Hawaii Estate Planning Blog

How Probate Can Get Expensive

The story of Geraldine Webber's estate has been followed closely on several estate planning blogs. The gist is that Webber was an elderly woman who met an on-duty police officer named Aaron Goodwin. Although Goodwin had a wife and children and was much younger than Webber, it appears that she became enamored with him.

She rewrote her will to leave Goodwin a $2 million inheritance.

The will was challenged by a group of Webber's friends, two hospitals, a city, and a school on the basis that Goodwin had unduly influenced and taken advantage of her. The challengers won the case.

However, as Seacoast Online reports in "Doc charged $70K for losing testimony in cop's inheritance case," testimony from one witness came at a steep cost for the estate.

A doctor, who was hired by the estate to serve as an expert witness, concluded that Webber was competent and not suffering from dementia at the time she signed the will.

The doctor, who reached his conclusion by reviewing medical records and visiting Webber's home, had never met her. For his services to the losing case he is asking to be paid $70,120 by the estate. A judge will have to approve the amount.

And that is just one way that probate can get so expensive.  There is no "one size fits all" solution to avoiding probate, but probate avoidance should be one of the goals of your estate plan.  Your trusted advisors can help you pick the alternatives that will work best for your situation.

Are Smaller Inheritances a New Trend?

Due to demographic changes and changing economic fortunes, older Americans increasingly have to transfer money to their adult children to help support those children. Barron's, in a recent article titled "Boomers Spend Their Kids' Inheritance -- On Supporting Them," reports that intrafamily transfers have increased significantly in the last few years.

The article is a good read for anyone interested in retirement and demographic trends.

For estate planning purposes, this trend could create some issues. For starters, if the money is being spent now, then it obviously cannot be part of the estate later and children might receive smaller inheritances than they are expecting.

What if one child receives more support from the parents while they were alive than another child? This could lead to bitterness and even fighting over the estate. This is likely to happen if the estate plan divides what is left between the children equally, even though one or more children received money along the way.

Parents who are helping to support their adult children now should speak with an experienced estate planning attorney about what that means for their estate plan.

No parent wants a family feud as his or her legacy.

Beware "Nursing Home Compare"

Nursing Home Compare, a website accessible through our Federal government's Medicare website, provides star-based ratings for all licensed nursing homes in the U.S.--including nursing homes in Hawaii.  These ratings are even adopted by U.S.News & World Report in its listing of the best nursing homes in Hawaii.  While these rankings may be the best currently available anywhere, BEWARE that they do not guarantee a good experience for you or your loved one. 

According to a recent New York Times article, the star system is largely based on self-reporting, and the system can be "gamed" by nursing homes in order to make themselves look better than they really are.  The article details how a 5-star California nursing home in California has been fined $100,000 relating to the 2006 death of a resident and was the subject of more than 100 consumer complaints between 2009 and 2013.

So where do you go for information?  A recent Wall Street Journal article provides some helpful guidance, but it also refers you to the problemmatic Nursing Home Compare website.  Just remember that there is no substitute for actually going to prospective nursing homes, interviewing the staff, observing caregiver-resident interactions, and asking trusted friends and neighbors about their real-world experiences with those nursing homes.

Retirement Truths

You'll probably retire earlier than expected. Although this sounds like a dream, it usually isn't. It's important to be aware of variables such as the size of your retirement nest egg and how many years you'll be saving before withdrawals start. The Wall Street Journal reported in a recent article titled "Five Myths About Retirement" that about 22% of workers say they expect to wait until age 70 to retire, but only 9% of retirees actually retire at that age.

It's not easy to get back into the workplace. Retirees may find it difficult to find new work. About two-thirds of retirees say they plan to work in retirement, but just 27% report actually doing so. Much of this drop-off is for the same reason it's more difficult for older workers to find jobs in general. This forced unemployment typically means they will try to find jobs with the same job skills. However, these retirees can't compete with younger and more socially savvy job seekers. Further, employers aren't eager to 'pay the price' for the experience these days. The article also notes that for some, the very health issues that prompted early retirement in the first place limit their ability to work.

You may regret buying that second home. A dream of some retirees is to buy a second home to live in part-time, and eventually sell their primary home. The advice from advisers is "Don't do it." They can be expensive, a hassle, and a mistake, the article says. Who needs the hassle of frozen pipes, neighbor disputes and volatile housing values? This issue is compounded by the fact that retirees age and become less able to take care of one house, let alone a second.

Medicare doesn't cover what you think it does. Health costs are a major issue for just about every retiree, but many individuals assume incorrectly that once they reach 65, Medicare will take care of everything. Not true. Traditional Medicare covers only about 48% of an enrollee's health costs on average. There are routine costs Medicare usually will not cover, such as eyeglasses, hearing aids, and dental care. Retirees are still required to pay deductibles, which can add up with any chronic or serious illness. The biggest problem: Medicare doesn't cover the cost of a long-term care facility or of home health-care aides. According to the article's sources, the average Medigap premium was $2,200 a year in 2010. However, premiums vary by age. For example, at 80, beneficiaries paid 52% more than 65 year-olds. And here is a critical point:  Medigap policies won't cover nursing home care.

Your budget may be unrealistic. A critical element of retirement planning is determining how much money you'll need to maintain a comfortable standard of living. Many retirees assume that they'll spend less after they stop working. The article cautions that while lower taxes and the end of retirement account contributions will typically lower income needs, retirees often don't take into account the general rise in out-of-pocket spending.

It pays to talk with your trust advisors about your specific situation.  They can give you tips and advice that will help you avoid retirement pitfalls.

What will they do with my body after I’m gone?

You have probably seen the news reports about the running legal battle between Kerri Kasem, the daughter of the legendary Casey Kasem, and Jean Kasem, Casey’s widow.  While Casey was alive but in failing health, the battle was over his care.  Now that Casey is gone, the battle has switched to what will happen to his body.  According to a July 24, 2014 report published in the New York Daily News, the latest chapter in this saga has seen Casey’s body shipped to Montreal, the hometown of a gentleman with whom Jean has allegedly been “romantically linked.”  Meanwhile, Kerri Kasem claims that her father had no connections with Montreal and that he had told a friend that he wanted his body to be buried in Southern California.

You may have heard other stories about family members feuding over similar issues.  One faction wants the dearly departed’s body to be cremated, and another faction wants the body to be buried.  What does the funeral home do in such circumstances?  Until recently, undertakers had no choice but to wait on the sidelines until the dust kicked up by the family ruckus settled back to earth and a consensus was reached within the family or one side or the other obtained a court order.  In the meantime, the body of the decedent (which is lawyer talk for “dead person”) did anything but “rest in peace.”

Here is the good news:  Hawaii law now allows you to state precisely who has legal authority to make proper disposition of your remains after your death.  Chapter 531B of the Hawaii Revised Statutes, which became effective in April of 2013, says that you may “provide written directions for the location, manner, and conditions of disposition” of your remains.  The law also says that if you would prefer, you can appoint the person who will have the last word about your final resting place.

The law says that you can direct the “disposition” of your remains in your Will or your revocable living trust agreement, or by way of a notarized written statement of your wishes.  If you want to appoint someone to be in charge of the “disposition,” you can do that in a notarized document (which could include your Will or your trust agreement).

Be sure to address this delicate issue as part of your estate plan.  The directions you leave can be as simple or as elaborate as you would like, as long as they are otherwise lawful and as long as your estate can afford to pay for carrying them out.

We Elected These People

Congress has lots of tricks for making us think that they are actually accomplishing things for us when, in fact, they are digging a hole from which we may never be able to emerge.  Exhibit A:  "pension smoothing."  Sounds, well, smooth.  What is it?  It is a gimmick whereby Congress makes an "emergency" appropriation to fund the crisis du jour and funds it with (are you ready for this?) . . . NOTHING.  How does that work?

Congress tells the big corporations "look, you can postpone funding your pension plans so you can keep more money in your coffers to spend on expansion or shareholder dividends or anything you want.  Of course, you will have to catch up someday, but don't worry about that now.  Good times are ahead, and you should have no problem catching up."  Having some extra money to spend is quite an enticement.  What's in it for Congress?  Well, if the big corporations don't fund their pension plans, they don't get a deduction for contributions they didn't make, and corporate income tax collections go up.  For the time being.

But there will come a time when the contributions "must" be made, and when (actually, IF) they are made, the corporations will get a deduction for making them, at which time corporate income tax collections go down.  Get it?  NO REVENUE HAS ACTUALLY BEEN RAISED.  Congress has "funded" the fix for the current crisis with smoke and mirrors.  It has effectively borrowed money from the future retirement of hard working citizens like us.  Wait a minute.  Some of them may be us.  You can find a better explanation for this chicanery here.

Will all of those corporations be able to meet their pension obligations when the time comes?  Experience tells us they will not.  Congress says that we will worry about that when the time comes.  For now, let's just eat, drink, and be merry.  No, let's not. 

Now is the time to take action.

Let's take responsibility for why this stuff happens.  We, the people, elected the people who do this to us.  Why don't we give some serious thought to electing Senators and Congresspersons who will treat us as their constituents rather than their personal piggy banks?

Thanking those who have made the ultimate sacrifice for our freedom

One of the more moving local Memorial Day observances is the lantern floating ceremony at Ala Moana Beach Park.  Each year, thousands of kama`aina and visitors make their way to this solemn occasion of prayer and remembrance.  If you have never been, it is worth your time.  Find out more at the Lantern Floating Hawaii website.  The ceremony has Buddhist roots, but people of all faiths are welcome to participate.  It starts at 6 p.m.  Weather permitting, it might be a good way to remember and honor a departed loved one.  A glorious sunset may be an added bonus.

It's That Time Of Year ... Graduation!

Spring time means graduation. Graduation may mean college.  What's the plan?

USA Today published an article a while back that's worth repeating in case you missed it. Titled "Prepaid college tuition plans: Know this before you invest," the article explains how prepaid college tuition plans can enable you "pay now" and minimize the rising cost of tuition. 

A prepaid tuition plan allows families to buy future tuition credits at current prices; if you buy shares worth one semester's tuition when your child is young, those shares should always be worth one semester's tuition regardless of how much rates rise.

Unfortunately, many states have ended their plans or changed them as their budget deficits grew.  Facing shortfalls, some states bumped up prices by charging larger premiums above the cost of current tuition, while some available plans don't offer guarantees.

College financing experts quoted in the article tell parents and students to review the specifics of their state's plan carefully.  Advocates of the tuition plans call them "peace of mind programs" and say they still deliver on their promise.

Speak with your trusted advisors to see what college funding strategy would work best for your specific circumstances.

Reference: USA Today (June 8, 2012) "Prepaid college tuition plans: Know this before you invest"

Fast And Furious Star Slowed Down To Plan Ahead

Often, the lessons we learn from celebrities are of the cautionary variety.  Interestingly, Paul Walker of Fast and Furious fame left a positive example of planning ahead for your inevitable demise, even if your demise does not seem imminent.  Forbes recently pointed out some of the sound planning Walker did at an early age and before much of his stardom in an article titled “Five Estate Planning Lessons From The Paul Walker Estate.”

For example, Walker left all of his assets to a revocable trust.  This means that he probably minimized the impact of probate on his estate, and he may have enabled his heirs to sidestep probate entirely.  Revocable living trusts are effective estate planning tools in that they help your family avoid unneccessary trips to court, and they can provide for management of assets passing to young or immature beneficaries.  Avoiding the courts means avoiding the limelight and unwelcome attention on your loved ones.

Many young people live life as "fast and furious" as they can, and they and don't think about what inevitably awaits.  It is a wise (and rare) young person who takes the time and expends the effort to develop an estate plan.  It is a foolish (and all too common) older person who puts off planning until it is too late.

Reference: Forbes, February 10, 2014: “Five Estate Planning Lessons From The Paul Walker Estate”

Make Sure You Know What You Want In Your Will, and Make It Clear

How many people really know you? Your spouse, parents, best friend, or business partner?

These people and more may try to “help” with your estate after you are gone, unless you leave a clear and unambiguous estate plan that specifically states your intentions for your belongings and describes all the details of how you want your assets administered and distributed.

Consider the case of the late Nelson Mandela, which was discussed in a recent Forbes article titled “Will Nelson Mandela's Heirs Tarnish His Legacy Through Greed And Fighting?”

Closer to home, someday you may have close relations or friends trying to divide up your assets in a way that you never intended. You may even have relatives you've never met claiming a right to some or all of your estate.  Others who feel they know you the best might try to help interpret your estate plan to their own benefit.

Avoid hard feelings, strain on already delicate emotions, and fighting among your relatives and friends by carefully thinking through your estate plan with the input of trusted advisors.  And then set out your plan in clear and unambiguous documents that will accurately convey your wishes.

Reference: Forbes, December 13, 2013: “Will Nelson Mandela's Heirs Tarnish His Legacy Through Greed And Fighting?”