Law News and Tips
PLANNING WITH IRAS
Vilbig © 2020
Many of us work all of our lives saving for retirement. Some begin at a young age tucking a little money away in an IRA, a 401(k), a 403(b), or a profit-sharing plan. Some put it off for some time because of day – to – day expenses, but most eventually save something, and when I meet with clients, if they don’t have some sort of a business, the two biggest assets they have is their house in the retirement savings.
But being frugal and saving for the future can create some issues. What do you do with a retirement account if you outlive the account? Many people (particularly guys) just say they’re going to live until they run out of money. Good plan if you know when you’re going to die. The problem is, we don’t know if we are going to get hit by a semi tomorrow or linger in a nursing home for years. We just don’t know, so we need to plan.
The simplest thing to do was to just name your spouse as the beneficiary and your kids as the contingent beneficiaries. If you have a 401(k), a 403(b), or a profit-sharing plan, federal law provides that if you name someone other than your spouse as the primary beneficiary, your spouse must consent to that.
The same rule doesn’t apply to IRAs. Under federal law, you don’t need your spouse’s consent. However, in a recent Missouri case, it was determined that a surviving spouse has rights in marital assets, including IRAs. So Missouri law now protects a surviving spouse’s rights in an IRA.
So assuming you’ve named your spouse as the initial beneficiary, on your death, he or she can roll the retirement account into his or her own name tax-free. If the surviving spouse is younger, that’s a good idea since using the younger spouse’s longer life expectancy means he or she can extend the tax-deferred growth of the account.
On the death of the second of you to die, if you’ve named your children as the contingent beneficiaries, then the assets can be divided among them and rolled over into what is called an “inherited IRA.” It used to be that inherited IRAs would last for the life expectancy of the beneficiary. In the recent SECURE Act, Congress limited the term of inherited IRAs to 10 years. It’s still a good idea to keep the assets in a tax-deferred account, it’s just that there’s a time limit.
But there’s another problem with inherited IRAs. In 2014, in the case of Clark v. Remeker, the US Supreme Court ruled that inherited IRAs are not protected from bankruptcy claims. What this means is that an inherited IRA is not protected from creditors. So if your son or daughter inherits an IRA from you and is later sued and doesn’t have insurance coverage on the matter, all of your hard earned money could go in payment of a judgment. To me, that’s a bad result.
In order to avoid that result, we typically recommend that clients name their spouse as the initial beneficiary of a retirement account, but named a revocable trust as the contingent beneficiary. In 1999, the IRS provided us with “magic language” that permits us to flow an inherited IRA through a trust. By having the assets run through the trust, they are protected from lawsuits.
If you have questions, let’s talk.
AN ESTATE PLANNING CHECKUP
Fred Vilbig © 2020
I recently met with a couple who wanted what I’ll call an estate planning checkup. They said they had a will and just wanted me to check to make sure everything was in order.
When we met, I asked to see their wills. She produced a very simple, generic will. She sheepishly admitted that she had printed it off the Internet a few years ago. In reviewing it, I saw that on her death, everything went to him if he was alive. If he was not alive, it went out right to their kids. Although it had normal (albeit brief) powers authorizing the personal representative to do whatever was necessary to take care of the estate, it did not allow for what is called independent administration.
She was surprised when I explained to her that the will would require the court to oversee and approve everything in the administration of her estate. She apparently thought you avoided probate with a will. A will is only a roadmap through probate. It doesn’t avoid probate. We then discussed ways to avoid probate.
I also talked about the problems with giving property outright to children. If they kept it in their own individual names, the assets could be exposed to the claims of their creditors. If they married and put it in joint names with their spouses, half of it could be taken in divorce. We talked about ways to avoid that.
I then looked at the signature page. She had, in fact, signed the will. There were spaces for the signatures of two witnesses, but they were blank. There wasn’t a notary block at all.
I explained to her that her will was not valid. On the death of the second of them to die, their estate would have to be administered by intestate succession (the will Missouri has written for you). They were not happy to hear that.
In order to have a valid will, there are generally certain requirements that have to be satisfied. There are some exceptions, but that will be for another column. Generally, in order to have a valid will in the state of Missouri, the testator has to be competent. Testamentary competency is very basic: you need to generally know what’s going on; you need to generally know the nature and extent of your estate; and you need to know the objects of your beneficence (that’s a fancy law school word for who your kids are). In addition, the will has to be written. You need to publish or declare that it is your will in front of witnesses. And the witnesses need to sign the will declaring that they found you to be competent and that you signed it in front of them. Although not required for a valid will, we always add a notary block regarding the witnesses’ signatures. Otherwise, on your death, we need to track the witnesses down, drag them to court, and have them prove that those are their signatures on the will.
I understand that people are trying to economize. But I have found generally that homemade wills end up costing a lot of money and causing a lot of problems.
Give me a call. Let’s talk.
A Bad Idea
Fred Vilbig © 2020
I got a call from a client the other day.His mother had died, and he had a lot of questions.
His mother and father had divorced years ago.She had remarried, and she and her new husband had had a loving relationship.Not knowing who might die first and wanting to be fair, they had verbally agreed that everything would pass to the survivor on the death of the first of them to die, and on the death of the second, everything would be split 50/50, with half going to her son and half going to his children.They didn’t put that agreement in writing, and everything was owned jointly.They did both execute wills that included those provisions, but that was it.And therein lies the problem.
When a married couple own property jointly, on the death of the first of them to die, everything passes to the surviving spouse.There is no need to probate anything since there is nothing to probate.If you’re talking about real estate, you do need to file an affidavit of death to clean up the title.With regard to financial assets, you probably need a death certificate to show to the financial institution.But no probate.
And when the assets pass to the surviving spouse, the surviving spouse is free to do whatever they want with them.My client said that his step-father was talking about putting the accounts in joint names with his son.The idea was that he wanted his son to be able to pay his bills.But joint ownership between non-spouses can create problems.In the case of bank accounts (they have special rules that apply to them), his son would be able to use that money to pay his bills.But his son would also be free to drain that account.Or if he got sued and lost, the other party could attach those funds to satisfy his or her judgment.In the case of a brokerage account, both joint owners would need to jointly withdraw funds, so he would be no better off than if the account was still in his name.And then on the death of the step-father, all of the assets would pass outright to the surviving son. There would be no probate, and the will that split things 50/50 would prove to be a useless piece of paper.
The best thing that my client’s mom could have done would have been to enter into a pre- or post-nuptial agreement.She and her husband could have agree to split the assets in writing just like they had verbally agreed to do.
But now, my client was in a sticky situation.Although he had a good relationship with his step-father, his step-father was free to do whatever he wanted to do with the assets.I told him that his step-father could put the assets into a trust, and that would avoid probate, allow for his son to take care of him if he became ill, and incorporate the testamentary disposition play he had agreed to with his wife.If he didn’t want to do a trust, he could keep his will and execute a power-of-attorney allowing his son to pay his bills, but not put everything in joint names.There are ways to salvage the situation to achieve what the spouses had agreed to, but it will take some cooperation.
Fred Vilbig © 2019
It’s November again. How did that happen? Wasn’t Christmas just last month? It seems that up to a point, the older you get, the faster time goes. I think that’s because when you’re young, one day represents such a large portion of your life. When you get older, each day is just a miniscule fraction of your life, so they seem to fly by fast. It’s all relative. That is, up to a point. You have to stay active. Once you stop doing things, then time seems to really drag, but that’s a whole other story.
As I was saying, it’s November again, and the holidays are just around the corner. As I’ve mentioned before, Thanksgiving is my wife’s favorite holiday. Christmas has the frenzy of shopping, Easter has eggs, and the Fourth of July has fireworks with a possible trip to the ER. But Thanksgiving is about cooking a really good meal (something my wife enjoys and is really good at) and sitting around the table with family.
When we get the family together for meals, my wife and I tend to listen a lot. The kids talk all about things that they did when they were young, and we knowingly bob our heads as if we knew all about them all along. After they’re gone, we compare notes and have to admit to one another that we had no idea they did those things. How did they ever survive? But here they are, and we are actually grateful. Things aren’t perfect, but we’re still grateful.
But there is also a nostalgic, maybe even a sad, element to the holidays. I’m always reminded of the holidays when we were kids. We’d always end up at my grandparents’ house with my cousins. We actually spent a lot of time with her cousins. I thought everyone did, but I have since learned differently. We lived in Texas, so we played football in the backyard in shorts. Great fun. I’m really grateful for the time we had as a family when we were young.
But it also makes me sad. My grandparents, aunts and uncles, and even my parents have all passed away. My kids often do things, and I think how much my parents would’ve enjoyed sharing that with them.And we are not getting any younger either. For those of us who are baby boomers (I was apparently at the tail end), we have to admit that we have more aches and pains than we’ve ever had before. A sure sign of aging.
And with aging, we need to plan. It’s the prudent thing to do. We don’t want our kids’ memories of us to be clouded by the confusion and uncertainty of having to take care of us without any planning on our part.
This is strange territory for many people, but I’ve tried to make it easier to understand through my book, You Can’t Take It With You. To learn more about the topic, either go online or contact me to order a book. And then I’d love to sit and talk with you about planning to make it easier for your kids.
AT THE END
Fred Vilbig © 2019
End-of-life decisions are tough. Although not always, they tend to be final. Even when we make the right decision objectively, we always second-guess. I’ve had to make those decisions for clients who had no close family members, and even that is tough. But when it is a close family member, it can be heart-wrenching.
I was recently reminded of that with my mother-in-law. She lives in an assisted living facility, and she has dementia. My wife (she’s not going to be happy with me for mentioning her in one of my columns) goes by almost every day to see her and to visit with almost all the other residents. They all light up when she comes in the room.
Some time ago my wife noticed that her mom was getting more and more tired. She would go to bed around six and sleep late. That was unusual for a girl who was raised on a farm, rising early each morning to milk the cows. We knew something was up.
One Friday evening we were heading out of town when her cell phone rang. It was the facility. They had called an ambulance. They said grandma had been exhibiting stroke like symptoms. We met her at the hospital. After examining her (and she was as mad as could be – “Leave me alone!”), the doctor told us that she was having an arrhythmia, one chamber of her heart wasn’t coordinating with another. The solution was a pacemaker. Without it, she would (in a sense) slowly drift off to sleep and eventually die. With it, she would live for several more years.
My wife faced a dilemma. Grandma’s friends have all pretty much passed away. If any are still alive we don’t know it. Grandpa died a few years ago. As I mentioned, my wife visits her almost every day, and we take her to church and out for brunch every Sunday, but grandma is terribly lonely. The doctors were pushing hard to implant the pacemaker.
My wife’s dilemma was this: does she pass on the pacemaker so her mother could die peacefully and join her beloved husband and friends in Heaven; or does she approve the pacemaker and consign her mother to at least a few more lonely years. That is a tough dilemma. In the end, after consulting with her siblings, she approved the pacemaker. But whenever grandma asks for grandpa (she forgets), I know it breaks her heart.
However, it needs to be noted that the only reason that my wife could make these kinds of decisions was that her mother had designated her as her surrogate for health care decisions using a health care durable power of attorney (a “DPOA”). Without taking the time to execute a healthcare DPOA, all of those decisions would’ve been left up to the hospital. I guess it’s normal, but it seemed as if since the doctors could fix the problem, for them at least, there wasn’t even a question. In Missouri, it is presumed that a person wants all of the life extending procedures and machines unless there is clear evidence to the contrary.
So if you want to retain some control over these kinds of decisions, you absolutely need to have a health care power of attorney authorizing a trusted loved one or friend to make these decisions when you are no longer able. In addition, a living will gives guidance to your family and friends regarding these final wishes and this can be very comforting.
Please feel free to call me if you want to set up an appointment to discuss this further. It’s the right and responsible thing to do.
Fred L. Vilbig © 2019
Many years ago the firm I was with was approached by a Chicago law firm about merging. I admit the managing partner of the firm (I’ll call him Joe) at a wedding in my wife’s hometown. He seemed nice enough, but pretty intense.
The next week he called me. We started the process of investigating a possible merger. This is called “due diligence.” There were meetings between the partners, financial records review, and overall philosophies to consider and compare. It takes a lot of time and effort to think through something like that. You don’t want to make a mistake since undoing a merger is even worse than doing one.
We were almost done with all of that due diligence at the beginning of summer. Joe told us that we would need to take a short pause because his partners were making him take a vacation. Evidently, he hadn’t taken a vacation in years, and his partners were concerned about the amount of stress in his life. He and his family were going to Florida. He said he’d be in touch when he got back.
I was expecting a call after about two weeks. Nothing. Three weeks went by, and there was still nothing. Soon a month had passed, and still nothing. Finally, I called to see what was going on. I got his secretary, and in a very somber tone, she said that she would have someone call me back.
A day or so later I got a call from one of Joe’s partners. He told me that while sitting on the beach on vacation, Joe had suffered a massive heart attack and had died. We were stunned, to say the least. Evidently, the stress of taking a vacation had been too much for him and his heart.
Vacation season is one of those times of the year when people need to think about estate planning. If parents with small children are traveling alone, they need to make sure that everything is in order. When kids go on vacations alone or study abroad for the summer, they at least need to have a power of attorney - to handle financial matters when they are out of town or unconscious - and a medical directive - so someone can make medical decisions when they can't.
There is an old saying - "An ounce of precaution is worth a pound of cure." So a little planning can go a long way. Give me a call.
HOME FOR THE HOLIDAYS
Fred L. Vilbig © 2018
The holidays are great. The food, getting together with family, other people’s decorations. Yes, I said other people’s decorations. We have a peak on our roof that is about 30 feet up, and it must be at least 100 feet down. Yes, I’ll get the decorations up, but it is a death defying feat if I say so myself.
So where was I? Oh, yes: the holidays. My wife’s favorite holiday is Thanksgiving because it just involves cooking a big meal, and she’s a great cook. That’s lucky for my kids since I am not such a great cook, and it really stresses me out trying to get everything on the table at the same time while it is still hot.
But either at Thanksgiving or Christmas, the family gets together for a big meal. The out-of-town kids fly or drive in, and the in-town kids come over for a full house like it used to be. It seems that our holiday dinners last a long time with people staying around the table reminiscing about things. My wife and I often listen to the stories about what the kids did when they were young. Later we’ll check with each other and find out that neither of us knew anything about those things. Often we’re surprised, but at least no one got seriously hurt.
In addition to all of the good times that we have at the holidays, they are also a good time to check up on family members, particularly our parents. For some, we see our parents on a regular basis. We may not notice the little, subtle changes that may be taking place. For others who see their parents only once or twice a year, the accumulation of these little changes can be shocking.
When you’re home for the holidays, you may want to pay attention. Are they eating right? Are they dressing appropriately for the weather? As we age, we all get a little forgetful, but are they getting forgetful to the point that it is a problem? Have they gotten lost when going to the store? Do you see big changes in habits that seem to be ways of compensating for something? Did they use to be social, and now they are a homebody? Do you see big changes in their personality?
As we age, there are changes, but the question is whether they are creating problems. If not, it might still be a good idea to check to make sure that everything is in order. Do they have a will and/or a trust? Do they have a durable power of attorney? Do they have a medical directive that includes a medical power of attorney and a living will? And it’s important for the children to know who is going to be primarily responsible if something happens.
These may be tough, maybe even awkward questions to ask, but they are important. Surprises are not welcome, particularly when it is too late to fix things. In prior columns, I have written about times we have fortunately discovered problems before it was too late. And in other columns, I have written about those times we were too late to fix the problem directly, but we were able to find ways to work around the problem. But there are times when we discover the problems too late to fix other than by going to court, and the client ends up paying a lot of money in legal fees. So even though the questions may be tough and awkward, not asking them can end up costing a lot of money and aggravation.
So enjoy your holidays, but you might want to ask some questions … before it’s too late.
HEALTH CARE PRIVACY
Fred L. Vilbig © 2018
HIPAA is the Health Insurance Portability and Availability Act. Many people refer to it as the “Privacy Law.” It’s a thick law (something like 2 inches), and it covers more than just protecting medical records, but that’s the provision that impacts people the most.Most doctors and hospitals have interpreted it to mean that without (written) permission, they can’t talk to anyone about anyone else’s medical condition. One of my former partners had to read the whole thing, and he didn’t think that was what it required, but that’s not what the lawyers for the health care industry thought.
When the law was first passed, medical providers became like Sergeant Shultz – “I know nothink!” One father (who happened to be an attorney) got a call from a hospital in Denver. His daughter had been skiing in Colorado, and the hospital told him he needed to come out. When he asked what was wrong, they said they couldn’t tell him because of HIPAA. Then there was the couple in a car accident. The husband was banged up, but the wife was unconscious and needed surgery. They asked him to sign an “informed consent.” When he asked what was wrong and what they were going to do, they said they also couldn’t tell him because of HIPAA.
Medical professional have relaxed these strict standards somewhat, but it can still be an issue. If you want medical professionals to be able to talk to your loved ones when you are unable to give consent, you need to execute a HIPAA authorization of some sort. Even more, it would be better to sign a medical power of attorney with HIPAA authorization in it allowing medical professionals to talk to family members. We usually do a Medical Directive which is a combination health care power of attorney and living will that includes broad HIPAA authorizations. We also do a separate HIPAA authorization (perhaps overkill) allowing medical professionals to talk to family even when you’re not incapacitated.
When I talk to clients about Medical Directives, they often tell me that they already have one. Upon admission to a hospital, patients are often asked (if not required) to sign a HIPAA release. They vary from place to place, so I can only talk about the ones I have seen, but in some instances (not all though) the releases are very narrow. They only apply to that particular stay at that particular hospital or doctor’s office. You can use those forms at any other time or any other place. So if you have a serious medical event, that HIPAA authorization won’t do you much good.
So even if you already have some sort of a HIPAA authorization, you might want to look at it. And if you don’t have one, you should think seriously about getting one. When you need it, it’s too late to sign one.
Dementia and sleep disorders often go hand in hand. People who live with dementia often experience poor sleep as they progressively lose cognitive function.
It's common for dementia patients to experience longer sleep latency, increased sleep fragmentation and a decrease in sleep efficiency and total sleep
time. Some experience confusion and wander at night, making it difficult to get good rest.
How Sleep Routines Help Dementia Patients
At any age, bedtime routines support healthy sleep. When we maintain a regular bedtime routine, going through that routine tells your body it's time to sleep. This sleep schedule happens subconsciously, so you don't have to think about it or even recognize that it's happening to work.
The subtle cues of going through a bedtime routine can help dementia patients orient themselves to the time of day. It offers calming reassurance that can make it easier to relax and fall asleep.
Developing a Bedtime Routine for Dementia Patients
Keeping a regular bedtime routine is essential to improving sleep in dementia patients. Consider these tips for supporting dementia patients with a bedtime routine.
Start forming nighttime habits: What you do in your bedtime routine isn't as important as simply doing it, each night without fail. The simple practice of going through the same steps every night before bed will help induce sleep and make it easier to get settled down at night.
Set a regular bedtime: Going through your bedtime routine at the same time each night offers reinforcement and reassurance that it's bedtime and time to wind down for the night. Try to help your patient go to bed at the same time each night and wake up at the same time each morning. A regular bedtime practiced consistently can offer a sleep cue that helps dementia patients feel sleepy and ready to go to bed at the appropriate time.
Avoid disruptive activities: Abstain from stimulating activities before bedtime as part of your routine. Turn off bright lights, and turn off the TV or other sources of noise. Offer a light snack, but be careful to avoid heavy meals or food that contains excessive sugar, fat, or even caffeine, as these can interfere with sleep.
But, be active during the day: Although stimulation at night isn't a good idea for dementia patients in need of sleep, activities during the day are an excellent choice. One option is to start your bedtime routine in the early afternoon, practicing light exercise such as walking or stretching.
Choose an enjoyable evening activity: Decide on a calming evening activity that can be done to wind down before bed. Good ways to wind down include crocheting or reading books aloud. Avoid watching TV, as the bright screen can interfere with maintaining a healthy circadian rhythm.
Practice massage therapy: Release tension built up throughout the day with a gentle massage. It can be practiced as the patient is lying down in bed, or in a chair before starting the rest of the bedtime routine. Massage can help dementia patients relax and improve circulation.This article is written by our Guest Blogger from: Tuck -Everything You Need for A Good Night's Sleep
Tuck Sleep is a community devoted to improving sleep hygiene, health and wellness through the creation and dissemination of comprehensive, unbiased, free web-based resources. Tuck has been featured on NPR, Lifehacker, Radiolab and is referenced by many colleges/universities and sleep organizations across the web.
A CLIENT LETTER
Fred L. Vilbig © 2018
Let me commend you on what you are doing. Having helped my wife care for her parents as their health and mental capacity declined, I know how physically, intellectually, and emotionally draining this can all be. Growing up, we never really think about the kinds of things you have to deal with now. Some people walk away. Some people delegate the duties. Some people just want to end it all. But you are caring for your mother at what is probably the most difficult time in her life, and also of your life up to now. As I said at the beginning, I commend you.
That said, I wanted to answer some of your questions. The first was whether having your mom declared incompetent created any problems for you personally. To answer that, I need to define what I mean by declaring your mom incompetent.
If she had not done any planning, that would mean getting a court involved. It’s not the end of the world, but it is sort of a pain. You’d need to get a doctor to answer a formal set of questions (“interrogatories”) to say that your mom can’t perform certain basic functions of daily living. For instance, can she remember to take her medicine at the proper time? Does she know to wear a coat when it’s cold outside?
Once you have the interrogatories, you have a hearing. Assuming all goes as planned, the judge would then put you in charge of her finances (a conservatorship) and her person (a guardianship). You would next need to get a court order authorizing you to spend money, and then you have to file an annual financial report with the court.
Fortunately, your mom did all the necessary planning. She has a general durable power of attorney, a medical directive (which includes a medical power of attorney and a living will), and a trust. Although people can put others in charge of things even while they’re competent, your mom (as most people) wanted to retain control as long as she could. So in her case, in order for you to take over, you just need a doctor to certify that she is not able to perform some of the necessary basic functions of daily living.
Just as a caution to you, although getting that kind of certification from a doctor used to be fairly easy, I have noticed in recent years that doctors have become more cautious. They are often reluctant to make that certification. However, given the right circumstances, they will.
Once you do get the certification, you can pay your mom’s bills and make decisions regarding her care. There is no need for any court proceeding. I know you were worried about having to testify, so I’m assuming that is a relief.
I now want to return to your main question about liability. The doctor’s certification does not impose any additional personal liability on you. You are basically already doing what needs to be done. With the certification, you will just have the proper authority to do it. And you can do everything with your mother’s assets, not yours. You will have no additional personal financial liability for your mom.
Once again, I want to commend you on what you are doing. Even though it can be very challenging, it is the right thing to do. Our parents took care of us when we were young, and now it’s our turn. Life is funny that way.
Let me know if you have any more questions.
Fred L Vilbig