April 30, 2010_#49
Loans and Sales To Children
Parents are frequently approached by children who desire loans for various purposes. Parents may make a
loan to a child for the down payment on a home, to start a new business, to cover costs for a personal
emergency or for education.
One of the considerations for parents who make a loan is whether they are treating all children fairly.
Many parents hope to treat their children equally. But the need for the loan will probably exist with one
child and not with the others.
As a result, parents may consider making the loan to a child and then planning to forgive that loan in the
estate plan. If this is the case, a parent frequently will create a similar benefit for other children in the
estate plan. By forgiving the loan to one child and then passing a similar benefit through the estate to the
other children, everyone is treated fairly.
Family Loan Guidelines
An “oral agreement” family loan may cause serious conflict. Parents or children may forget the loan
amount, the loan duration and the interest rate. Therefore, the loan document should be written.
It frequently is either a “demand” note or a term note. A term note is for a fixed number of years, in a
manner similar to most notes for the mortgage on a home or residence. A demand note allows the parent to
request full payment at any time. Many family loans are made on demand notes and there may not be an
expectation that the principal will be repaid.
Will There Be Taxes?
If the demand note does not require any interest or an interest rate that is below the market rate, then there
is assumed income to the parent. In effect, the child is treated as if he or she is making payments of the
interest to the parent at the appropriate rate. Even though no interest may be paid, the parent will be
required to report income in that amount. If the loan interest is deductible by the child, he or she may take
With a no-interest demand note, the parent also is making a gift. However, the annual exclusion ($13,000
in 2010) is frequently sufficient to cover the gift of the parent in forgiving interest payments by the child.
If there are two parents, the gift exclusion amount is doubled.
In many cases the note will be written at the applicable federal rate for the month it is created. The IRS
publishes a revenue ruling each month with applicable rates for loans of various duration. So long as the
note bears an interest rate at that rate, there will not be a gift.
It is beneficial if the child actually makes payments to the parent at the applicable interest rate each year.
Even if the parent has used annual gift exclusions to provide funds to the child, a written note with
payments by the child shows that the parents and child are treating the note in an appropriate businesslike
manner. This makes it much more difficult for the IRS to claim that the principal value of the note was an
immediate gift to the child.
Family Loan Exceptions
There are two general family loan exceptions. First, a loan of $10,000 or less is not covered by the “market
interest rate” rules. A parent may make an interest-free loan of that amount without any impact.
Second, if the loan is from a parent to a child and is $100,000 and under, then there may be another
exception that reduces the amount of the assumed income interest reported by the parent. For these loans,
the parent may report income that is the lower of the applicable federal rate or the child’s actual net
investment income for the year. This may reduce the income reported by the parent.
Mother Carol Helps Daughter Susan Purchase a Home
Mother Carol wanted to help daughter Susan purchase a home. Mother Carol lent Susan $100,000 on a
written demand note. The applicable federal interest rate that month was 3.2%. Susan does not pay interest
on the note and therefore Carol has assumed income. Her income each year is 3.2% or $3,200. In addition,
Carol is making a gift of $3,200 to Susan each year. Fortunately, there is no gift tax because it is less than
the annual gift exclusion amount of $13,000 in 2010. (The annual exclusion may be indexed to higher
amounts in future years).
If Susan records the $100,000 loan as a second mortgage against the home that she purchases, she will be
able to deduct the $3,200 of income that’s reported by Carol. However, because Susan is likely to be in a
lower tax bracket, there still will be a substantial net tax paid by Carol.
Bill Helps Son Joe Start a Business
Father Bill would like to assist son Joe who is starting a business. Father Bill lends son Joe $50,000 on a
demand note. The note requires an annual payment of 3.2%, which is the applicable rate on the date the
note is created. Under the note terms, at the end of each year, Joe must pay $1,600 of interest to Bill.
Joe starts the business and makes the payment of $1,600 each year to Bill. Joe’s CPA deducts the payment
on Joe’s tax return as an ordinary and necessary expense of the business.
There are a number of circumstances in which a parent may wish to sell real estate or stock in a family
business to a child.
Many parents also choose to make gifts of land or stock to the child. However, a parent may have already
used the annual exclusion and his or her gift exemption. Alternatively, the parent may desire the economic
security of payments on the property. Some parents prefer to sell assets to children and then have the
payments available for retirement income.
Finally, a parent may give part of the land or stock to the child and then sell the balance. This transfer
enables the child to own the investment or business. However, the child benefits from the self worth that
results from the process of making payments on the note. While the child has been given part of the
property or business, he or she has the self confidence that comes with making the business productive so
that the note payments can be made.
Because children who purchase assets are frequently in the starting years of their careers, they usually lack
the funds to purchase the entire property or stock in the business. As a result, it is quite common to use an
From the perspective of a parent, the installment sale also has the benefit of spreading out the capital gain.
He or she probably has a high level of appreciation in the land or stock. Using an installment sale will
allow that gain to be recognized over a term of many years. Because the tax on the gain is not due until
each portion is recognized, the total cost of the capital gains tax may be significantly reduced.
The parents also may be thinking of the impact on their estate plan. It may be quite desirable to “freeze”
the value of a particular asset through an installment note. If the parents owned a parcel of land until they
pass away, that property could greatly increase in value by the time of their death. However, if they freeze
the value by selling it at a fair price on an installment note, then the growth in value of the land will benefit
the children’s estates.
Installment Sale Taxation
The primary benefit of an installment sale to the parent is that the capital gain is prorated. The CPA for the
parent will develop a schedule showing the amount of the interest (which is ordinary income to the parent)
and the amount of the capital gain each year. The payments by the children will be in part ordinary income
on the interest portion and capital gain on that portion for the parent each year. If the parent has a tax basis
in the property, a portion of each payment will be returned with no tax.
There is an important limitation on the installment sale to the child. If the parent transfers the property to
the child, the child should not sell within two years. If the child were to sell the property prior to the two
year limit, then in most cases the gain will immediately be taxed to the parent. Therefore, if a parent sells
assets to a child on an installment note, the child should plan to hold the property for a minimum of two
Joe and Mary Sell to Daughter Linda
Joe and Mary have a commercial building and lot that is valued at $200,000. They have taken straight-line
depreciation and the adjusted basis is now down to $20,000. They would like to sell this building to their
daughter Linda. She will make payments to Joe and Mary and will immediately lease the building to a
tenant who is waiting in the wings.
Because the applicable federal rate is 4%, Joe and Mary set up a 20 year installment sale to Linda using the
4% interest rate.
Each year, Linda will make a payment of the interest plus principal as set forth in the note that has been
developed by the family’s CPA. Joe and Mary will report the interest as ordinary income, a portion of the
capital gain each year is capital gain and their prorated part of the $20,000 of basis is tax-free. Because
Linda plans to hold the building and will not sell within two years, there will be no acceleration of the gain.
Joe and Mary also considered other options with their CPA. One possibility is for there to be a provision in
the 20 year note that would eliminate the debt if both Mary and Joe pass away prior to the end of 20 years.
This provision to cancel the debt if the parents die early is called a “self-canceling installment note.”
Another option is to use an alternative to the installment note called a private annuity. With the private
annuity, Joe and Mary would receive payments from Linda for their lifetimes, rather than the fixed term of
the installment note.
After discussing these two other concepts with their CPA, Joe and Mary decided to use the 20 year
installment note. This will freeze the value and gives Linda a clear picture of the payment amounts and
April 23, 2010_#48
How to Fund Your Living Trust
A revocable living trust is one of the principal estate planning methods. While everyone should have a
will, there are many benefits of a revocable living trust. For individuals who have moderate or larger
estates, the revocable living trust can receive and own your property. It is a very good centralized method
for managing your property.
If you as a senior person are unable or unwilling to manage assets, the individual you’ve selected as
successor trustee will take over and manage property for you. Not only does this protect you, the property
will eventually pass to your heirs and bypass probate. The probate savings could be many tens of
thousands of dollars.
A primary benefit of the living trust is that it avoids a conservatorship. If you have only a will, own
substantial assets and become unable to manage your property, it may be necessary to conduct an expensive
and lengthy court process to appoint a conservator of your assets.
For example, comedian Groucho Marx had a will. But in his mid-eighties, he no longer was competent to
manage his property. There was a major court battle between his family members and a long-time
companion over who should be appointed conservator of both himself and his property. The court battles
consumed large sums of money and led to a very awkward and humiliating spectacle that was bewildering
to Groucho Marx.
If Mr. Marx had created a living trust and transferred his property to that trust, then his selected successor
trustee could have managed the property for his benefit.
Funded or Unfunded Living Trust?
It is possible to create a living trust that is unfunded during life. Together with the living trust, you would
then sign a pour-over will. The assets that you possess at death would go through the probate process.
However, the pour-over will would then transfer these properties to the living trust. It then could be
administered under the trust provisions for your selected heirs.
The disadvantage of the unfunded trust is that you have not avoided probate. Your estate will pay the full
probate costs. In addition, you give up the potential protection of a successor trustee during life. It is only
if your assets are transferred to the trust that a successor trustee can then manage them for your benefit.
The unfunded living trust therefore could lead to a conservatorship, as was the case with Groucho Marx.
Funded Living Trust
There are several different types of assets that will be transferred to a living trust. You will need to work
with your attorney and other advisors to make certain that your property is correctly placed into the trust.
Title to your property is determined by state law. You will need to comply with the appropriate agreements
or documents to make sure that the title is held by the trustee. In most cases, you will serve as the initial
trustee of the revocable living trust. Therefore, real property and other assets will be transferred from you
as an individual to yourself as trustee of the trust.
Real estate is often the principal asset that is transferred to the trust. This is normally accomplished
through a warranty deed or grant deed, depending upon your state. The property is transferred directly
from yourself as an individual to yourself as trustee. Deeds are notarized and then recorded at the county
registrar of deeds.
There are considerations that you should discuss with your attorney before transferring your home or other
real property into your trust through a deed. There may be a reassessment or increase in the property tax,
or there may be transfer taxes when deeds are recorded. In most states, the popular living trust has been
protected from an increase in property taxes. However, you should check with your attorney.
Guidelines for Living Trust Property Transfers
1. Even though your home is transferred to a living trust, you still qualify to deduct the mortgage interest
paid on the home. If you later sell the home and have made it your principal residence for two of the past
five years, you will be able to exclude $250,000 for a single person or $500,000 of capital gain for a
married couple. In addition, most states permit you to live in the home and qualify for a homestead
exemption reduction in your property tax, even though the home is now titled under the living trust.
2. Public stocks and bonds can be transferred directly to the trust. You may hold title to the bonds in trust,
or you may create a trust securities account that holds stocks and bonds.
3. If you have a safe deposit box, that can be taken out in the name of the trust. However, some
institutions who maintain safe deposit boxes require a certified copy of the trust to be kept on file. Another
option may be to give your successor trustee signing authority on your safe-deposit box.
4. If you have real estate in your home state or other states, it should be transferred to the trust. If you pass
away with real estate owned in your individual name in another state, it will require a rather expensive
probate proceeding in that state to transfer the real estate. However, if it is transferred to your revocable
trust, then you avoid that foreign state probate proceeding and cost.
When your home or other real estate is transferred to the trust, there may be a requirement to send a copy of
the trust to your lender. Most title companies and lenders will accept a short “affidavit of trust” that can be
prepared by your attorney. This indicates that the trust is a qualified living trust and the trustees have the
power to transfer real estate.
5. A common question is whether tangible personal property should be included in the trust. It is possible
to transfer your cars, boats, recreational vehicles or art and other collections to the trust. However, many
individuals choose to retain personal ownership of most tangible personal property. This is frequently the
case that individuals periodically buy or sell vehicles or other tangible personal items. By not transferring
them to the trust, it simplifies transfer of those items. However, if there is extremely valuable tangible
personal property that would be subject to substantial probate cost through your will, then it may be
appropriate to transfer that property to the trust.
What if you would like to sell trust property? It is entirely possible to transfer property from the trust to a
new person. The trustee may simply deed the property directly to an individual.
In some circumstances, your attorney may think that it is better for title insurance purposes for you to sign
two deeds. One deed would be from you as trustee to yourself as an individual. The second deed would be
from you as an individual to the new buyer. There may be a modest transfer tax cost for both deeds, but
this is an acceptable strategy for simplifying the transfer of real property.
April 16, 2010_#47
Domicile – Where You Live Affects Your
A successful business owner with a large estate passed away in 1976. He had grown up in Texas, moved to
California and lived for many years in Nevada. With a $2.5 billion estate, there were substantial federal
and state taxes.
While the estate proceedings were held in Nevada, both California and Texas sued to collect state estate
tax. The Nevada Court eventually determined that the domicile or personal residence of the businessman
was Nevada. This was quite important, because the 40 wills that had been submitted were all determined
invalid under Nevada law. The estate was finally distributed to 22 cousins under the intestacy law of
While this was an unusual case with a very large asset value, there are several reasons why you should
understand the basic rules of domicile. Where you live can affect both the distribution of your estate assets
and your estate taxes.
There are two basic words that are used in common language, but may have quite different legal meanings.
You may be a resident of a given location, but you can only have one “domicile.” Your domicile is your
permanent place of residence. It is where you reside most of the year and where you intend to make your
fixed and permanent home.
If you have homes in more than one state, then the question of domicile may become quite important. For
example, if your will were declared invalid the laws of your state of permanent residence would determine
who receives your property. These laws vary substantially from state to state, and they are quite likely to
generate litigation by distant cousins and other family members. Some family members may receive more
under the law of state A and some may receive more under the law of state B. This result will nearly
always lead to litigation – with a potentially huge cost to your estate.
Old State Domicile
If you have homes or a residence in more than one state, you may decide for tax or other reasons to move to
a new state. However, the auditors of the “old state” revenue department may seek to find reasons for you
to pay estate tax to the old state.
There are several flags that state tax auditors will examine to try to show that you still are domiciled in the
First, if you have retained your old home and it is more valuable than the new state home, that will be
considered. Second, you might spend a sizable period of time in the old home and employ domestic
assistance there. Third, if you have a business and are actively involved in the business, that could show
that you intend to stay in old state and are subject to taxes there. Fourth, if you spend the majority of your
time (and most states count any part of a day as a day in the state), then you could be considered domiciled
in old state. Fifth, if you have valuable art collections or other items of great personal importance and you
keep them in old state, that is another potential tie. Finally, if there are children, grandchildren, nieces or
nephews or other relatives that you regularly visit in old state, that suggests intention to remain there.
While the question of domicile is a fact-based issue, any of these factors will be used by state tax auditors
to try to collect estate tax from your executor. If you intend to change your domicile to a new state
(perhaps a low-tax state), there are a number of steps that you should take.
How to Change Your Domicile
In order to change your domicile, there are about 10 steps that will show you intend to be a permanent
resident of your new state. These are as follows:
1. Sell your old home and buy a home in new state. This is a very clear indication that you plan to live
there. You also should keep track of the time that you spend in old state. The majority of your time should
be spent in new state. It is helpful if over 183 days per year are spent in new state.
2. Obtain your driver’s license in new state. If necessary, attend training or education courses related to
driving vehicles in new state.
3. Register all of your vehicles, such as your cars or a boat or recreational vehicle, in the new state.
4. File your final partial tax return in old state. After that, plan to file your income tax returns and pay
state income taxes in new state. If the state does not have income tax but has an intangible property tax or
other type of tax form, file and pay that tax.
5. Register to vote in the new state. Do not vote again at any time in old state.
6. Close your bank accounts in old state and open new bank accounts in new state.
7. Close your securities accounts in old state and open securities accounts with brokerage firms in new
8. Obtain new medical advisors and financial advisors in new state. Transfer all of your medical records
and financial records to the new advisors.
9. Purchase a cemetery plot or other burial location in new state.
10. Change your passport address or obtain a new passport with the address of your residence in new state.
New State Documents
Another important way to show that you are moving to new state is to contact an estate planning attorney in
new state and obtain new documents. It is desirable to sign a new will, a living trust, a durable power of
attorney for healthcare or advance directive and a HIPAA release. All of these documents will demonstrate
that you now are intending to be a permanent residence of your new state.
If you take the 10 steps and complete your new documents, you can be quite confident that you now have
changed your domicile to the new state. If you spend a considerable period of time or still have active
business interest in the old state, you should also make certain that you are keeping track of the exact
number of days that you spend each year in new state and the old state.
If you pass away with a substantial estate, your heirs will be pleased that you have documented your
domicile. Please note that the exemptions for estate tax or inheritance tax may be much lower in many
states than a future federal estate tax exemption. Therefore, even with a moderate estate, there may be
incentive for the state tax auditors to want to collect tax from your estate. Taking these steps and keeping
good records is a way of protecting your heirs from the state tax auditors.
State Inheritance and Estate Taxes
Many states have an estate tax that is calculated using the amount that once was the state portion of the
federal estate tax. This is commonly called the “pickup tax.” While the federal rules have changed, many
states still use the calculation to determine the amount of state tax your estate will pay. Many states also
have an exemption amount and collect tax on the excess value over that amount.
Other states have an inheritance tax. The tax rate depends upon the person who receives the property. A
spouse, a child, a grandchild and a niece may all have a different tax rate.
Finally, some states have a combination estate and inheritance tax. The following table is a summary of
state death taxes. It is generally accurate as of the publishing date. However, state death taxes are
regularly changed. All readers should seek advice from qualified professional advisors about their personal
State Type of Tax Exemption
Connecticut Pick up tax $3.5 Million
Delaware Pick up tax $3.5 Million
District of Columbia Pick up tax $ 1 Million
Indiana Inheritance tax
Iowa Inheritance tax
Kentucky Inheritance tax
Maine Pick up tax $1 Million
Maryland Pick up & Inheritance $1 Million
Massachusetts Pick up tax $1 Million
Minnesota Pick up tax $1 Million
Nebraska Inheritance tax
New Jersey Pick up & Inheritance $675,000
New York Pick up tax $ 1 Million
North Carolina Pick up tax $3.5 Million
Ohio State tax $338,333
Oregon Pick up tax $ 1 Million
Pennsylvania Inheritance tax
Rhode Island Pick up tax $850,000
Tennessee Inheritance tax
Vermont Pick up tax $ 2 Million
Washington Estate tax $ 2 Million
April 9, 2010_#46
Your Family Letter – Memorial Services
A family letter is a key part of a good estate plan. It is much more personal than many of your estate
documents. A family letter allows you to share your heart and do show appreciation and gratitude to family
members. During a time when family members are grieving, it also helps them to complete many practical
steps to protect your property.
The family letter may have up to ten different sections. Each section will cover an important but separate
I. Estate Data
Your estate organizer usually has four parts. It will explain the family names and key information, identify
your attorney, CPA and other financial and health advisors, cover all of your assets and financial
information and outline your estate planning choices.
The estate organizer may be printed, or you may be using an online version. Your family letter should
explain where the information is located. If you are using an online estate planner, it’s important to know
your account name and password so the information will be available.
II. Important Documents
Your important documents will generally be safeguarded in three different ways. First, many individuals
have a safe deposit box. The safe deposit box typically holds birth certificates, death certificates, degrees
and other legal agreements, marriage or divorce documents, military discharge records, property deeds, a
personal property inventory, stock and bond certificates and vehicle titles.
Second, you may have a fireproof box at home. This box will frequently include your insurance policies,
your living will, medical power of attorney or advance directive, trust documents and your will.
Third, there are some items that should be left with your attorney, friend, agent or another trusted person.
These are items that may be needed while you are still living or will be necessary very soon after you pass
away. These documents (or copies of documents) could include your financial power of attorney, a durable
power of attorney for healthcare or advance directive, your living will, trusts and your will.
III. Accounts and Passwords
Because an increasing number of records and information are retained online in personal accounts, you will
want to be certain that your personal letter lists all accounts. You may decide to include passwords with
the personal letter. Alternatively, if you are entrusting all of this information to a specific person or other
location, that should be identified.
With the rapid movement to online banking, online mutual funds and securities accounts, donor advised
funds accounts, health savings accounts and your email accounts, you may have six to 10 accounts with
various passwords. It will be important to have all of this information recorded.
IV. Your Family History
While your estate organizer will include basic information about you and your family members, there is an
excellent opportunity in your family letter to discuss your family history. This can include a few short
paragraphs that give the names and background of your parents. List all of their children or other key
relatives in your family. Your history may discuss marriages, divorces and any blended family
relationships. Finally, the family history will show the date of death for persons who have passed away.
Family history can include discussions of your activities, interests and career. It enables all of your
extended family to have a good picture of your entire life.
V. Care for Children, Grandchildren or Pets
If you are responsible for any children, grandchildren or pets, this is an opportunity for you to explain your
plan for their care. While your estate planning documents will normally appoint guardians for your
children or grandchildren who are under your care, it still may be quite beneficial for the guardian to
receive recommendations from you on their education and other areas of development that you understand
very well. If someone is to care for pets, you may have recommendations on the way in which that is done.
You may have memberships in a number of civic organizations. Some memberships, such as those in a
golf course or in a club that purchases various types of sport events tickets, are transferable to heirs. It
would be quite helpful to your family for you to list any memberships that you have so they can handle
VII. Care of Your Body
When you pass away, your body will be frequently in the custody of a medical center or nursing home. If
you have previously decided to make any organ donations, it is helpful to explain that decision in your
family letter. The requirements for making organ donations are typically covered under state law. In many
cases, decisions on organ donations are made when you sign your living will or advanced medical
VIII. Funeral or Memorial Services
The cost of many funerals now exceeds $10,000 per year. If you would like to assist family members in
the decisions surrounding your funeral or memorial service, the family letter is an excellent way to do so.
First, your family will need to decide whether to have a burial in a cemetery with a casket or to use
cremation services and an urn. You are likely to have personal or religious reasons to prefer one or the
With a casket and burial in a cemetery, your family will generally make use of a funeral home. Because
there now is significant competition in the industry, funeral homes are starting to offer advance prices and
package services. If you desire a specific range of services, type of casket or prefer not to be embalmed,
those directions are helpful to your family.
There are funeral consumers’ alliances in many locations. Your family may find assistance and guidance
on www.funeral.org. This guidance may help them make good decisions during a very difficult time in the
midst of grief over your loss.
If you are a veteran, your family may want to contact the Department of Veterans Affairs. You may
qualify for a gravesite at no cost in one of the 130 National Cemeteries for veterans and their spouses.
In your funeral or memorial service, there will be eulogies. It is also customary to have a printed
description of your lifetime. This will frequently include your basic history, awards, achievements,
military service and lifetime employment. If you have specific requests for information to be included in
the obituary, it is very helpful to your family to give them guidance. You may have certain principles or
values that are important to you that you would like to share through the obituary. This is an opportunity
for you to communicate your values to the public.
X. Final Words and Blessings for Family
Your family letter may conclude with a word of blessing. It is a tradition in many cultures for the elders to
provide a blessing for the next generation. This is frequently done when the elder is still living, but
certainly your family letter provides a similar way to bless your children, grandchildren, nephews, nieces
and other family members.
Your final words of wisdom and blessing for family members will be of great comfort as they grieve for
your loss. It is an appropriate and fitting way to conclude your family letter.
April 2, 2010_#45
Planning With a Serious Illness
If at some point in life you have a serious illness, there are a number of planning options that should be
With a serious illness, there are emotional, physical and mental challenges. The illness may be primarily
physical, but the person will eventually start to suffer discouragement and even depression. His or her
mental capabilities may also start to fail due to deterioration of the body.
Given these serious issues, it is important to consider the care of the person, care of his or her property,
financial decisions, potential actions and securing assistance from advisors and family.
Care of the Person
There are several areas that are important in thinking through care of the person. You should check to
make sure you have a current durable power of attorney for healthcare or advance directive. This
document needs to be shared with the person who is designated as healthcare proxy. A serious illness
could lead to your hospitalization and a need for the healthcare proxy to make important medical decisions.
There also are potential physical changes for a home or a vehicle. If you have an illness but can operate a
motorized wheelchair, it may be appropriate to modify or remodel your home to make it handicap
accessible. Similarly, you may suffer from a major illness, but are still capable of driving. However, it
may be necessary to obtain or modify a vehicle so that you can still drive.
A primary concern for the ill person is, “Who will be the caregiver?” Initially, the seriously ill person may
stay at home and a family member may be caregiver. However, you should have a plan to move to assisted
living, a nursing home or even a hospital if needed.
Care of Your Property
If you have a serious illness, it will be important to have either a person who has a power of attorney to
manage your property or a revocable living trust. With a revocable living trust, your property is transferred
by deed or other document to change title into the trust. The trust also lists a successor trustee to take over
if you are no longer able to manage. With a serious illness, you may wish to resign and have the successor
trustee take over while you still have the ability to offer advice and counsel.
If you have a home with valuable art or other types of collections, it will be important to prepare for
management of your property. At any time in the future, you may need to move to nursing care or the
hospital. Valuable property will need to be protected for your estate beneficiaries.
With a serious illness, it is a good time to review all of your trusts, wills. If you have a trust, you should
make certain that the title and ownership of property is correct. The trust is effective only if property is
legally transferred to the trustee. Similarly, some individuals have had property held as joint tenants with
right of survivorship with other family members. If this is the case and you pass away, the surviving family
member will own the property outright. If that is your intention, this method is fine. However, you should
check all titles to make sure that they are correct for the plan that you have created.
You may have bank accounts, securities accounts and other business accounts. Check to be certain that all
of the accounts are listed on your financial records. If you have online access to the accounts, a trusted
advisor should know all of the passwords. If you are in the hospital or nursing home, your advisor will
need access to your accounts.
You may have a current pattern of gifts to family or gifts to charity. If you wish to have your successor
trustee or the person holding your power of attorney continue that gifting pattern, there will need to be a
specific direction in your living trust or power of attorney to achieve that result.
In some states, there could be very significant income and estate taxes. Even though you have a serious
illness, it may be worth considering changing your domicile to a state with a lower tax structure. This will
require that you establish a new residence, change your driver’s license and auto registration, file your
income taxes and show that you are a permanent resident of the new state.
Advisors and Family
Particularly if you have a substantial estate and are quite ill, it is important to make sure that there are good
advisors. Far too many elders who have substantial assets and become weak are victims of elder abuse. A
group of trusted advisors and family members will protect you and your property.
You advisors will discuss your vehicle use. There are several cases where seniors felt able to drive
vehicles, but were progressively less capable. One individual in her eighties drove regularly to visit her
daughter just one mile away. However, one day she made a wrong turn and became disoriented. A day
and a half later, the Highway Patrol discovered the car idling at the side of the road several hundred miles
away. Fortunately, she did not become lost during the winter or she very easily could have frozen to death
before being discovered.
Advisors and family members will need to discuss with the seriously ill person the arrangements for
transportation and the possibility of higher levels of care. This could mean moving from your home into an
assisted living facility or a nursing home. These discussions are best while the seriously ill person is still
able to think clearly and make good decisions.
Planning with a serious illness is a challenging process. Yet it is so much better for the person and for the
protection of the estate that the process is entered into openly and willingly by the individual, and his or her
advisors and family.