Bielski Law Office, Ltd.

What to Do after an Alzheimer's Disease Diagnosis

If you or a loved one is diagnosed with Alzheimer's disease, it is important to take immediate steps to ensure that end-of-life care is as comfortable as can be.

There is a common myth that people with Alzheimer's are completely incompetent and cannot be trusted to make their own decisions. It is not true as the early stages of the disease are relatively mild.

People who are diagnosed with the disease early enough can still make their own decisions. However, as the disease progresses most do eventually lose the ability to make their legal decisions as NorthJersey.com points out in "Planning becomes vital following Alzheimer's diagnosis."

The article suggests that people who receive an Alzheimer's diagnosis should get a general durable power of attorney, a health care power of attorney and a living will.

The powers of attorney will allow the person to appoint someone else to handle financial and medical affairs, respectively, when the Alzheimer's patient is no longer able to do so. The living will is used to give advanced directives about what type of treatments doctors should employ to keep the patient alive.

These are important documents to have.

Getting them after an Alzheimer's diagnosis is solid advice. However, even better advice is not to wait until after receiving such a diagnosis. All three documents are part of general estate planning. There is no need to wait until you know you will need them to get them.

Plan ahead and get them now before an issue of competency is raised.

Reference: NorthJersey.com (Dec. 27, 2015) "Planning becomes vital following Alzheimer's diagnosis."

How Healthy Will Elderly Baby Boomers Be?

The baby boomer generation is on average expected to live a lot longer than previous generations, but that does not mean they are expected to be healthier than the elderly of those previous generations.

In 2030, when the last of the baby boomer generation will be fully eligible for Medicare, the average life expectancy of a 65 year old is projected to be 20.1 years.

A recent study suggests, however, that those elderly people who will live longer will do so in poorer overall health than the elderly people from previous generations. It appears, in part, this is because medical science has done such a great job of finding treatments for diseases that often kill people early, such as cardiovascular problems. As people will be living longer, however, they will get other diseases, such as cancer and Alzheimer's, in greater numbers.

The Bangor Daily News reported this story in "Baby Boomers are more likely to spend their last years in worse health than past generations."

This has important implications.

While an individual cannot know for certain whether he or she will be one of the people who live longer and suffer from disease, individuals can play it safe and plan ahead.

The wise baby boomer would plan as if he or she will live as an elderly person for a long time and will likely suffer health complications as a result. This means that baby boomers should get estate plans that include powers of attorney and advanced health care directives. That way should they get sick or become incapacitated in their elderly years their affairs will still be handled by people of their choosing.

Reference: Bangor Daily News (Dec. 29, 2015) "Baby Boomers are more likely to spend their last years in worse health than past generations."

Family Sues to Reverse Brain Dead Declaration

Issues concerning when a person can be taken off life support did not go away when the Terry Schiavo case stopped appearing in the headlines. A current lawsuit in California highlights that the issue is still very much alive.

In December of 2013, then 13-year-old Jahi McMath checked into an Oakland hospital for routine surgery for sleep apnea. Doctors initially believed that the surgery was successful, but complications soon arose.

McMath began bleeding profusely.

She suffered from brain swelling and cardiac arrest. A few days after the surgery, McMath was declared to be brain dead by the doctors. The designation is important as when a person is declared brain dead hospitals are no longer required to provide life support or other treatment.

However, McMath's mother refused to agree to allow her daughter to be taken off life support.

After a court battle a judge agreed with the doctors and declared McMath brain dead. Her mother continued to believe otherwise and quickly arranged for her daughter to be transferred to New Jersey as that state has a religious exemption that allows families to keep brain dead people on life support for religious reasons.

For two years McMath has continued to "live" in New Jersey on life support and her family insists that she shows signs of not being brain dead, but California has refused to remove the designation. Now, her mother has filed a lawsuit in federal court demanding that California be forced to do so.

Courthouse News Service reported this story in "Family Wants Brain-Dead Girl Declared Alive."

What this case highlights is the importance of advanced health care directives, especially living wills. The one person who does not have a say right now regarding whether she remains on life support is McMath. She is a minor so her parents' wishes would take precedence over hers in any case. Adults, however, can avoid these types of situations and make their own decisions by getting living wills as part of their estate plans.

Reference: Courthouse News Service (Dec. 24, 2015) "Family Wants Brain-Dead Girl Declared Alive."

The Real Tax to Worry About

The federal estate tax might get most of the political headlines, but the truth is that it affects a relatively very small number of Americans. Of far more concern for most Americans is how the federal capital gains tax will impact their estates.

If you listen to enough politicians speak, you might come away with the impression that the biggest concern for American estates is the federal estate tax. This might lead you to believe that if your estate is smaller than the $5.45 million individual exemption, then you do not need to worry too much about how taxes will affect your estate.

However, there is a silent estate killer out there.

It is the federal capital gains tax, which can be as high as 33% and can have a devastating impact on estates that do not plan for it.

Recently, Market Watch offered some estate planning tips about the capital gains tax in "5 ways to protect your estate from capital gains taxes."

The tips include:

• Undo a Trust – Assets put into a trust to keep them out of the estate can have a greater capital gains tax cost when eventually sold.
• Upstream Gifting – If you give an asset to an older family member, that asset will receive a step-up basis for capital gains when the older person passes away.
• Joint-Exempt Step-Up Trust – These special trusts allow a surviving spouse to sell an asset after a spouse passes away without having to pay capital gains tax.
• Home-Sale Tax Exclusion – If you have lived in and owned your home for two out of the last five years, you can sell it without owing capital gains on the first $250,000 of appreciation or $500,000 for married couples.
• Like Kind Investments – Selling one type of property and using the proceeds to invest in the same type of property can allow you to delay paying capital gains tax.

To learn more about these tips for dealing with the capital gains tax visit with an estate planning attorney.

Reference: Market Watch (Dec. 25, 2015) "5 ways to protect your estate from capital gains taxes."

Charitable IRA Tax Break Made Permanent

The 2006 IRA charitable rollover exclusion was a popular tax break for wealthy elderly people and the charities to which they donate. It has been made permanent.

Seniors trying to spend down the size of an estate for estate tax purposes often find it helpful to donate to charities. Other seniors donate for philanthropic reasons.

In 2006, Congress made it much easier for many people over 70½ to make donations. They could donate up to $100,000 directly from their traditional IRAs to charity without facing income tax penalties. However, as Congress so often does this charitable rollover exclusion was not made a permanent part of the tax code. It required periodic reauthorization.

It has recently been made permanent retroactive to Jan. 1, 2015 as reported by the Wills, Trusts & Estates Prof Blog in an article entitled "Congress Makes Permanent IRA Charitable Rollover Exclusion." Of course, this does not mean the exclusion cannot be taken out of the tax code by Congress later. It just means that it does not need reauthorization to stay in the code.

While this is a great benefit for elderly people trying to spend down their estates, it is important to remember not to start the spend down process without first consulting an estate planning attorney. Dealing with the estate tax and reducing the size of an estate should be handled as part of a larger estate plan.

Using the charitable rollover exclusion might not be the best idea for everyone, so talk to an estate planning attorney about other options that might be better for you and your estate.

Reference: Wills, Trusts & Estates Prof Blog (Dec. 20, 2015) "Congress Makes Permanent IRA Charitable Rollover Exclusion."

Tax Consequences of Inheriting an Annuity

If you inherit a non-qualified annuity, then before you decide what to do it is important to understand the different options and tax implications.

Annuities have become an extremely popular tool in people's retirement plans. Like any other asset, these contracts can be the subject of an inheritance.

If they are inherited then the beneficiary needs to know what the options are for handling the annuity and what the tax consequences are. First, if a spouse inherits the annuity, then he or she can almost always continue the annuity contract as it is and thus face no immediate tax issues.

As the Motley Fool discussed in an article entitled "Tax Rules for an Inherited Non-Qualified Annuity," non-spouse heirs typically have three options, including:

• Take a Lump Sum – If an heir chooses a one-time payment, then the heir will need to pay income tax on any appreciated amount over the original premium payments the deceased made.
• Arrange for Smaller Payments Over Time – By accepting smaller period payments, the heir can avoid a large one-time income tax payment. However, income tax will still be owed on any appreciation of the annuity.
• Switch to a Different Annuity – The person who purchases an annuity can switch to a different provider without paying income tax. However, it is unclear if someone who inherits the annuity can do the same. In a private letter ruling the IRS allowed one heir to do so, but many annuity providers do not wish to rely on the ruling as it technically only applies to the person who asked for it. Some providers will work with heirs on switching providers though.

If you inherit a non-qualified annuity and have questions about what to do with it, talk to an estate attorney about these options and which is the best choice for you.

Reference: Motley Fool (Dec. 19, 2015) "Tax Rules for an Inherited Non-Qualified Annuity"

Choose an Estate Planning Attorney Carefully

Financial abuse of the elderly is a serious problem. While most estate planning and elder law attorneys can be trusted not to abuse clients unfortunately not all can be trusted.

William Edy was a respected elder law attorney in Florida. He was known for writing columns about elder law issues and estate planning. He even wrote about the financial abuse of the elderly.

However, he is no longer respected or an attorney.

On Dec. 10, 2015, the Supreme Court of Florida permanently disbarred Edy. The list of things Edy did improperly is long.

He was charged with skimming money from a client's settlement checks, charging for unnecessary work that was never completed, charging a deceased person's credit card and not maintaining a trust account to hold client funds. These are all serious ethical problems that resulted in charges that Edy financially abused his elderly clients.

The News-Press reported on this story in an article entitled "Elder law attorney rips off seniors."

As horrendous as these charges may be it is important to note that he does not represent the overwhelming majority of estate planning and elder law attorneys who do not financially abuse their clients.

When hiring an attorney make certain you can trust the attorney. If something does not seem right, then it is often a good idea to ask a friend or family member if it seems right to them. You can also ask another attorney in the field for a second opinion.

Most likely the attorney you hire will not financially abuse you, but just in case be careful.

Reference: News-Press (Dec. 21, 2015) "Elder law attorney rips off seniors."

Long-Term Care Insurance Might Not Be Worth the Headache

Purchasing a long-term care insurance policy can be extremely confusing, time-consuming and a complete waste of aspirin.

Anyone who has ever looked into it knows that the costs of staying in a nursing home are extreme. With people generally living longer more and more people are having to confront how they will pay those costs.

Because of this concern an industry arose to seemingly help pay for the costs. Insurers began to offer policies that would cover the costs. As simple as it might sound to pay for nursing home costs with a long-term care policy it is anything but a simple process.

Recently, The New York Times discussed the complexities in an article entitled "Long-Term Care Insurance Can Baffle, With Complex Policies and Costs."

The key thing to understand is that 90% of the companies that offered long-term care policies in the past no longer do so. These companies discovered it is very difficult for insurers to make money on the policies.

Those companies still in the market offer a confusing array of policies with benefits and costs that are not always easily understood. It can be migraine-inducing for people to figure out what they are getting if they purchase a policy.

It can also be a complete waste of time for a couple of reasons.

First, 40% of people who apply for the policies are turned down for health reasons. Second, the policies do not offer life coverage. They are short term policies and if your need for coverage exceeds the policy term then the money spent on premiums is wasted.

As the New York Times suggests, if you are considering long-term care insurance, it is important that you seek independent advice, such as from an elder law or estate planning attorney. That way you can be sure the policy is actually needed and can be certain of the benefits you will receive under the policy.

Reference: The New York Times (Dec. 18, 2015) "Long-Term Care Insurance Can Baffle, With Complex Policies and Costs."

Planning for Your Passion

Estate planning for complicated financial instruments and business interests is often tricky at best. However, planning for the things people are often passionate about can be the most complicated part of estate planning.

When some people think about investments they think about traditional assets. The kind of assets in which you invest depends on the hoped for return you expect (and the risks you are willing to assume). Securities and real estate are two common assets familiar to most people.

However, there are other people who also think in terms of "tangible items of personal property" when thinking about investments. For example, these people invest in art, wine, collectible toys, vintage cars and much more. In the sense that these things can be sold later for profit, they can be seen as investments.

On the other hand, there is almost always more involved when people make uncommon investments, which is why they are sometimes referred to as "passion assets." Those who invest in these assets have an emotional attachment to the objects themselves beyond their pure investment value.

Investopedia, in a recent article entitled "How to Handle Passion Assets in an Estate Plan," discussed how planning for these passion assets can be problematic. One key problem is determining whether heirs want to keep the items or want them to be sold. The answer to that question can make different ways of holding the assets better than others. For example, if heirs want to sell a passion asset, then holding it in an irrevocable trust can create a substantial capital gains tax liability. Alternatively, holding title directly can avoid capital gains taxes but can create estate tax issues if heirs do not also inherit enough liquid assets to pay the tax.

If you have invested in any passion assets, it is important that you consult with an estate planning attorney about the impact on your estate plan.

Reference: Investopedia (Dec. 17, 2015) "How to Handle Passion Assets in an Estate Plan"