall into that category. 


Hoffman left most of his estate to Mimi O'Donnell, the mother of his three children. They were not married, so federal estate taxes will significantly erode what the family gets. Since Hoffman was a resident of New York, which unlike Florida has its own estate tax, Hoffman's estate will also pay out a hefty chunk of change to the state.

The other question that begs to be asked is this: Why would someone with such a public profile rely on a will as the crux of his estate plan? The probate process is a public one. Had Hoffman been my client, I would have steered him away from that approach, and suggest he use a revocable trust in order to protect his family's privacy. Moreover, probate can tie up an estate for some time. It is said that O'Donnell has requested that the will be probated in an expedited fashion, which could signal that the family cannot wait and needs the cash now.


We also now know that Hoffman's will establishes a trust with his son as the beneficiary, to pay for his son's "education, support, health and maintenance." Hoffman directed that half be distributed to his son at age 25, and the remainder at age 30. There's no question that this is preferable to releasing all the money when a beneficiary attains the age of legal majority. Still, as readers of my blog know, my experience has been that many of today's youngsters are far slower to mature than the prior generation was, at least as far as money management is concerned. Not every child becomes financially savvy at 25, or even 30. Had I been advising Hoffman, I would have suggested that he consider putting more thoughtful strings on the timing and method of distributing the funds Cooper will receive, which will probably amount to the millions.

Moviegoers and theater-lovers will surely miss Hoffman. Estate planning aside, he leaves behind an extraordinary artistic legacy.

Why it may be advisable for a surviving spouse to file an estate tax return for a non-taxable estate

Current federal estate tax law entitles a surviving spouse to retain the unused portion of the deceased spouse's unified estate and gift tax exemption. The 2010 Tax Relief, Unemployment Insurance Reauthorization &  Jobs Creation Act introduced this so-called "portability" option. It was extended in 2013.

A spouse may pass assets in any amount to a surviving spouse who is a U.S. citizen, free of estate tax. However, even if the decedent's estate is not taxable and an estate tax return (Form 706) is not required, a return must be filed in a timely manner with the portability option elected in order for the surviving spouse to retain the decedent's tax credit. (Note: A spouse who remarries loses the credit, even if he/she has elected it.)

Here's an illustration of how portability can impact a surviving spouse's estate tax liability. For the purposes of this example, I am assuming a unified gift and estate tax credit of $5.25 million, the current figure. Let's say a man dies with a $5 million estate and leaves it all to his wife. He has done no gifting and thus he has left untouched his full $5.25 million estate and gift tax credit.  His wife has $4 million of her own assets and she, too, makes no gifts that are taxable during her lifetime. She dies several years later, leaving an estate of $10 million. 

• If she elected portability at her husband's death: Both his tax credit and her own are applied to her estate when she passes away. That's a total exemption of $10.5 million. Since her estate is $10 million, no taxes are owed and the entire amount passes to heirs tax-free.

• If she did not elect portability at her husband's death: She is entitled to only her own tax credit, $5.25 million. Thus, $4.75 million ($10 million minus her own $5.25 million credit) is taxable. Her estate will have to pay Uncle Sam 40% of that amount, or $1.9 million. 

When determining whether to elect portability, the survivor's age and finances must be considered. In the above example, if the survivor was in her late 80s and had only modest assets, it is unlikely her own estate would ever be taxable, short of her winning the lottery. Therefore, filing a 706 to retain her husband's estate tax credit would probably not be worth the expense or bother. If on the other hand the survivor was much younger and/or had significant assets, it is possible that over the course of her lifetime she might accumulate assets sufficient to leave a taxable estate. That scenario presents a more compelling case for preserving the decedent's tax credit for future use by the survivor. 

Of course, whatever the age of the survivor or value of assets involved, in the interests of prudence, some surviving spouses might want to file the 706 and elect the portability option even if the chances of future benefit is marginal. It's a decision every surviving spouse should make with input from the lawyer during the probate and/or trust administration process.

Also, although the current tax credit of $5.25 million means the average person's estate is not taxable, it's important to remember that that figure is not set in stone. Prior to the Bush tax cuts, the lifetime exemption was $650,000. Despite the so-called "permanency" of the new estate tax, it can always be modified, and indeed there are rumblings in Congress about just that. Any reduction in the lifetime estate tax credit makes it increasingly important for the survivor to retain the deceased spouse's credit for possible future use.

Contact The Karp Law Firm's Florida estate planning lawyers for assistance. In addition to the firm's attorneys, a Certified Public Accountant is on staff with vast experience in this area.

Can you disinherit an adult child?.

Not all parents enjoy a warm relationship with all their children. I've met with many parents - some pained, some resigned, others angry - who have been estranged from their children for years. They may have tried reaching out and been spurned by kids who want nothing to do with them. Or the parents may find the child's behavior so egregious or heartbreaking that they have just given up.

In these situations, parents often ask if they are obligated to leave anything to the estranged child. The answer is no. Under Florida law, you may disinherit an adult child entirely, or leave him as little as you desire, unless there is a court order in a divorce requiring the parent to do so. This could be part of a child support order for minor children; or a property settlement agreement where the parties have agreed and contractually obligated themselves to make provisions for their children, whether the children are minors or adults.  

If you plan to disinherit an adult child, or leave him less than what would probably satisfy him, it is crucial to create an ironclad estate plan. If you die without a valid Florida estate plan, Florida intestacy laws govern who gets your assets. And guess what: Florida law 732.103 states that if there is no surviving spouse, your estate passes to your lineal descendants.

The law requires that you recognize "the natural objects of your bounty" which of course includes your children. Therefore, if you wish to disinherit a child, I recommend that you acknowledge his existence in your Will and/or Trust by stating in the document that "For reasons known to me, I make no provision for (child's name) and/or the child's lineal descendants." Refrain from spelling out the actual reason you are making no provision. If you state a reason, you may provide a jumping-off point for the child to mount an estate challenge. Not revealing your reasons reduces the likelihood that your disgruntled heir can successfully challenge your dispositions.

People frequently ask if, as a way of acknowledging the child, they should leave him $1. This is a bad idea, for several reasons. First, leaving the child any amount automatically gives him the legal right to obtain information about your estate, without having to file a lawsuit. Second, even that paltry $1 gift must be delivered to the child and a receipt obtained. If a receipt cannot be obtained, the $1 gift will have to be filed with the registry of the court to be held for the beneficiary. All of these administrative steps incur additional costs, create delays, and cause unnecessary headaches for your Personal Representative or Trustee. Moreover, as you might expect, costing your estate money, creating delays and annoying your Personal Representative or Trustee is exactly what many disinherited children have in mind. I have seen cases where the child refused to take delivery of his "gift," ignored certified mail, refused to sign receipts, and threw up every possible obstacle to bog down the smooth administration of the estate. He need not launch a formal lawsuit to create problems, delay the Florida probate or trust administration process, and create hassles for your beneficiaries.

Occasionally a client wants to leave an estranged child a modest amount. I usually recommend that they  exclude that child as a beneficiary under the Florida Will or Trust, and instead, name him/her as the designated beneficiary of a specific asset, such as a bank account that is payable on death by the bank to the beneficiary, keeping your estate and its Personal Representative and/or Trustee out of the process. Because the asset has a designated beneficiary, it will pass outside the Will or Trust. The Personal Representative or Trustee should know about this account, and when the time comes, should request that the attorney contact the child or the bank with the information about the account, and a copy of the parent's death certificate. The child can then claim his/her inheritance on his own, and will have no opportunity as a beneficiary of the will or trust to create problems for the Personal Representative or Trustee.

Another question I'm asked with regularity is whether a "no contest clause" is of value. A no contest clause states that a beneficiary who challenges the estate will receive nothing. Clients hope this will discourage a child from making trouble when he/she finds out they are getting nothing, or a sum that is sure to disappoint. Although that may be viable in other states, under Florida law a no-contest clause, either in a will or a trust, is unenforceable. 

As a parent, I feel the pain of clients whose relationship with an adult child has been fractured. If this is your situation, I wish you and your family a speedy and happy reconciliation. But if that is not to be, you are entitled to do whatever you want with your hard-earned assets. Contact our estate planning lawyers for a consultation to discuss your needs.

Learn more about Florida Wills and Trusts and Florida estate administration..

To read the Florida Probate statutes online (an excellent cure for insomnia!), click here. 

Two states involved in food tycoon's estate battle

A new estate battle is capturing public attention. As often is the case, it involves questions about  undue influence. What's not so usual is that the conflict is unfolding in two states: Minnesota and Florida.

You may not know the late Jeno Paulucci by name, but you probably know the products his company has produced: Jeno's Pizza Rolls and Chun King foods, to name just a few. The Minnesota native and his wife died last year, leaving trusts with a combined value of over $100 million.

According to a report in the Minneapolis Star Tribune, just weeks before their deaths, the Pauluccis removed the Minnesota attorneys who had been their longtime trustees. They were replaced by Floridians Larry Nelson, longtime president of Paulucci International, and David Simmons, the Florida State Senate majority whip. 

The couple's children want the former trustees reinstated, claiming that their parents were manipulated to remove them. Nelson and Simmons argue that they were appointed because the Pauluccis believed that they would be better stewards of the money, and point out the the majority of the assets are located in Florida, not Minnesota.

But before any of this gets resolved, the case first must slog through the issue of what state gets to handle the dispute. That's critically important to all sides because probate laws differ in the two states. Minnesota law permits trustees to be removed if the adult beneficiaries consent. In contrast, Florida requires the consent of both the adult beneficiaries and the minor beneficiaries (with the minors' parents representing them). The Star Tribune reports that one parent of one of the minor beneficiaries, a Florida resident, objects to the removal of the current trustees. As yet, the venue has not been set.

This conflict demonstrates that first, the creation and execution of your estate planning documents must be orchestrated with every "t" crossed and "i" dotted. That makes it more difficult for anyone to contend that you were manipulated. Second, the case is a real-life answer to the question I am often asked, "Should my estate plan from another state be changed, now that I live in Florida?"   The answer is, there are many difference in laws among states, so it behooves you to have your existing estate plan reviewed by an experienced Florida estate planning attorney.

How to coordinate your life insurance with your estate plan

Life insurance can be a powerful tool in your estate plan. It can be relied on to help your surviving spouse or heirs when you're gone. If your estate is taxable, life insurance may be used to pay estate taxes and other expenses. 

As with any aspect of estate planning, the devil is in the details. Life insurance is not a tool to be used casually. It must be managed with precision to ensure it fulfills your estate planning goals.

Here area few tips to keep in mind:

1. If you don't want the proceeds to be taxed for estate tax purposes, you should not be the owner.
2. Don't make your estate the beneficiary. If you do, you'll trigger probate and you may make your estate taxable.
3. Review your policies periodically, particularly when major life events occur, like divorce or the death of a beneficiary. You also need to keep an eye on your financial and tax situation to ensure that your policy continues to meet your goals.
4. Minor children should not be named as beneficiaries. That would likely require court involvement to approve the distribution.
5. Do not name people of any age as beneficiaries of the policy if they are financially irresponsible. It's wiser to establish a trust for them, which provides more control over how and when monies are distributed.
6.  If your spouse is not a U.S. citizen, consider establishing a Qualified Domestic Trust and naming him/her as the beneficiary. Don’t automatically make your non-citizen spouse the beneficiary of your life insurance, since doing so may trigger estate taxes.
7. Be sure to name contingent beneficiaries in the event your first-named beneficiary predeceases you.
8. If you purchased your life insurance to fund a buy-sell agreement, keep an eye on the policy to make sure it keeps up with any increase in the value of your business.
9. If you are married and you do not have sufficient assets in your living trust to pass on the maximum amount of tax-free money to your heirs, you may want to consider making your living trust the beneficiary of your policy.
10.  If you are considering cancelling your policy, consider a life settlement rather than taking the surrender value.

Picking up Pearls of Wisdom at the AATEELA Meeting

Off this afternoon to Memphis for the semi-annual meeting of the American Association of Trust, Estate Planning and Elder Law Attorneys. AATEELA is a small, select group of legal professionals from around the country who brainstorm and exchange information. We're in touch all year round, but twice a year we get together in person. It's an honor to be part of this elite, invitation-only group, and whatever I learn ultimately benefits my clients.

AATEELA's discussions can take us just about anywhere, but this year we plan on discussing a variety of estate planning issues: the ins and outs of Heritage Trusts; irrevocable trusts and modification techniques; the implications of clients' diminished capacity for estate planning; and of course, that perennial topic, tax strategies for estate planning clients and the status of current federal estate tax.

In future posts I'll share the pearls of legal wisdom I'm sure to pick up this weekend.

"The Descendants" shows challenges for trustees

I saw "The Descendants" this weekend, a new film starring George Clooney. The film has an estate planning subplot that masterfully portrays how difficult it can be to satisfy all family members when an estate planning pie must be divided and distributed. 

Matt King, played by Clooney, is the sole trustee of a breathtakingly beautiful plot of virgin land in Hawaii. The property has been in his family for generations. Because of the law of perpetuities preventing a trust being "controlled from the grave" forever, the trust must be dissolved soon. King has to decide what to do with the land. On the one hand, he wants to honor what he believes the grantors wanted -- keeping the land pristine. On the other hand, he faces enormous pressure from the beneficiaries, his cousins, who need the cash and want the land sold to developers.

I don't want to spoil the end for you, but I can tell you this: The situation depicted in the film is spot-on realistic. Whenever you have a family entity that must be distributed among family members, there's ample potential for family conflict. Rare is the family trustee who can be objective and implement the provisions of the trust without getting rattled by the demands and complaints of family members awaiting their piece of the pie. That's why under certain circumstances, appointing a third-party trustee makes a lot of sense. If your family is going to hate someone, at least in won't be a sibling, aunt or nephew, or in the case of this film, cousin.

Similar problems come up when my estate planning clients have a family business and want to equitably distribute their estate. For example, let's say Mom and Dad own a dry cleaning business and have two sons. One of the sons has worked in the business most of his life; the other has never taken an interest in it. If Mom and Dad direct the business to be sold, that effectively puts the first son out of a job. If the business is not sold, how can Mom and Dad be fair to each son and ensure that the estate is equally divided?  There are several options,  one of which is purchasing life insurance to compensate the uninvolved son for the value of the business the other son is inheriting.  

Whenever there is a family entity that is going to flow into an estate, questions need to be answered well in advance about who is going to get what piece of the pie, when, and how. These are complex issues with enormous ramifications for family relationships, as "The Descendants" illustrates. Consult with an experienced Florida estate planning-elder law attorney.

Rhinestone Cowboy not riding off into the sunset

Glen Campbell, the Grammy Award-winning writer/performer of the hit song Rhinestone Cowboy, is not riding off into the sunset. Despite his recent diagnosis of Alzheimer's Disease, the 75-year-old musician intends to perform as long as he can. He just released an album and has embarked on a farewell tour. Campbell is just one of many celebrities who have made their diagnosis public. What makes Campbell him unique is his plan to remain on the public stage. He makes no apologies for his lapses, laughing when he told a CBS interviewer that he was not sure of his age.

What is not unique is the years of creeping symptoms that elapsed before Campbell's diagnosis. It can be hard to make a definitive diagnosis, since most people become a bit forgetful with age. But beyond that, most people  tend to sweep their symptoms under the rug. According to the Alzheimer's Association, the average person has about eight years to live after symptoms become noticeable to others. That makes early detection very important. The earlier the diagnosis, the sooner critical medications can be administered; the sooner patient and family can adjust; and the sooner vital legal planning can be done.

Anyone diagnosed with Alzheimer's or another dementia needs to put an effective estate plan in place without delay. If there is an existing estate plan, it should be reviewed. If the patient has a spouse, he/she must also create or review his own estate plan, since in all likelihood the spouse's plan will have named the patient as Personal Representative, Trustee, Durable Power of Attorney agent or Health Care Surrogate.

The estate plan should include:

A Durable Power of Attorney for Property, which will empower one or more persons to handle the patient's finances when he/she no longer can.

A Health Care Power of Attorney, giving someone else the right to make the individual's medical decisions.

A Living Will, specifying what kinds of life-prolonging treatments the patient wants or does not want.

A Will and.or Living Trust.

Contact our elder law/estate planning attorneys to examine your estate planning options.

IRAs as part of Florida estate planning

IRAs, or individual retirement accounts, require special consideration when creating your Florida estate plan. Any unused funds in your IRA upon your death may be paid to beneficiaries. Proper planning can ensure your heirs get the most benefit.

IRAs are personal savings plans that allow you to set aside money for retirement and create tax savings. The advantage of IRAs is that you may be able to deduct some or all of your contributions to an IRA from your taxes and also be eligible for a tax credit equal to a percentage of your contribution. Earnings in a traditional IRA are generally not taxed until distributed to you. At age 70 1/2 you must begin taking withdrawals from your traditional IRA. Earnings in a Roth IRA are not taxed nor do you have to start taking distributions at any point, but contributions to a Roth IRA are not tax deductible. Any amount remaining in your IRA upon your death can be paid to your beneficiary or beneficiaries.

Generally speaking, your estate should not be the beneficiary of your IRA, since that would trigger probate. Most people name their spouse as beneficiary. A spouse who inherits an IRA can "roll it over" into his/her own IRA. You should also name contingent beneficiaries. A non-spouse beneficiary who inherits an IRA must start taking distributions from the IRA within a year after the IRA owner dies.

If you do not need your IRA funds for your retirement years, you can take only the minimum required distributions starting at 70 1/2, and create an "IRA Stretchout Trust" which can benefit your children, your grandchildren and beyond. When you die, your beneficiary can also stretch distributions out over his or her lifetime and then designate a second-generation beneficiary. You can read more about the IRA Stretchout Trust here.

If you have a Living Trust, there are certain circumstances when it's wise to name the Trust as beneficiary. Examples include if you have minor children, children with special needs, or a beneficiary who is not fiscally responsible. However, the Trust must be properly drafted to avoid negative tax consequences. If you are thinking of leaving your IRA to a Trust, be sure to consult with our elder law/estate planning attorneys to ensure the Trust is properly drafted.

Free Senior Survival Workshops this week!

The Karp Law is holding three Senior Survival Workshops this week in Palm Beach Gardens, Boynton Beach and Port St. Lucie. The events are free, there is no obligation, and you don't need a reservation. Attendees will have the opportunity to book a free consulation with one of our Elder Law Attorneys. Find out what you need to know to protect your assets, keep from going broke if you or a family member need longterm care, make sure your asssets stay in your family, learn about wills, trusts and powers of attorney...and much more. Presenting attorneys will be Joseph Karp and Genny Bernstein, both Florida Bar Certified Elder Law Attorneys..

Here's the schedule:

Tuesday, July 12, 1:30 pm to 4:00 pm: Port St. Lucie Holiday Inn, 10120 S. Federal Highway

Wednesday, July 13, 1:30 pm to 4:00 pm: Palm Beach Gardens Marriott, 4000 RCA Blvd.

Thursday, July 14, 1:30 pm to 4:00 pm: Boynton Beach Courtyard by Marriott, 1601 N. Congress Ave.

More information on our elder law/estate planning law firm.

Living Trust can protect your assets as you age

As we grow older, our ability to make sound money decisions may diminish. Last month's Morningstar financial conference addressed this issue. Harvard Economics Professor David Laibson pointed out the need for seniors to protect their assets not just from financial predators, but from themselves in the event of cognitive decline. With half of those over the age of 80 experiencing significant cognitive impairment, every senior needs to take this issue seriously.

A Living Trust (also known as a Revocable, or Intervivos Trust) is an effective precaution for seniors who want to safeguard their assets. A properly drafted and funded Living Trust  holds your assets (with the exception of a few types of assets that should remain outside your Trust). You appoint a Trustee to manage the assets. You may be the initial Trustee, and designate a Successor Trustee to take over if disability strikes. Or you may appoint someone else to be the Trustee from the get-go. Your Trustee can be a trustworthy individual or a corporate Trustee. In any event, if you become incapable of managing your money and your financial well-being is imperiled, your Trustee is authorized to step in on your behalf.

There are additional benefits to using a Living Trust as a cornerstone of your estate plan, for example, probate avoidance.  Read more about the benefits of a Florida Living Trust.

Free Senior Survival Workshops This Week

Our Certified Elder Lawyers offer Free Senior Survival Workshops this week in Boynton Beach, Palm Beach Gardens and Port St. Lucie, Florida.  We'll discuss what all Floridians need to know to protect themselves and their families, with topics ranging from protection against longterm nursing costs, explanation of wills and trusts and other documents, and much more. The workshop is free, and you don't need a reservation. Click here for the schedule.

Florida considers trimming Medicaid longterm care benefits: Plan, don't procrastinate!

Florida Medicaid cutbacks are under discussion in the Florida legislature. A bill is pending that if passed will make qualifying for longterm nursing care benefits more difficult after July 1.

Medicaid benefits are what make the difference between a family preserving a good portion of its assets or being virtually wiped out by longterm nursing home costs. So, if you do not have longterm care insurance or are not wealthy enough to finance your nursing home costs, you should act now to do Medicaid planning. While our Florida elder law attorneys can often assist families who already have a loved one in a nursing home, planning in advance is always the better choice, affording families more options for greater asset preservation.

One advance planning method is the Irrevocable Medicaid Trust. This is a flexible legal instrument that can save your family significant funds in the long term. It is also a complex one, and should be planned and drafted only under the guidance of a lawyer who is experienced with these matters and certified by the Florida Bar in elder law. 

To hear more about your options for Medicaid planning and preserving assets in today's economic climate, listen to my recent interview on the "Seniors Taking An Active Role in Society" radio program.

Estate Tax: What Now?

So Congress finally did it. Well, not final as in really and truly final. Final as in, for the next two years. Through Dec. 31, 2012, there will be a top federal estate tax rate of 35% on estates over $5 million. (Unless Congress changes its mind before then. In this volatile economic and political climate, nothing is impossible.)

For now, like every estate planner on the planet, I'm figuring out just what it all means for clients. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 will present new estate planning opportunities, that's for sure; but the question is, how best to take advantage of them? I'll keep you posted as developments unfold. For now, here are some useful points to guide you.

1. Families of those who die in 2010 have a choice: elect to use the new law, or go by the pre-2010 tax code. The new law allows for a full step-up in basis, thus alleviating capital gains on inherited assets. But families who are more concerned with estate taxes than capital gains taxes will probably still opt for the pre-2010 regimen.
2. Do not forget that many states impose an estate tax. And cash-strapped states aren't likely to do away with that revenue anytime soon. New Jersey may tax estate assets in excess of $675,000; New York, estate assets over $1 million. If you live in Florida but the appeal of being closer to your kids and grandkids is making you think about moving back there, you’ll need to do the appropriate tax planning before you pack your bags.
3. You current tax planning should probably be reviewed. For example, many married couples with substantial asssets who established an estate plan years ago have a Credit Shelter Trust (Bypass Trust) as the crux of their plan. This requires that trust assets to be split into two pots upon the death of the first spouse. But if your estate is not taxable under the new law, having to split the assets accomplishes nothing. It only incurs additional bookkeeping, fees and paperwork. I am recommending that clients who fall into this category consider establishing a Spousal Option Trust, which lets the survivor decide if splitting assets into two pots is worthwhile, depending on the tax situation at the time of the first death.
4. Remember, your estate plan is about LIFE, PEACE OF MIND and FAMILY HARMONY - not just death and taxes, though the latter get far more attention in the press. The vast majority of Americans do not have a taxable estate, anyway. If you fall into the majority, you still need a sound estate plan that authorizes someone to make your medical decisions and financial decisions if you become ill or incapacitated,  keeps the courts out of your affairs, and ensures a smooth transition when you pass away that allows your loved ones to avoid unnecessary hassle, delays and fees.

More on what the new law means to you in coming weeks, dear readers.

Ambiguity turns estate plan into house of cards

You can learn a lot about estate planning from celebrities. Even if you're not into Hollywood gossip or have millions yourself, it's undeniable that their mistakes can help us learn what to do... and what not to do.

To make sure your wishes are carried out, it's critical that your documents be crystal clear. Where there is ambiguity, there is the potential for "interpretation," and the stage is set for conflict and possibly, costly litigation.

Take controversial actor Dennis Hopper, who died in May leaving behind an estate worth $25 million. When he married his fifth wife in 1996, a prenuptial agreement was drawn up stating that she would get 25% of his estate if they were still living together. It also stipulated that if either of them filed for divorce, she was to vacate the home they lived in within 60 days.

When Hopper filed for divorce in January, she indeed moved out of the "home" -- right into the guest house located on the compound property.

The question is, when Hopper died in May, were they still "living together?" She says yes. The trustees of the Hopper trust say no. You can be sure that this conflict will provide plenty of work for plenty of lawyers for a good time to come.

Do you have estate planning documents currently? Are you sure they are crystal clear? Do you want to draw up an estate plan that eliminates any trouble-making ambiguity? The attorneys of The Karp Law Firm can advise you.

Living Trust: Fund it or Flub It

I'll call the couple Joan and Bill. They were in my office for a consultation, asking me to review their living trust (aka revocable trust). It had been prepared by another attorney and executed over five years ago.  As we began chatting, reviewing their documents and discussing finances, Joan and Bill dropped a bombshell on me:  I learned that they had never funded their revocable trust! In fact, this nice couple did not even know what "funding" was! Their living trust was the core of their estate plan, but they said that the lawyer who had drafted it had never told them about funding. They had a revocable trust - wasn't that sufficient?

I told them that without being funded, their trust was just a piece of paper, and worthless from an estate planning perspective.  We were all happy they had sought legal advice so this could be set right.

Funding a trust means switching your assets from your own name into the name of the trust. Assets outside your trust are not controlled by the trust. Thus, if Bill had died before we had a chance to set things right,  any assets Bill owned outside the trust, without a named beneficiary or co-owner, would have had to be probated, with the expense and hassle it can entail - exactly what they wanted to avoid.  

Funding your revocable trust is a vital part of your estate planning; however, not all your assets should be owned by your revocable trust. For example, 401ks, 403bs or IRAs should be left outside the trust, as transferring them to the trust would trigger income taxes. Other assets that may be appropriate to keep outside your trust are tax-deferred annuties, real estate, life insurance and limited partnerships. Your estate planning/elder law attorney can give you detailed advice.

As you acquire new assets, you will also have to make sure they are titled in the name of your revocable trust.

Bill and Joan were lucky: They caught their error before either of them became disabled or passed away. Remember, drafting and signing your revocable trust is just step one: you must also fund your revocable trust. Contact our elder law attorneys for guidance.

Don't let your estate fall into the wrong hands

If you're like most people, you want to be sure that your estate ends up with the people you care about most: your own family. Unfortunately, many traditional estate planning strategies just can't guarantee that your assets will go to precisely whom you want. All or some of the inheritance you intend for your loved ones could end in the wrong hands, such as:

• Your child's spouse, if your child's marriage ends in divorce.
• Your spouse's own children from his/her prior marriage.
• Your child's inlaws and inlaws' children. 

Fortunately, there are steps you can take to prevent this from happening. Learn about these valuable tools at The Karp Law Firm's special informational session, "Keeping Your Assets in Your Family." We'll explain why a will is sometimes not enough to accomplish your goals; how a Heritage Trust can provide for your child and grandchildren; the value of prenuptial agreements; and how an IRA Stretchout Trust can allow you to provide for your children and for your children's children.

Join us for this FREE estate planning workshop on Tuesday, August 10 at 4:30 p.m., at the North Palm Beach, Florida Library, 303 Anchorage Drive. No reservations are required, but seating is limited and first-come, first-serve. For more information, call the library at 561-841-3383.