Legacy is one of the most difficult and important issues we all face because it has to do with our existence and answers these three important questions:
- Who am I?
- Why am I here?
- Have I made a difference?
I believe legacy begins in the heart and moves to the head. Planning should begin with vision, values, and your goals rather than the more traditional method that revolves around strategies, tactics, and tools that, when finished, often leaves loved ones confused and never knowing the story and meaning behind the legacy. In addition, I think it’s important for each of us to pass on our stories, heritage, and wisdom along with our wealth and treasures. How do you do this? Let me share a story with you.
My mother and step-father married when he was 74 and she was 58. My step-father wanted to ensure my mother would be taken care of when he passed away, so he told me he was putting everything in joint ownership with her. I suggested there may be a better way that would not only take care of my mother, but also his children (who were almost her age). How many times have you heard of children losing their inheritance after a second marriage? It can easily be avoided with proper planning.
We met with an estate planning attorney who created and funded a trust that would keep everything private. In addition, this planning included very important living benefits. You see, before my step-father died, he was diagnosed with lung cancer at age 86. At that same time, my mother was diagnosed with Dementia.
The planning we had done 15 years earlier now created a smooth and seamless process that allowed us to handle their affairs without going to court. This included:
- paying their bills;
- filing tax returns;
- accessing medical records and speaking doctors on their behalf;
- managing investments;
- selling their home and moving them to assisted living;
- making sure his estate not only took care of my mom during her lifetime, but passed free of probate to his two children at my mother’s death.
One of the biggest benefits is that we were able to focus on his quality of life and quality of care during that last year of his life. What I did not share is that as part of the financial and legal planning, I created a “legacy video” of my step-father for his children, grandchildren, and friends I presented this video to his family after his death. In this legacy video, he was able to share in the most beautiful way:
- stories about his life and where he grew up;
- what he wanted them to remember;
- the lessons he had learned;
- and the wisdom he had gained.
What if you could tell your story and share your vision, values, and lessons in a form that your loved ones would not only understand, but could cherish for many generations to come? You can do this with a letter, an audio, or a video. This can accompany the traditional planning and be presented at death, or better yet, while you’re alive!
I suggest doing this today because none of us know when our time will come. My birth father died accidentally at 32. Thank goodness my mother was the great archivist, so I have so much of his story preserved. For most, however, those stories and history are lost.
I want to leave you with this key idea: Legacy is more than money, it’s what people think,
feel and remember when they hear or say your name, because the life you lead is the legacy you leave!
I invite you to listen to my 25 minute Legacy Life Story audio presentation in full where I share several exercises to help you get clarity about your purpose and your legacy. Prefer to talk with me privately? Then schedule a complementary Discovery Coaching session by visiting my online calendar.
Katana Abbott, CFP® practitioner, is a Wealth Coach™, host of the Smart Women Talk Radio™, founder of the Smart Women Companies with over 1 million subscribers globally, inspirational speaker and author of several books. She began her financial planning career in 1987 and became a Certified Financial Planner™ practitioner. In 2003, Katana created Smart Women’s Coaching® to offer financial coaching and educational workshops for women in transition who are dealing with caregiving, death of a loved one, divorce, retirement or looking to create or grow a business. She founded Smart Women’s Empowerment in 2008 to bring free financial empowerment resources and programs to women around the world through her team of Contributing Experts. To learn more about Katana Abbott visit www.katanaabbott.com.
Of all the problems that arise when an elder needs personal assistance with daily matters, perhaps the least recognized are those that arise when a caregiver is compensated. In this article we will review the legal issues arising from compensation of private and family caregivers. These issues become more complex when the caregiver handles the elder’s finances and compensates herself.
Employer & Employee: Under the laws of most states when a person is paid for caregiver services, an employer employee relationship is created. Being an employer creates a host of legal duties and responsibilities. These are not avoided by claiming the caregiver is an “independent contractor.” The employer-employee relationship is defined and controlled by law.
How does the law determine whether the caregiver is an employee or an independent contractor? Perhaps the best guide is found in IRS Publication 15a. It lists some 20 factors to consider. In general in-home personal services are presumed to be supervised. Examples of unsupervised in-home services include the work of tradesmen such as a plumber or electrician.
Is the child the employer if she hires someone to take care of her parent? If a child acts for the by oral authority or a power of attorney and directly hires the person, then the elder is the employer. If the child chooses, hires and pays a person to perform caregiving service for a parent, then the child is the employer. If an agency is hired then the agency is the employer.
Duties of the Employer
Legal Employee: You must have proof the person you employ is legally able to work. You need to have a completed U.S. Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification in your file.
Employment Discrimination Laws: Employment Discrimination laws commonly ban discrimination based on race, age, sex and other factors. While the federal law only applies to employers over a minimum number of employees, you may be subject to state or city anti-discrimination laws.
Minimum Wage: Check and see what the minimum wage is in your area.
Employment Taxes: If you pay any one person more than $2,100 per year, you are responsible for FICA taxes and those are Social Security and Medicare taxes. The employer is also responsible for withholding the employee’s share of those taxes. Currently the total tax rate is 15.3%. If the employer does not withhold and pay the tax the IRS will impose penalties, interest and proceed to collect from the employer.
The employer is responsible for withholding income tax from the employee. The employer may
be relieved of this duty if the employee fills out a “W9″ form indicating the number of dependent deductions results in no tax due. You should check your state income tax requirements.
Federal and State Unemployment Compensation: An employer is also responsible for paying unemployment taxes. A terminated or laid off employee may be able to collect unemployment compensation on the employer’s account.
Failure to Pay Taxes: An employer who fails to pay required taxes may find that the penalties and interest equal the amount of taxes owed.
Workers Compensation: What if the caregiver injures her back or knee helping lift the elder? What if she falls down the stairs and fractures a bone? She can file for workers compensation to cover her medical expense and her wage loss. Your homeowners’ insurance will likely not cover employees. You should have workers compensation insurance.
While the list of employer requirements looks formidable it can be easily met if you consult an accountant use a payroll service.
Completing the duties of an employer is not the end of considerations when compensating caregivers.
Government Benefits: If the care recipient is a wartime veteran or a surviving spouse of an eligible vet then caregiver payments will be a factor in eligibility for VA “Aid and Attendance” pension benefits. The VA considers such payments to be “unreimbursed medical expense” where the need for services are caused by a medical condition, which must be supported by medical evidence.
Unlike the VA, many state long term care Medicaid programs presume that payments to caregivers were made to qualify for benefits. The Medicaid program only allows an applicant to have $2,000 of cash assets and has a five year “look back” or review of financial transactions made within time period. In many states the payments are deemed “divestment of assets” which means the payments were transfers of assets for less than fair market value, made for the purpose of qualifying for Medicaid benefits. This conclusion can be avoided with advance planning. For example the Michigan Medicaid program requires a certification of need for the services by a doctor and a personal service contract that conforms to the Medicaid agency’s requirements.
Child Caregiver Compensation Issues: Compensating a child brings additional legal issues. This compensation includes not only pay for service, but can include gifts of cash or property to the child.
It helps to understand the issues concerning child caregivers if one keeps foremost in mind the legal presumption that children should not be paid for helping parents. Under the general law
children are presumed to provide commercially valuable services for free, for “love and affection.” It does not matter how valuable the services are or how much a parent was paying for the same service before the child began to help.
Even if the child is not paid, any unaccounted loss or use of the parent’s money may be presumed to have been taken by the child. A parent may have agreed to the child’s taking of the money as a gift. However, if the parent suffers from cognitive decline or memory problems she may not remember making the gift and the child will face legal consequences.. There must be evidence that the parent understood what the payment was for and that the parent freely consented to the payment. Oral consent is not enough.
Child is a “Fiduciary”: In short a “fiduciary” is a person trusted to handle the affairs of another and in this article we address the caregiver’s handling the financial affairs of the elder. An elder may have very haphazard record keeping of finances. But, when a child is trusted to take care of all the parent’s business, the child is a “fiduciary.” The child is held to a high standard of conduct such that all actions may only benefit the parent. If the caregiver fails to meet the standard he or she will be responsible for any harm or loss the parent suffers. How does a person meet the high standard?
When the child handles the parent’s finances, complete and detailed records must be kept. For example many elders still like to have cash in the home to make payments. It saves them trips to the bank. If the caregiver is managing the finances the practice is risky unless the monthly cash withdrawals are modest. Otherwise the caregiver may have no record of where the money went and as a fiduciary be responsible for any loss. It may be presumed that the caregiver took the money.
Mom Leaves the Nursing Home: A hypothetical may provide a useful context to show how problems can develop. Suppose a parent is in a nursing home, is paying $8,000 a month and receives horrible care. Suppose a daughter steps up and provides 24 hour care for her mother in her home and Mom does much better. By any commercial measure the daughter is providing care worth more than $8,000 a month. After six months the daughter is exhausted and her mother, who has memory problems, agrees that daughter should have a nice vacation. Daughter arranges for mom’s care in the home and goes on a great Las Vegas vacation at a cost of $10,00 out of mom’s bank account. Mom does fine, daughter comes back and brother who never offers to help finds out about the expensive vacation. Mom does not remember agreeing or the payment. What could happen?
Elder Financial Abuse: The brother could file an elder abuse charge. If a child has control of the parent’s finances and takes payment out of the account, without proof of informed consent by the elder, then the child may be accused of theft or elder abuse. This can result in criminal charges.
Control of Parent: The brother may hire an attorney and file a guardianship petition for control of the parent and the parent’s money. This can be a whole article in itself, but in short it can be very expensive and the elder may end up footing the bill. If the court grants the petition it may not appoint either child as guardian. The court may take the elder under its continuing supervision with an attorney or professional guardian managing the parent’s affairs. That guardian may remove Mother from the home, place her in a nursing home and demand a full accounting from the daughter. That can start a series of court expensive actions.
Inheritance: What if the mother makes a Will favoring the daughter for providing care for her? Major court battles can erupt after a parent dies. If a child receives more than the others, through the Will or a joint bank account, expect the “knives to come out.” The siblings will hire attorneys and begin court action. Where a child has had significant time alone with the parent and control of the parent’s finances, the favored gift may be overturned by the court.
The Will: can be contested on grounds of “undue influence” which means the child used his or her position to make the parent decide to give the caregiver a larger share of the estate. The greater the need for a full-time caregiver the easier it is to prove undue influence or elder abuse. If the will contest is successful the caregiver will not get the gift and could end up with an even smaller share of the estate.
Even without charges of undue influence, lifetime payments or gifts may result in a probate court contest. A court may rule that the money is an advance on inheritance leaving the caregiver with a diminished share of the estate and no recognition for the years of service that the child may have rendered.
Recommendation: This article has not exhausted the “What if” scenarios that can occur in the caregiver – elder context.
When the caregiver – elder relationship is begun there must be an agreement on the terms and conditions of the caregiving relationship. What about compensation? Even if government benefits are not contemplated a legal contract is a good idea.
And finally, while the parent’s “business” is her own private affair, when a child is a caregiver a family meeting at the outset is simply wise.
Be prudent, be safe. Talk to an elder law attorney and make sure you “do it right.”
Jim Schuster has been licensed as an attorney since 1978 and has focused his practice in Elder Law since 1996. Jim has been a member of the State Bar Elder Law and Advocacy Section since 1996 and served on the Section Council in all capacities, finally being Chair of the Section in 2003 – 2004.
Jim has had articles on Elder Law published in the Michigan Bar Journal, Michigan Lawyers Weekly, the Detroit Legal News and Laches, the publication of the Oakland County Bar Association. He has also presented course material for the Institute for Continuing Legal Education. To learn more about Jim, visit www.jimschuster.com
A s a family estate planning attorney, clients often come to me with ideas about wills & trusts that they learned from friends, neighbors, and the internet. I’ve come to realize that a lot of people think they know about wills & trusts – but they don’t. Unfortunately, most people don’t ever find out they don’t know, because by the time it comes to light, it’s simply too late.
Here are some frequently misunderstood facts about wills & trusts:
1. Many people think that if they have a will, they will avoid probate…not true. A will is, essentially, your ticket into probate court.
2. Everything that your will says is completely public. Even worse, any property that passes through a will is public record. This can be bad for those left behind, because this tells the whole world things about your loved ones you may wish to keep private – for their sake.
3. What is probate? I tell my clients the TRUTH: “Probate is a lawsuit you file against yourself, with your own money, on behalf of your creditors.” What this means is your creditors, not your family, will get first dibs on your property.
4. A will only controls what you own in your sole name when you die. If you have assets that are jointly owned, or have beneficiary designations (IRA’s, 401Ks, bank accounts) the property passes according to different rules – and they may not be the rules you intended.
5. A will is subject to what we call “the State’s rulebook.” What this means to you is that, regardless of what the will says, probate is a court process that means your property passes according to the timeframe and the rules the State has…not your rules.
6. On the other hand, a trust, if written properly, is your rulebook. It gives your family your rules for life, disability, and death.
7. Unlike a will, a trust remains private.
8. Many people believe that a revocable living trust protects them – but this is a false belief. Revocable trusts provide NO asset protection to you during your life.
9. There is such a thing as an “irrevocable trust” that also allows you complete control over the assets inside of it! This version is special purpose trust.
10. The special purpose “irrevocable trust” DOES allow you to protect assets during your life – to avoid lawsuits, but even more importantly, to avoid nursing home poverty!
Nicole Wipp is the founder and lead attorney of the Family & Aging Law Center, a family estate planning and asset protection firm. Nicole is frequently sought out for her expertise, and she has appeared on radio shows nationwide and in such publications as Forbes, Inc., and the Huffington Post.
To learn more about Nicole, visit www.miestatelawyer.com.
Rosalyn Carter eloquently stated:
“There are only 4 types of people: those who have been caregivers, those who are caregivers, those who receive care, and those who will be caregivers in the future!
- How many children are really prepared for that phone call from one of their parents or loved ones that will turn their lives upside down?
- If you are the parent, are you prepared and have you talked with your children about your wishes if something should happen to you and you need assistance?
The secret is to be prepared so when a triggering event should happen, you will feel confident for making decisions and everyone involved will understand what’s expected.
As women, we are often expected to fill multiple roles: that of loving mother, career woman, supportive wife or partner and for many, a new role – that of a caregiver to our parents or loved ones. For the last 20 years, I have helped clients plan for their “golden years” and how they will address the issues of aging and remaining independent.
Here are the five steps that you can take now to get prepared:
Step 1 – Get Organized.
Before attempting to discuss financial, tax and estate planning issues with your loved ones, be sure to sit down with a financial advisor and get your own life plan in order.
Step 2 – Initiate “The Discovery Conversation” with Your Loved Ones. O
ne way to initiate this conversation with your loved ones is to ask them what they would do if something happened to you. Do they know who your advisors are, where your documents are, your doctors, etc? This may help lead the conversation into what your role would be for them. Are you needed as a care giver, a trustee, a personal representative and who else would be involved? Knowing this up front, will help you plan for your own future.
Step 3 – Start Planning as Early as Possible.
Don’t wait until the unexpected happens. It’s never too early to start planning for the unexpected. Meeting with an attorney, financial planner and insurance agent to create the proper planning may be all it takes to make sure your needs are met. Planning early when your have the most options makes sense – being proactive rather than reactive.
Step 4 – Consider Purchasing Long Term Care Insurance.
Start the conversation when your parents or loved ones are young and healthy and then suggest that they apply for long term care insurance as early as possible. We are living much longer and the need for healthcare and related services is exploding. In fact, seriously consider purchasing your own policy now while YOU are still healthy and the premiums are affordable!
Step 5 – Create a Team of Trusted Advisors.
This is not the time for-do-it-yourself-planning. Find a “key advisor” who is an eldercare expert and have this individual manage the team with you based on your loved ones goals, values and objectives. The final product should enable your loved ones to maintain their dignity, lifestyle and assets. It should also meet the needs of the caregiver. The end result; everyone involved should be able to sleep better at night knowing all concerns have been addressed and that a team and a plan is in place to meet the unexpected.
Katana Abbott is a certified financial planner who built a $100 million investment management and financial planning practice over 20 years and recently retired to follow her dream – The Designated Daughter Program™ and Smart Women’s Coaching™. Visit http://www.smartwomenscoaching.com/ to sign up for her monthly newsletter and be invited to events, workshops and tele-classes.
The State Bar of Michigan’s monthly journal has recently reviewed our book, Trial & Heirs: Famous Fortune Fights! . Here are some of the highlights: After reading Trial & Heirs, I am convinced that I need an estate plan.
It’s time to get serious about, you know, death. Danielle and Andrew Mayoras, Michigan estate-planning attorneys who are married to each other, have written a lighthearted book. But a reader can’t miss what they’re really talking about: the dreaded D-word. Isn’t the whole point of estate planning to plan for your own inevitable death? Luckily, the Mayorases probably agree with Bugs Bunny: “Don’t take life too seriously; no one gets out alive.” The whole point of estate planning is to control your property from the beyond. Or, if the decedent (legalese for dead person) is a bit more altruistic, to lessen the pain of death, taxes, and unnecessary disputes for survivors. And most disputes are avoidable.
In fact, “Avoid a family fight!,” a sidebar in every chapter, is one of the more important features of this book. We all know nice people from loving families who, after the death of a parent, suddenly became greeneyed monsters. These sidebars discuss, very briefly, how to slay the monster—or, better yet, avoid the monster’s appearance altogether. The authors offer tips, some obvious and others not, for avoiding disputes. In one sidebar, for example, the tip is to avoid fighting because of the legal fees the estate will incur (and this from two lawyers!). The authors give two examples: the Johnson & Johnson legacy, which took 210 lawyers, 22 law firms, and $24 million in fees (the wife, a former chambermaid, took $300 million); and the Leona Helmsley estate, which was settled between her grandchildren and her dog (Trouble, the dog, took $2 million).
Mere mortals like you and me needn’t worry about estates of that size, but everyone should be concerned about the emotional costs of family fights. And family fights result from poor estate planning. Where there is uncertainty in a will or estate plan, there will be unrest. Where there are gaps, there will be greed. And where there are mistakes, there will be fights. * * * If you are an estate-planning lawyer, you shouldn’t read this book. Do read, however, the “official disclaimer” on the first page; it’s clever. But consider buying the book in bulk as gifts for your clients or as a marketing tool. You’ll have to accept the overuse of exclamation points, the overdone design, and the celebrity caricatures that are not all recognizable. But remember that an informed client is a better client, and a client who understands some of your language is one who is easier to talk to. I bet you can get a quantity discount from the publisher. What do they mean too many exclamation points?!?! How dare they?!!!! We would never! ever! use . . . well, you get the point.
Seriously, if you’d like to read the whole review, here it is . By Andrew W. Mayoras and Danielle B. Mayoras, co-authors of Trial & Heirs: Famous Fortune Fights! and husband-and-wife legacy expert attorneys. As educators across the United States through speaking engagements, print, broadcast, and social media, Danielle and Andrew consistently draw rave reviews and are in high demand. Email them at firstname.lastname@example.org .
Read more here:
Michigan Bar Journal Review of Trial & Heirs