Wednesday, June 21, 2017

Reverse Mortgages for Now-and-Later Estate and Retirement Planning

Many times, lawyers are asked by clients about financial decisions before they are made, and sometimes we’re told about them after they’ve already occurred.  One example of such a decision concerns reverse mortgages.  Reverse mortgages are home loans also known as home equity conversion mortgages, or HECMs (pronounced Heck-ums). HECMs, as explains, allow seniors aged 62 and older to access some of the equity in their homes without having to move.  At Geyer Law, clients will often discuss the wisdom of using a reverse mortgage as part of their retirement planning.  Other times, new clients will inform us that they’ve already entered into a HECM arrangement.

“The HECM is a safe plan that can give older Americans greater financial security,” says Ben Carson, Secretary of the U.S. Department of Housing and Urban Development. In answer to the consumer question “Will we have an estate that we can leave to heirs?”, the HUD website provides the following answer: “When the home is sold or no longer used as a primary residence, the cash, interest, and other HECM finance charges must be repaid.  All proceeds beyond the amount owed belong to your spouse or estate.  This means any remaining equity can be transferred to heirs.  No debt is passed along to the estate of heirs.”

At Geyer Law, we find it important to explain to those contemplating a reverse mortgage that of course a HECM transaction lowers the value of their estate, because they themselves are using part of their assets. The same would be true were they to tap any of their assets other than home equity.  Anything you cash in and spend reduces your estate.

Reverse mortgages provide financial solutions for homeowners, including:
  • paying off debt
  • settling unexpected expenses
  • funding long term care insurance
  • funding life insurance premiums
  • improving current lifestyle
  • helping adult children and grandchildren with current needs
In the course of discussing all these different needs and wants with clients who are thinking about entering into a HECM but have not yet done so, we encourage them to, wherever possible, involve the younger family members (their heirs) in the discussion. Why? A reverse mortgage doesn’t need to be repaid until the last surviving borrower no longer lives in the home, or the home is sold. However, both parents and adult children should consider the ramifications:
  1. If the borrower doesn’t meet the tax and insurance payments or doesn’t maintain the condition of the home, the loan might need to be repaid earlier, which might impact the heirs.
  2. Once the owner has died, the heirs have six months to pay off the loan or refinance the home with a conventional mortgage. (If the mortgage balance is less than the value of the home, the heirs will be able to keep that balance.)
A HECM represents one of many tools that can help older Americans plan for their own – and their heirs’ greater financial security,” but, as with all tools, a reverse mortgage needs to be used in the right way and for the right situation.

 by Rebecca W. Geyer

Wednesday, June 14, 2017

Awkward Conversations Can Be a Great Gift of Love

Conversations with people you love about money concerns can get awkward and tense pretty fast, writes Tobie Stanger in Consumer Reports, offering the following example:

You and your two siblings inherited the lake house where your family spent many cherished summers. But now, arranging who gets July 4th weekend – and whether you, your banker sister, and your struggling artist brother should all pay the same amount for the new roof – makes you behave like nursery schoolers.
Stanger lists 15 of the toughest money talks in descending order, with the toughest being about:
  • a spouse who isn’t bringing in enough income
  • a parent giving more financial help to one sibling over another
  • one sibling asking another for financial help
  • spouses disagreeing over big purchases
Of those who’ve had these conversations, Consumer Reports reveals, 29% were uncomfortable telling their parents it’s time for someone to take over the managing of their finances. A 2014 Wells Fargo survey revealed similar results: Americans find discussing personal finances the most difficult to do, with death a close second in terms of awkward topics.

At Geyer Law, we understand the challenges, fears, and family dynamics that often come into play with legal issues. After all, estate planning involves broaching three on Stanger’s list of sensitive topics: finances, death, and family affairs. As advisors, we take an empathetic and compassionate approach, assisting clients, yet still allowing them to address in their own way their particular goals and concerns.

So that the cost of legal services does not serve as a deterrent to having those vital estate planning conversations, the attorneys at Rebecca W. Geyer & Associates, PC make every effort to offer legal guidance at a fixed fee, even, under certain circumstances, entering into payment plan arrangements. That way, concerns may be addressed without the ongoing stress of an increasing legal bill.

Yes, conversations with people you love about death, long term care, elder law and inheritance can certainly get awkward. At the same time, those very conversations represent a gift of great love for both older and younger family generations.
- by Ronnie of the Rebecca W. Geyer blog team

Wednesday, June 7, 2017

Individualizing Estate Planning Using Life Insurance

Life insurance has many uses in an estate plan, observes investopedia, listing several of those uses:
  • To provide liquidity in an estate (to pay expenses, provide access to cash for heirs while the estate is being settled)
  • To repay debts
  • To replace income that the deceased was providing to the household
  • To accumulate wealth
Married couples and business partners can make use of special types of insurance policies:

First-to-die (also called joint whole life insurance)
When one of the couple (or of the group) dies, benefits are paid out to the surviving 
insured. Typically this arrangement is used to insure spouses or a parent and child.
Survivorship life (also called second-to-die)
This policy pays out upon the last death of the couple or group instead of the first one. This type of insurance is also typically used for spouses, in parent-child or business  
partner situations.

There are some circumstances where it makes sense to continue to carry life insurance past retirement, investopedia goes on to explain:
  • You don’t have enough of a nest egg to provide for a surviving spouse
  • Disabled adult children or other relatives rely on you for lifelong care
  • You’re wealthy and need a tax advantaged savings vehicle (you’ve maxed out your savings in other tax-advantaged accounts)
Yet, failure to consider the estate and gift tax consequences of life insurance is a common mistake, Forbes points out. The decision as to how the policy should be owned and controlled can be complex and is highly individualized, the authors explain, with those decisions dependent on individual circumstances: family dynamics, net worth, financial position, personal preferences and even philosophy about transferring assets to future generations.

That part about estate planning being highly individualized is very much in tune with our approach at the law firm of Rebecca W. Geyer & Associates. Our goal? To be a resource for clients, combining clear and concise legal recommendations with responsiveness and compassion, creating solutions to best meet each client’s needs.

- by Ronnie of the Rebecca W. Geyer blog team

Wednesday, May 31, 2017

Graduation - the Time to Put Documents in Place

The time is fast approaching when many young adults leave the nest and head for college. But, just as the famous American Express commercial cautions consumers not to “leave home without it”, referring to a credit card, at Geyer Law we caution students not to leave home
without first putting two important estate planning documents in place:

1. Durable power of attorney
This document relates to finances and property, and empowers the “agent” to access the child’s bank accounts and financial records, pay rent, utilities, and credit card bills, and manage loans and investments. If a child were to become even temporarily disabled, without this document, parents might need court approval to act on the child’s behalf.

2. Healthcare proxy
The formal name for this document is Durable Power of Attorney for Healthcare. The language should stipulate that HIPAA-protected private medical information can be released to the “agent”.  Without this document, parents don’t have the authority to make health care decisions for the young adult; doctors might even refuse to discuss their son or daughter’s condition with parents due to privacy laws.

“Accidents happen, and it’s important to realize that when they do, having the proper paperwork in place can greatly improve a parents or loved one’s ability to help,” says the Virtual Attorney, reminding readers that, upon reaching the age of 18, an individual is an adult in the eyes of the law, and a parent’s rights in controlling some affairs of that child become significantly diminished.

While these terrible situations are difficult for any parent to contemplate, it’s vital to be prepared. In the event a child is not only hospitalized, but unable to determine his own course of treatment, medical professionals’ hands will be tied without the intervention of the court. Meanwhile, the financial repercussions of failing to keep the bills paid can result in bad credit and even collections.

At Geyer Law, our estate planning attorneys tell parents: Graduation is a time to celebrate, to congratulate your son or daughter – and yourselves! Graduation is also a time to put the proper estate planning documents in place!
- by Rebecca W. Geyer

Wednesday, May 24, 2017

Keeping Farmland in the Family

Over the next decade, a quarter of our nation’s agricultural land is expected to change hands, according to the USDA Natural Resources Conservation Service. The NRCS identifies four key goals for a strong estate plan for farm owners:
  • Transfer ownership and management of the agricultural operation, land, and other assets to a new operator
  • Avoid unnecessary transfer taxes, such as income, gift, and estate taxes
  • Provide for financial security and peace of mind for all generations
  • Foster the next generation’s management capacity
Further complicating the task of assisting farm owners with their estate planning, we’ve found at Geyer Law, is knowing that complete estate planning for farmland owners must involve the needs of all family members, even those who may not be actively involved in farming.
The Farm Journal Legacy Project outlines four possible strategies farm owners can use in estate planning:

First Right of Refusal: 
A landowner can give first right of refusal to a family member, friend, neighbor, or tenant.  The farm cannot be sold without first being offered to the holder of the first right on the outlined terms. That right to purchase can be effective immediately or set up to be in effect upon the death of the owner. A will or trust might leave the farm equally to all the children, requiring the non-farmer children to offer their interests for sale to the farming children using the appraised value as of the date of death.

Dynasty Trusts:
A dynasty trust gives the farm income to your heirs for their lifetime and can help keep the farm intact for distribution to your grandchildren without being included in your children’s taxable estates.

Limited Liability Company (LLC):
Parents and children contribute land to an LLC. Each receives proportionate ownership shares. An LLC may restrict the right of non-family members to acquire interests in the farm ground. An LLC may avoid probate administration upon death if used in conjunction with a revocable trust agreement.

Buy-Sell Agreements:
A buy-sell agreement is used when unrelated parties are in business together or when brothers or cousins farm together and want to set forth exactly how the business will transfer upon the death of one.

Often farm owners are so busy they don’t have time to address all these legal issues. At Geyer Law, we advise clients on proper organizational structure for preserving the farm interests or preparing to transfer the farmland with minimal disruption to operations. Such plans may also result in the reduction or elimination of costly taxes.

- by Rebecca W. Geyer

Wednesday, May 17, 2017

Do Unequal Inheritances Mean There was Undue Influence?

Whenever there is a very uneven distribution of assets among heirs, state law carries a presumption of the exercise of undue influence, a 2014 article in the Indiana Lawyer points out. Whenever it appears that a dispute among rightful heirs might result in litigation, attorneys have a duty to ensure that their client hasn’t exercised undue influence over the estate owner. In other words, as an estate planning attorney in Indiana, if my clients make changes in their wills or estate plans that result in favoring one of their heirs over others, it’s up to me to determine they are competent and capable of handling their own affairs at the time they are making those changes.

Here is the case described in the Indiana Lawyer article:
In her new estate plan, Phyllis Hayes agreed to give her son Kenneth the right to purchase the family’s 200-acre farm for $500,000. When Kenneth was about to exercise the option agreement his mother had signed, sisters Jo Ann and Diane objected, since the value of the farmland had more than tripled since the contract was signed. The case went to court, which ruled in favor of Kenneth; the sisters appealed, claiming that undue influence over their mother had resulted in this “unfair” distribution of their mother’s assets.
  • The Indiana Court of Appeals ruled in favor of Kenneth’s purchasing the farmland at the price agreed upon in the original contract. The reasoning:
  • The agreement had been based on fair-market value per acre of farmland at the time the contract was drawn.
  • The mother explained that her son had helped her out during hard times, and had helped run the farm after his father did.
  • A doctor’s statement said Phyllis was capable of making decisions regarding her estate.
  • The attorney had videotaped Phyllis talking about why she was changing her estate plan.
As a colleague of mine in the Indiana Section of the National Academy of Elder Law Attorneys, Claire Lewis expressed in the Indiana Lawyer article, “There are legitimate reasons….. why an older adult might choose to amend a will.  Perhaps one sibling has sacrificed to provide care, for example, and the parents decide a greater share of the estate is warranted.”

Still, whenever a client of ours treats one heir more or less favorably than others, it’s incumbent on us, the attorneys at Geyer Law, to understand why – and to be able, if the plan is challenged later on, to be certain of the grantor’s competence.

- by Rebecca W. Geyer

Wednesday, May 10, 2017

Don't Wait for a Triggering Event - Do You Know Your Own Personal Property?

Insurance company claims adjusters refer to them as “triggering events”, which might include:
break-ins, tornados, hailstorms, fires or even divorces
(disputed items sometimes “disappear” in the process). In any event, it’s up to the insured to prove what items were lost. That means producing available receipts, photographs, and other evidence.  “It doesn’t matter where you live…the insurance claim process is the same, United Policyholders points out. “When it comes to collecting on your insurance policy to replace the contents of your home, it’s all about documentation, organization and negotiation.”

Sometimes, when inventory professional Greg Holton gets a call, it isn’t from an insured or an insurance agent. Instead, it’s an executor or trustee calling. One of the executor’s most important – and often most onerous – tasks is listing the estate’s assets for the court and for the heirs. To complete that inventory list, the executor must gather:
  • proof of ownership, including vehicle titles, property deeds, and financial statements
  • appraisals for heirlooms, jewelry, artwork, antiques, and vehicles
Once the executor has completed the inventory, it is filed with the court and copies are ‘served” to all the heirs at their proper addresses.

At Geyer Law, we counsel and represent executors, personal representatives, trustees and beneficiaries on the proper settlement of estates and administration of trusts to ensure prompt resolution and minimize stress at an already difficult time. Services we regularly provide include:
  • commencing probate proceedings
  • advising regarding valuation and taxation
  • paying of claims
  • funding trusts
  • preparing tax returns
  • closing the proceedings
 “People always seem to have their eye on their next purchase,” Holton observed in an interview.
“We’re not about keeping track of those purchases, at least not until a triggering event happens. Then you realize you don’t even know what you own.”  T

You need to think of both business and personal assets the same way you think of your money, Holton asserts. We turn to professional advisors such as accountants and financial planners to manage and “inventory” our money; we need to do the same with our physical assets, hiring a professional inventory specialist to create and then, as we add assets, updating our inventory list.

An executor is most often a sibling or an adult child. The duties and responsibilities he or she is required to complete are often overwhelming. While experiencing one of the most difficult times of their lives, executors are burdened with completing the emotional task of creating the estate inventory. Taking inventory of your assets is a must-do, not a mere “should do”. Don’t wait for the triggering event, Holton urges.

- by Ronnie of the Rebecca W. Geyer blog team