When Parent and Child Reverse Roles

When we start off in life, our parents provide love and nurturing, as well as the necessities of daily life.  As time passes, we grow into adulthood.  Our relationship with our parents becomes one of equals, with each providing love and nurturing for the other, while both are self-sufficient.  Often, parents reach a stage in their lives when they are no longer self-sufficient, typically due to advanced age or illness.


While we bear the emotional responsibility with love, at times caring for our parents can work an economic hardship at a time that we are raising children of our own.  Luckily, under such circumstances, the government gives us a break.


Your parent is your dependent if you provided more than one-half of his or her support during the year for food, shelter, clothing, medical care, and housing.  Insurance payments, Medicaid benefits, and Medicare benefits are not counted in this support calculation.  For example, your mother lives with you and you provide her with housing, food, and utilities.  She has medical expenses of $5,000 a year, of which Medicare picks up $3,000.  She gets Social Security of $500 per month, or $6,000 per year.  She uses her social security check to pay her uncovered medical expenses, for clothing, etc.  Let’s assume the value of the housing is $500 per month and the food and utilities is $200 per month, for a total of $8,400 per year.  The total amount spent for your mother’s support is $14,400, of which you provided approximately 58%, so she is your dependent.


Even if you do not contribute more than 50% of her total support, you may still qualify if all of the following apply:  1) You contributed at least 10% of her support, 2) You and other persons besides your mother contribute more than 50% of her support, 3) No individual provided more than 50% of her support, 4) Each other person contributing 10% or more signs Form 2120 waiving his or her right to claim your mother as a dependent, and 5) You attach that Form 2120 to your return.


Once you have determined that your parent is your dependent, you can deduct your parent’s medical expenses.  For this purpose, your parent must be your dependent on either the date the services were performed or when they were paid for.  However, these will be considered as other medical expenses for yourself and your other dependents.  In other words, you will need to itemize your expenses and you can only deduct them to the extent they exceed 7.5% of your adjusted gross income.


If your parent is your dependent, you may be able to get a dependent care credit for part of qualifying expenses if 1) Your parent cannot care for himself or herself, and 2) Your parent resides with you.


Finally, you can claim a personal exemption for your dependent parent if he or she does not claim the personal exemption himself or herself.


While the financial burden of caring for a parent may be lightened by tax deductions or credits, proper planning with long term care insurance or other methods could remove this financial burden.  A qualified estate planning attorney can help you and your parents plan to reduce the financial burden of their care so you can focus on providing your parents with the love and nurturing they deserve, without worrying about the financial aspects.

Estate Planning for Gay Couples

Estate planning for LGBT Same-sex couples have unique concerns when creating an estate equalpeple1plan.  Here are six estate planning issues that same-sex couples should consider, and some resources for further help.

Read more about Estate Planning for Gay Couples.

1.    Will

A will is the heart of any estate plan. It is a simple, powerful, and relatively inexpensive document that you may be able to make yourself. With a will, you can :

  • determine who will inherit your assets
  • nominate a guardian for your children
  • arrange for an adult to manage any assets children inherit, and
  • name an executor.

You can also use your will to name a caretaker for a pet, direct how taxes should be paid, forgive debts, and more.

If you do not make a will, you will die intestate, and your property will be distributed according to the intestate succession laws of your state. Dying intestate almost always has an undesirable effect.  This is especially true for same-sex couples because intestate succession laws rely on the legal relationships of marriage – so if you are not married, or cannot get married in your state, intestate succession laws may leave your partner with no right to your property.  Learn more about Intestate Succession.

You can make a simple will yourself with a quality will-making program like Quicken WillMaker Plus.  If you want a more complicated will, see a lawyer for help.

Learn more about Wills on Nolo.com.

2.    Probate Avoidance

Probate is the court process of wrapping up your estate.  Probate can be a long and expensive process, and it is rarely a benefit to the estate. There are ways to avoid probate, and many estate plans focus on doing so.

Avoiding probate may be more complicated for same-sex couples because, in most states, they cannot take advantage of laws that allow property to pass to spouses without probate.

You can avoid probate by using these estate planning tools:

Additionally, most states have simplified probate procedures for small estates. So if you don’t have much property, you may not need to plan for probate at all.  Learn more about Probate Shortcuts in Your State.

Read more about How to Avoid Probate and Avoiding Probate in Your State.

3.    Health Care Directives

Health care directives let you set out your wishes for end-of-life health care, in case you cannot speak for yourself. There are two pieces to a health care directive:

  • the living will or declaration, in which you state what kind of care you want or don’t want, and
  • the power of attorney for health care, in which you name a person to make health care decisions for you if necessary.

Health care directives are a vital aspect of a same-sex couple’s estate plan, because they give healthcare professional clear and legal instructions for providing care – without room for any speculation about the legality of the couple’s relationship.

Learn more about Health Care Directives.

4.    Financial Powers of Attorney

With a financial power of attorney, you give another person power over your finances. You can make a limited power of attorney for a specific purpose or time, or a durable power of attorney, in which you name someone to take care of your finances in case you become incapacitated and can’t take care of them yourself.

If you anticipate incapacity, or just want to make sure that your partner is named to take care of your finances in case of emergency, consider making a durable power of attorney.

Learn more about Financial Powers of Attorney and how Health Care Directives and Financial Powers of Attorney can work together to protect you and your partner.

5.    Estate Taxes

Most people do not have to worry about estate taxes, but if you do and you and your partner are not married, you won’t be able to use many of the tricks that married couples can use to avoid these taxes.

The Federal Estate Tax Exemption Is Very High

Only estates worth more than $5.25 million will pay federal estate tax in 2013. So, if you die in 2013, and you leave taxable assets worth less than $5.25 million, you don’t need to worry about federal estate tax. And all assets left to a surviving spouse — including a validly married spouse of the same sex — are exempt from federal estate tax.

One caveat: Find out whether your state has its own estate tax. Of the states that do, most exempt less than the federal government does. So, your estate could end up owing state estate tax, even if it doesn’t owe federal estate tax. Read State Estate Taxes to learn about the estate tax in your state.

Planning to Reduce Estate Taxes

If you are worried about estate taxes, you and your partner should see a lawyer or tax professional to discuss how to reduce them. For example, if you and your partner are married, leaving everything to each other, and are worried that your combined estate may cause the surviving spouse to owe estate tax, you can use the “portability” provision of the tax law, or use a bypass trust to give the surviving spouse access to the first spouse’s property, without having that property included in his or her taxable estate. Learn more about reducing estate taxes in the Estate Tax section of Nolo.com.

6.    Final Arrangements

As part of your estate plan, you and your partner should also consider making a final arrangements document. In this document, you lay out your wishes and plans for your final arrangements.  You can specify your wishes, in as much detail as you choose, about:

  • burial or cremation
  • embalming
  • caskets and urns
  • headstones or burial markers
  • ceremonies, and
  • paying for final arrangements.

While this document is not legally binding, it can come as great relief to those who must take care of these details after you die. Knowing what you wanted can calm concerns and put to rest any questions about your final wishes. This may be of particular help to your partner if you anticipate that other people in your life may have strong opinions about how to lay you to rest.

A final arrangements document is one of many documents available with Quicken WillMaker Plus. This program – with which you can also make a will, healthcare directive, and financial power of attorney — walks you through all of the issues listed above, allowing you to leave as much or as little detail as you like about your final wishes.


This is a good article we found on http://nolo.com that fits what some of our clients have expressed concerns in.

Estate Plan, Safeguarding Originals Is Critical

Safeguarding Originals Is Critical


In this electronic age of copy machines, fax machines, and scanners we often lose sight of the distinction between an original document and one that has been copied, faxed, or scanned.  However, at times, especially in estate planning, there is no substitute for an original.


  1. Douglas King’s family found out just how important an original can be. In 1994, Douglas executed a will leaving everything to his second wife, Laurel, with whom he had two minor children. In addition, he also had three adult children from his first marriage, Rebecca, Rachel, and Jason.  He made provisions for these adult children, but only if Laurel predeceased him.


Between 1994 and 1997, Douglas and Laurel’s wealth grew rapidly to $8 million.  Douglas decided to rethink his will and consulted an attorney.  He brought her a copy of his will.  Pursuant to his instructions she prepared an amendment or “codicil” to the will, changing some minor provisions.  The attorney retained the copy of the 1994 will and the original 1997 codicil.  In 2000, Douglas died in a motorcycle accident and the original will could not be found.  The copy of the will and the original codicil were offered to the probate court.


However, Douglas’ children from the prior marriage contested the admission of the copy, alleging that he must have destroyed it, intending to revoke it.  If Douglas had intentionally destroyed the original will, the destruction would have revoked it and his assets would have passed under the laws of intestacy, letting the children from the prior marriage share in his wealth.


A bitter fight ensued.  The adult children brought up that their father and Laurel had repeated marital problems, including a divorce filing that was later withdrawn.  They also testified that the accountant had told them that their father had told him he had provided for all of his children.  To further complicate matters, the accountant was unavailable to testify because he was wanted for embezzling over $1 million from Douglas’ estate.


The New Hampshire Supreme Court, citing a New Hampshire presumption that a missing will indicates revocation, found that it was unclear whether the will was missing because of loss or intentional revocation by destruction.  The Court considered the will revoked and ordered the estate distributed pursuant to the laws of intestacy.  Under those laws, Laurel and each of his children, minor and adult, would share in his estate.


This case illustrates how the absence of an original document can dramatically change your estate plan, even if a copy is available.  A qualified estate planning attorney can help you avoid hidden pitfalls like this that can sabotage your estate plan.  Further, such an attorney can help you stay organized by providing you an estate planning portfolio including copies of all your estate planning documents in a simple, organized binder for your reference.  Then, you can put the originals away for safekeeping.

Probate, Privacy in Life and Death

Privacy in Life and Death

Privacy is a concern to all of us, both during life and after death.  Privacy is a concern for many reasons.  We each have our own reasons for wanting privacy.  People want to keep private the existence of children out of wedlock, their sexual orientation, their wealth or lack thereof, or even their choices of charitable causes.  People also want to maintain their privacy just to prevent nuisances, such as telemarketers.


There are solutions to each of these issues, both during life and after death.


Lifetime gifting directly to the charity may be public because the charity must reveal the sources of its public support.  You can maintain the privacy of your charitable giving and still get a charitable deduction by giving to a donor advised fund, such as the Charitable Gift Fund operated by Fidelity Investments, http://www.charitablegift.org .  This fund allows you to designate where the funds go, but allows you to keep your name from being connected to the charity.  For example, someone in a conservative industry may not want to be seen giving to a liberal cause or vice versa.


A revocable trust is an excellent way to achieve privacy both during life and after death.  Without a revocable trust, your assets go through “probate,” which is the legal process to transfer title from a person who has died to his or her heirs or beneficiaries.  As part of that process, the identity of the beneficiaries must be made public.  So, if you leave assets to your child who was born out of wedlock, everyone will know what assets you left them.  Similarly, if you left all your assets to your same sex partner, everyone would know.  Without a trust, even the extent of your wealth or lack thereof, including your debts, is a matter of public record.  Trusts can even be used to keep hidden who bought real estate or other assets.  With a trust, your business stays your business.  With a trust, how much you have and to whom you are leaving it remains private.


Nuisance calls can also be a violation of privacy, both for you during your lifetime and for your loved ones after your death.  While it may be impossible to completely eliminate such calls, there are ways to reduce their number.  First, during life, you can put your telephone numbers on the “do not call” list.   Go to http://www.donotcall.gov to place your name and phone numbers on the list.  The telemarketers have thirty-one days to remove you from their lists and stop calling you.  Your phone numbers will stay on the list for five years.  Then you would have to re-register.  If a telemarketer violates the do not call list, they can be fined by the Federal Trade Commission.


Similarly, now there is a way to put a deceased person on a “Deceased Do Not Contact” list managed by the Direct Marketing Association.  Beginning January 13, 2006, all of the 5,000 plus members of the organization were required to refrain from contacting people on the list and their loved ones.  This includes removing their physical address, e-mail address, and phone numbers from databases.  In order to register someone, go to http://preference.the-dma.org/cgi/ddnc.phpThe DMA requires a charge of $1 to your credit card in order to provide a method to track who reported the deceased.


Of these methods to maintain your privacy, the use of a revocable living trust is the strongest and broadest measure.  A qualified estate planning attorney can help you determine the best way to maintain your privacy both during life and after your death.

Estate Planning, Plan Now or Pay Later

Krispy Kreme and Wal-Mart have a lot in common.  Die-hard fans line up in front of their locked doors the night before grand openings, licking their lips for a puffed up glazed donut or a bargain that can set the neighbors talking over the fences.  But what do these two incredibly successful businesses and the families that started them have that sets them apart?


wmt_logo_2Sam Walton, the founder of Wal-Mart, is an excellent example of a man who planned not only for the future of his business but also for the future of his family.  He and his wife, Helen, formed a family partnership called Walton Enterprises, which allowed them to pass part of their business interests to their children while keeping part of it separate.  When Walton passed away in 1992, his estate tax was much smaller because he was able to protect his assets by planning ahead.  In addition, his children were tied to the family business through Walton Enterprises.  Effective estate planning allowed Sam Walton to protect his wealth and pass it on to his heirs when he died.


downloadBut not all entrepreneurs take an active interest in planning for the future of their business, as well as for their family.  Vernon Rudolph, the founder of Krispy Kreme, is a case in point.  While he was a successful donut maker and entrepreneur, his failure to create a succession plan for his family business left his family without a business.  Upon his death in 1973, Krispy Kreme had to be sold because Rudolph had no business succession plan.  Had Rudolph had the foresight to plan, Krispy Kreme could still be in the Rudolph family, run by his children and thus preserving his legacy.  Instead, Krispy Kreme was sold in 1976 to the Chicago conglomerate, Beatrice, which nearly resulted in Krispy Kreme’s demise by leading it into serious debt.


The failure to plan is central to the downfall of many family businesses.  Only 30% are successfully passed to the next generation, 12% to the second generation, and 3% to the third generation.  Sam Walton’s sound succession planning benefited his family and allowed them to maintain an active role in Wal-Mart.  Vernon Rudolph’s tale exemplifies the risk in failing to plan.


Business succession planning provides business stability, tax savings, and most importantly peace of mind.  The central questions are 1) who should take over the business when you phase out your involvement due to retirement, disability, death, or you just want more time with your family, and 2) how will that transition be funded.  Choosing a successor is not an easy task.  But, if you plan ahead, a successor can be groomed slowly and will be ready to step in should unforeseen circumstances arise.  Choosing a successor in an emergency is a near impossible task.

Once the identity of the successor is chosen, a strategy can be formulated to accomplish the goal.  The strategy can allow you to retain control for as long as you want.  But, it can put a mechanism in place that will allow you to have an exit strategy.  The strategy may include a buy-sell agreement.  Such an agreement allows your successor to purchase shares of stock from you at a time chosen by you, such as your death or disability.  Life insurance or other funding mechanisms can be put in place to make sure that your successor has the capital necessary to buy out your interests without crippling the business with debt.


These strategies can include income and estate tax savings in addition to providing you peace of mind and business stability.  A qualified estate planning attorney can help you wrestle with business succession issues and determine which strategies will work best in your situation.

Estate Planning, Plan Now or Pay Later

Estate Planning is Life Planning

It seems like there is always some discussion in Congress about changing the estate tax.  There even have been proposals to eliminate the tax permanently.  If Congress ever eliminates the tax, does this mean that there will no longer be a need for estate planning?  No, it does not.

Estate Planning is Life Planning

Estate Planning is Life Planning

Estate taxation is just one of many considerations that go into Estate Planning.  According to Estate Tax: Myths and Realities, a study by the Center on Budget and Policy Priorities revised in 2005, approximately 99 percent of estates pay no estate tax at all.  There are other taxes that are far more important for most people, including income taxes and capital gains taxes.


But, even lumped together, taxes are not the primary motivation for Estate PlanningEstate Planning is organizing your life to achieve your goals, both now and after you are gone.  This includes:

  • Organizing your assets to minimize the impact of disability
  • Avoiding probate
  • Minimizing income taxation
  • Protecting your assets from creditors
  • Ensuring your children’s futures
  • Instilling your values in your descendants


It has often been said that he who fails to plan plans to fail.  It is true in Estate Planning as in any other endeavor.  Without planning, you will leave those you love with a mess on their hands.  For example, without planning, your incapacity could prove a nightmare.  Who would pay the bills?  How would they get the authority to do so?  They would have to go to court and have you declared incompetent and have someone appointed as your guardian / conservator.  This tedious process would come just as your family would be dealing with the financial and emotional drain of your disability.  Any disagreements in the family would make the process even more problematic.


There is a better way.  You can plan ahead and avoid these problems and achieve your goals.  The basic documents of an estate plan can help you plan for your future and that of your loved ones.  A Revocable Trust helps you avoid probate and is very flexible.  The trust helps you provide for your own incapacity.  Later, after you are gone, the trust can help reinforce the values you have taught your children.  It can do that by encouraging or discouraging certain behavior.  For example, the trust can match income in certain altruistic professions.


A General Durable Power of Attorney can appoint someone to make financial decisions for you in the event of your incapacity.  A Health Care Durable Power of Attorney can appoint someone to make healthcare decisions for you.


Whether or not you are in the 1% of Americans that may be subject to estate taxes, Estate Planning is life planning.  An Estate Planning attorney can help you plan for your future and that of your descendants.