Comprehensive Planning. Lifelong Solutions.

Stop Procrastinating. It’s Time To Make A Plan!

By Letha Sgritta McDowell, CELA

This month Americans lost the Queen of Soul and, while it is a tragedy within the music world, the passing of Aretha Franklin highlights a legal tragedy as well.  Aretha Franklin died with no estate plan.  That means she had no last will and testament, no revocable trust, no irrevocable her trust, no power of attorney, nothing!  For estate planning attorneys it seems ludicrous that an accomplished woman with a net worth estimated to be in excess of eighty million dollars would have no estate plan.  Such a plan would have minimized the estate tax her estate will pay (which will ultimately born by her heirs), nor has she planned to protect her heirs by placing their assets in further trust, nor is there a clear statement of her intent as to who shall inherit upon her death and who shall be responsible for managing her estate.  Already her four sons and a niece have come forward as interested parties in Ms. Franklin’s estate.  Sadly, Ms. Franklin is not the only person of means to die without an estate plan. Paul Walker, Heath Ledger, Prince, Bob Marley, and Howard Hughes are just a few of note.

Estate planning is not something that is only needed by extremely affluent individuals.  Instead estate planning is needed for almost every adult.  Creating an estate plan allows a competent adult to clearly specify who will make medical and financial decisions upon their incapacity and how assets will pass at their death.  Not having some sort of estate plan can cost heirs in the way of additional legal and court fees, additional taxes, and potentially losses due to a failure to see in the future.  If a person dies without some sort of plan, each state has a set of rules that dictate where assets will pass after all final bills and expenses are paid.  In many cases, the state default is not how most want their assets to be left, and even if the state default is the individual’s intent, the additional fees for passing assets without a will or trust are not a part of the intent.

In addition to the consideration of who will receive certain assets at death, of equal importance is the manner in which the beneficiary will receive the assets.  Are the assets to pass outright, in which case, they may be subject to current or future creditor claims or claims of a  beneficiary’s future ex-spouse.  Perhaps there is a thought that a surviving spouse can and should re-marry.  In many cases, the remarriage of a spouse would be celebrated, but the first spouse to die may wish to preserve his or her assets (or share of their jointly-held assets) for his or her heirs. With a little planning, these goals may be easily accomplished and the goal of preserving and protecting future generations is not one which is isolated to high net worth families.

There are other things to consider such as who will have custody of minor children should both parents die.  And, while the federal estate tax exemption has increased to $11 million per person (neither Virginia nor North Carolina have a state estate tax) all income earners are required to pay income tax.  So, while estate taxes may not be of high importance to many, income tax is still an issue for all, and, therefore, an estate plan should consider tax efficient transfers of wealth to different generations.

Humans have a 100% mortality rate which means we will all die at some point yet, 70% of Americans between the ages of 45 and 54 do not have a will and more than half of Americans over the age of 55 do not have a will.  The reasons for delaying vary from an irrational fear that executing a will or trust will hasten a person’s death or fear of the process.

A good estate planning attorney will work with you to solidify your goals and objectives, discuss potential issues which you may not have yet considered, and then draft documents which achieve your goals.  The process for estate planning does not have to be difficult and the need for planning does not require great wealth, simply a desire to preserve and protect loved ones.

Kit KatAsk Kit Kat – Burros Booming

Hook Law Center: Kit Kat, what can you tell us about burros in Arizona and how they are actually thriving there?

Kit Kat: Well, yes, it does appear that burros or donkeys are doing quite well in Arizona. Their numbers are increasing to the extent that there are nearly 15,000 burros living in areas that the Bureau of Land Management (BLM) controls in that state. So, with some help from the Humane Society of the United States (HSUS), an experimental program to limit pregnancies is underway. It is called the Platero Project. The four-year project is funded by an anonymous donor who just loves burros.

The project will begin by working with a small sample and injecting females with the  contraceptive vaccine PZP. Burros are bit late to this method, which has been successful with deer and wild horses. What makes the attempt so tricky with burros is that they don’t have a defined breeding season, so it has been difficult to pinpoint their fertility periods. According to Stephanie Boyles Griffin of HSUS, “The question isn’t whether PZP works. The question is how to apply it to a herd of 1,000 female burros on 900,000 acres of land—and it’s best answered by starting on a smaller scale.” Burros are extremely intelligent, and they have learned to thrive in harsh, dry conditions by using their hooves to find sources of underground water.

Heretofore, attempts at birth control for burros has been limited to separating female burros from their herds, and putting them in holding facilities until they can be adopted. But that method is slow and cannot handle much volume. Currently, there are nearly 1,000 burros in BLM corrals. A new approach is needed. Stay tuned to see how the Platero Project progresses. We’re hoping it achieves its goals. (Emily Smith, “A better way for burros,” All Animals, July/August 2018, p.8)

Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Friday, August 24th, 2018. Filed under Senior Law News.

To Shred or Not To Shred?

By Sarah Schmidt, Esq.

Hook Law Center will be sponsoring our “Shred With A Purpose” event to support the Alzheimer’s Association THIS Saturday, August 25, 2018, from 9 AM to 12 PM. Bring your documents to our Virginia Beach office at 295 Bendix Rd. for free on-site data destruction provided by Stealth Shredding. We will be accepting donations for the Alzheimer’s Association at this event. Cant make it, but still want to donate? Click here to donate online.

With that in mind, how long should you keep those important documents?

Federal Taxes

Typically, you should keep your federal income tax returns and supporting documentation for at least seven years. The Internal Revenue Service provides that “[t]he length of time you should keep a document depends on the action, expense, or event the document records. Generally, you must keep your records that support an item of income or deductions on a tax return until the period of limitations for that return runs out. The period of limitations is the period of time in which you can amend your tax return to claim a credit or refund, or that the IRS can assess additional tax.” The IRS has several different periods of limitation. Most significantly, if you have ever failed to file a tax return or have ever filed a fraudulent return, you should keep records indefinitely.

However, the IRS has assigned other scenarios (such as failure to report income or failure to claim a credit or refund) varying periods of limitation, ranging from two to seven years. To err on the side of caution, best practice is to keep your records for the longest period of limitation recommended by the IRS. Therefore, consider keeping your federal income tax returns and supporting records for at least seven years from either the due date of the return or the date the return was filed, whichever is later.

Virginia Taxes

You should keep your Virginia tax returns and supporting documentation for the same length of time, at least seven years. The Virginia Department of Taxation recommends keeping your records for three years from either the due date of the return or the date the return was filed (whichever is later) unless the Internal Revenue Service suggests otherwise. Therefore, keep all of your tax records for the same length of time, seven years.

Contracts

How long you should keep a contract and supporting documentation varies. At a minimum, you should keep a contract for the length of time that you (or the other party) could file a lawsuit.  This length of time is determined by the terms of your contract and the laws in your state. While the terms of your contract may control this length of time, each state law provides a “statute of limitations” as well. A statute of limitations is a law that bars a party from filing a claim after a specified period of time. Because a court can find that an express clause in your contract is unreasonable, you should keep your records for the length of the statute of limitations in your state. Once the period of time specified in the statute of limitations has passed, you (and the other party) are barred from filing a claim.

In Virginia, the statute of limitations for a contract also depends on the type of contract. In general, the statute of limitations for a written contract is five years and for an oral contract, it is three years. See Va. Code § 8.01-246 for exceptions.

Credit Card and Bank Statements

According to the FDIC Consumer News keep your bank and credit card statements for a period of one year; unless they have any tax significance (in which case, keep them for seven years).

Investment Accounts

Keep investment account statements for the life of your investment, plus seven years for tax purposes. This should provide you with basic guidelines from various sources to help you trim your file cabinet. However, opinions vary on the exact dates for retaining records and when in doubt, always err on the side of caution. Moreover, there are many important documents not mentioned above that should be kept indefinitely. If you have any questions or concerns, please feel free to call the Hook Law Center, P.C. and we will be happy to assist you.

Kit KatAsk Kit KatDogs Respond to Crying

Hook Law Center: Kit Kat, what can you tell us about dogs responding to their owners when they cry?

Kit Kat: Well, this is very interesting and just goes to show how smart and intuitive dogs and other animals are. A new study published  July 24, 2018 in the journal Learning & Behavior suggests that dogs picked up on crying cues by their owners. In the study, dog owners were behind doors with windows, with the door loosely ajar. When their owners made distressed sounds like “help” in addition to a crying sound, the dogs responded significantly more quickly than when their owners sang “Twinkle Twinkle Little Star.” When the distressed sounds were made, the dogs responded on average within 23.43 seconds. When the humming of a children’s song was heard, they responded in 95.89 seconds on average. “It’s really cool for us to know that dogs are so sensitive to human emotional states,” said Emily Sanford, a graduate student in psychological and brain sciences at Johns Hopkins University, who was a co-author of the study. There weren’t any measurable differences among different breeds or dogs of different ages in regard to how they responded.

The study was small with only 34 dogs participating. Still, the scientists believe it is a useful first step in measuring dogs’ emotional states. They also evaluated the dogs’ heart rate and behavior during the experiment. In summary, they found that dogs who were less stressed, responded to their owners’ sign of distress more quickly than those dogs who tended to be stressed themselves. Sanford and her other researchers concluded from this, “ The idea is that if you can perceive someone else being in distress but it doesn’t overwhelmingly stress you personally, then you’re more likely to be able to provide help.”

Isn’t it wonderful to know our canine friends are so attuned to how their owners are doing. Anecdotal reports have shown the caring and concern of dogs, but this study and others prove it really is true. (https://www.cnn.com/2018/07/24/health/dogs-human-crying-empathy-study/index.html)

Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Monday, August 20th, 2018. Filed under Senior Law News.

Should I Transfer My House To My Kids?

By Emily Martin, Esq.

One of the most common questions we get from clients is whether they should transfer their house to their children. The answer to this question is almost always absolutely not! Many people think that transferring their house to someone else will allow them to protect their home from having to be sold in the event that they need to go on Medicaid or receive VA benefits. They believe that getting the house out of their own name will help them qualify for these benefits more easily, and that such a tactic is easier and less expensive than executing and funding estate planning documents. However, there are several reasons why this is never a good idea.

Your Children May Have to Pay Crippling Amounts of Capital Gains Tax.

If you are elderly, it is very likely that you purchased your home thirty, forty, or even fifty years ago. The price you paid for your house at that time was probably much less than its current value. For example, say that you paid $35,000 for your house, and it is now worth $250,000. If you transfer the house to your daughter and she later wants to sell the house, she would have to pay capital gains tax on the difference between the price you paid for the house and the value it had at the time she received it – $215,000. You can see how much this can add up!

In the alternative, if you transfer the house through a will or a trust, your beneficiaries will receive what is called a step-up in basis equal to the value of the house at the time they inherited it rather than the value of the house at the time you purchased it.

 You Could Be Prevented or Disqualified From Receiving Medicaid Benefits.

As you may know, there is a five-year “look-back” period for Medicaid eligibility purposes. This means that, when your Medicaid application is being reviewed, any gifts or “uncompensated transfers” that you have made in the past five years will result in a “penalty period.” In 2018, every $6,422.00 worth of uncompensated transfers that you made in the past five years will result in your Medicaid benefits being withheld for one month. Medicaid will not penalize applicants for transfers that occurred more than five years ago.

If you transfer your home to your children and then require long-term care within five years of the transfer, Medicaid will consider this to be an uncompensated transfer. This type of transfer has the potential to delay your Medicaid benefits and possibly even prevent you from ever qualify for Medicaid.

Debt, Disability, Divorce, or Death

There are a few other reasons why the idea of transferring ownership of a parent’s house to their children is never a good idea. If you transfer your home to your child and they have significant debts, then creditors could inquire as to the assets in their name. If your house is in their name, then creditors could make claims against that property in order to recover the debt owed to them. This could result in your child having to sell your house to satisfy his or her creditors.

Additionally, if your child becomes disabled and requires Medicaid or government benefits of her own, owning your house could prevent her from qualifying for these benefits in the same way that it might prevent you from qualifying for benefits if you need long-term care.

Another potential issue is divorce. If you transfer your home to your child and then they go through a divorce, your house could be considered an asset to be divided or dealt with as part of the property agreement with their former spouse.

Finally, if your child passes away before you do and you have transferred your home to him, then your house could be considered part of his estate and distributed to his heirs instead of yours.

Obviously, none of these outcomes are ideal. If you own a home and you are looking to qualify for Medicaid, VA benefits, or other long-term care benefits, an experienced elder law attorney can work with you to implement strategies that will preserve your assets while allowing you to accomplish your goals and receive the benefits you need.

Kit KatAsk Kit Kat – Light Bulbs & Wildlife

Hook Law Center: Kit Kat, what is the connection between the type of light bulbs one uses and the impact on wildlife?

Kit Kat: Well, I must admit when I saw the title of this article I was intrigued. I just never had thought about any connection between the two things, but apparently there is one. The increase in the use of outdoor lighting is having, in some cases, a negative effect on wildlife. Worldwide, there has been a 2.2% increase annually of outdoor areas that are artificially lit. Inexpensive LED lighting is partially responsible. According to Paul Bogard, author of The End of Night, “Every creature on this planet has evolved in bright days and dark nights. None has had the evolutionary time to adapt to the blitzkrieg of artificial light.” Some of the harmful side effects of artificial light are: 1) baby turtles heading toward lit-up hotels instead of seeking the sea guided by moonlight, 2) migrating birds disoriented by spotlights, 3) salamanders sleeping later, 4) moths stopping mating, 5) delayed maturation of soybean plants near sodium lighting, and  many more  according to experts.

What can be done to reduce this stress on ecosystems? Well, awareness is the first step. If one didn’t know there was a problem, then there could never be a solution. So, this is what the experts tells us: 1) turn off outdoor lighting when it is not being used, 2) install motion-detector lighting which only comes on when an object is approaching, 3) generally, LED lights are better than other types, but not in all cases. It depends on what creatures are native to an area, and how they interact with the particular type of lighting, and 4) close your curtains or blinds at night to eliminate glare which may be affecting the animal world. There are a surprising amount of them who are nocturnal—30% of vertebrates and 60% of invertebrates. They thrive in the dark, so let’s help keep it that way for them as much as we can. (Nancy Lawson, “Going to the dark side,” All Animals, May/June 2018, p. 38-39)

Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Tuesday, August 14th, 2018. Filed under Senior Law News.

Will You Outlive Your Nest Egg?

By Jennifer Rossettini, CFP®

As Generation X approaches its retirement years and the Baby Boomer generation is in the midst of theirs, this question should be on the minds of millions of Americans. The answer to the question is not quite as simple as some of the “rules of thumb” out there.  For instance, the “10% Rule” which suggests saving 10% of your income annually may not work for someone who waits until age 40 to start saving. Similarly the “4% rule” which theorizes that you can withdraw up to 4% of your investment portfolio safely, is an old rule based on assumptions that no longer hold true, such as bonds paying higher rates.  Finally, the myth that seniors should not invest in stocks could prove fallible if the return they do have in the portfolio does not keep pace with the rate of inflation.

More important than why the above mentioned rules of thumb may not work, is that every situation is unique. What works for your neighbor may not work for you and vice versa. A good financial planner will not rely on rules of thumb alone, but will take your individual goals, resources and risk tolerance into account.

If you are approaching retirement, chances are that you have a pretty good idea of what your spending needs are, and you may have even accumulated some savings. Your financial planner should take a snapshot of where you are today, compare that snapshot to your goals for the future, determine whether those goals can be accomplished on your current path, and if not, work with you to straighten out the bumps in the path.  If you are in the midst of retirement, it is just as important to evaluate your current path and determine whether the path leads straight to a successful retirement or veers off in an unpleasant direction.

The current snapshot should include an analysis of your income sources, including whether those sources increase with inflation and provide a survivor benefit for your spouse if you are married; your annual spending and savings; the amount and allocation (stocks vs. bonds) of your investment portfolio; and your risk tolerance (how you feel about the prospect of your portfolio’s value dropping). Based on how your investment portfolio is allocated, an average rate of return can be estimated. Taking into consideration that rate of return, how much you need to withdraw from your portfolio to supplement your income, and your life expectancy, your financial advisor can calculate whether you will run out of money before the end of your life.

This “straight-line” approach has its limits, however. It assumes that your portfolio will achieve that same rate of return year after year. It assumes that inflation will remain the same year after year. We all know from experience that the financial markets do not behave that way.  Just as important as how much the value of your portfolio declines or appreciates is the timing of such decline or appreciation.  Many financial planners use a Monte Carlo analysis to more accurately predict the answer to the question: “Will I Outlive My Nest Egg?”

What is Monte Carlo analysis? It is a computer simulation that takes into consideration the allocation of your portfolio and the rate of withdrawal from your portfolio and runs them through a random number of trials (usually 1,000 or more).  The simulation is designed to take all of the possible ups and downs in the market and the timing of the ups and downs to come up with a “probability of success.” The probability of success is based on the number of trials during which your portfolio runs out of money before the end of your life expectancy. For example, if your portfolio ran out of money in 200 of 1000 trials, you have an 80% probability of success.

If your probability of success is below the 70% to 90% range, you and your advisor have some work to do. There are a number of variables that could change the result.  You may achieve your goals with a little less risk in your portfolio (or a little more risk); by spending less or choosing to take Social Security at a later age; by delaying retirement or saving more if you are still in your earning years; and by doing any combination of these things.

The Hook Law Center has two CERTIFIED FINANCIAL PLANNERS™ on hand and the resources available to help you develop a financial plan that is customized to your needs and helps you determine whether you are on the path to success or whether some adjustments need to be made.

Kit KatAsk Kit Kat – Wildlife Land Trusts

Hook Law Center: Kit Kat, what can you tell us about the Humane Society of the United States’ (HSUS) wildlife land trust?

Kit Kat: Well, this is interesting. HSUS is an affiliate of the Humane Society Wildlife Land Trust which has 116 sanctuaries in the United States and Canada. The land mass covered is more than 20,000 acres. The best part is that all that land is safe from hunters. Recently, a wildlife researcher and rehabilitator, Alice Henderson, and Jason Patnode, a photographer and filmmaker, visited seven of the land trusts. The following is what they observed in 3 of the land trusts.

Allranch Wildlife Sanctuary, New Mexico, 1,280 acres – What is unique here are the bats. They spotted a greater bonneted bat, which has a 2-foot wingspan. This particular bat roosts in cliffs and has a call which is audible to humans. Other interesting creatures were horned lizards, and a bird (the loggerhead shrike) which is in decline due to habitat loss.

Demetriades Wildlife Sanctuary, Montana, 240 acres – This is one of the smaller sanctuaries, but it was teeming with life. They observed pronghorns (a deerlike animal with black horns), sandhill cranes, eagles, trumpeter swans, badgers, and moose. They also conducted a Bortle dark-sky test, which is a measure of darkness, or on the flip side, of light pollution. It had a very low score, which is a sign that darkness is being preserved. Darkness is helpful to migratory birds, because it helps them see lots of stars, which they use for navigation.

Meadowcreek Wildlife Sanctuary, Arkansas, 1,219 acres – Once again, bats were observed, but different species than in NM. Here is the home of the gray and Indiana bats, which are endangered. Also seen were the following: deer, coyote, river otters, whip-poor-wills, Eastern screech owls, and barred owls. What a wonderful mix of species!

We are indeed fortunate that HSUS and its affiliate, the HS Wildlife Land Trust, protect these wonderful species for all of us to enjoy! (“Trust in the wild,” All Animals, May/June 2018, p.28-29)

Upcoming Seminars

Distribution of This Newsletter

Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.

Posted on Friday, August 3rd, 2018. Filed under Senior Law News.
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