The Estate Planning of Prince, Harper Lee, and David Bowie

In 2016 so far, we have said farewell to some of the most legendary names in music, film, literature, and television, including Prince, Harper Lee, and David Bowie — all within the first four months of the year. While nothing can make the horrific loss of these legends better for their families, friends, and fans, we hope they have taken the proper steps with their estate planning, to put less stress on loved ones.

Today, we will take a look at these celebrities to see how well they planned, and hopefully learn a thing or two from their proper, thoughtful planning, or what not to do from their mistakes.

Nelle Harper Lee

Nelle Harper Lee, better known by her pen name Harper Lee, died on February 18, 2016 at the age of 89. She was a novelist and a Presidential Medal of Freedom recipient best known for the Pulitzer Prize-winning 1961 book, To Kill a Mockingbird. She’s also the author of a sequel titled, Go Set a Watchman, which was controversially published in 2015, 60 years after she wrote it.

Lee never married and had no children, and her parents and siblings died years ago. Lee has a nephew, named Hank Conner. She lived in her hometown of Monroeville, Alabama until she died, and it is the place where she created her nonprofit called the Mockingbird Company.

At the time of her death, the value of Lee’s estate wasn’t immediately clear. However, paperwork from an old lawsuit indicated that she earned nearly $1.7 million during a six-month period in 2009. And that’s before the release of her second book last year, sales of which were set to total $40 million.

So, what will happen now to the legendary writer’s earnings, which will likely continue to grow as millions read her works?

Raley L. Wiggins, an estate planning attorney in Montgomery, Alabama believes that Lee probably didn’t die without her affairs in order, since the writer’s father and sister were both practicing lawyers (and her estate has been involved in multiple lawsuits). And, given her desire for privacy, he suggested that Lee may have opted for a trust rather than a will. Why? Wills become public record when they are submitted to probate court, whereas trusts just get taken over by someone else. (In Lee’s case, Tonja Carter, Lee’s lawyer, is apparently the trustee of her trust.)

In addition, Lee once publicly referenced having a will, but only her friends and family know for sure, since she was a private person whose last formal interview was in 1964.

David Bowie

On January 16, David Robert Jones (known as David Bowie) died at the age of 69 from liver cancer.  He was a British singer, artist, actor, and Rock and Roll Hall of Fame inductee with a five-decade glam rock career, five platinum albums, and roles in Labyrinth, The Last Temptation of Christ, and The Prestige. He was survived by his wife, Iman, their 15-year-old daughter, Alexandria, and a son from his first marriage, Duncan Jones, who is a film producer.

Similar to his approach to music, his estate plan was creative in the way it preserved his assets for his family. After nearly experiencing bankruptcy, Bowie took charge of his finances by selling an interest in his archive of music. Investment banker David Pullman helped Bowie develop “Bowie Bonds,” which permitted him to sell a 10-year investment, which functioned like an annuity, and yielded a fixed rate of return of 7.9 percent. The sale price was $55 million.

Pullman revealed that Bowie was curious about estate planning when he was much younger, and wished to make certain that his assets were transferred to his family. He prudently carried out the Bowie Bonds transaction for the purpose of tax savings, and to ensure that his estate would realize advantages from his music catalogue.

As far as his assets go, it was reported that Iman Bowie will in all likelihood receive the bulk of Bowie’s estate, which is believed to be approximately $200 million, excluding the predicted rise in sales that will continue in light of Bowie’s death. David Bowie’s children will also receive significant bequests. Considering the accounts about his sophisticated estate planning, David Bowie probably used one or more trusts, which may have increased the value of assets he left to his heirs in a way that reduced estate taxes. In addition, the use of trusts, rather than only a will, allowed his assets to be transferred confidentially, and without a probate proceeding, as the details of probate proceedings are public.

Prince

Last week, Prince died at age 57. He was a legendary musician and actor whose music spanned three decades, many instruments, and numerous genres. His body was discovered at his Paisley Park compound in Minneapolis, Minnesota. No cause of death has been determined, but a week prior, his private plane make an emergency landing when he became ill with the flu.

Prince’s parents have been deceased for more than a decade. He had six siblings from the same father, but it’s unclear how close he was with the ones still alive (at least two have died). He was married and divorced at least twice. He reportedly had one child — a son — who died one week after being born due to a genetic cranial ailment known as Pfeiffer syndrome.

At this point, it is believed that Prince died intestate (or without a will). This was confirmed yesterday by Prince’s sister, Tyka Nelson, 55, who indicated in probate documents filed with the Carver County District Court in Minnesota that her brother died without a spouse, children or surviving parents, and that she “did not know of the existence of a will.” According to Minnesota law, as in most states, in the absence of a will and without having a surviving spouse, with no descendants and no living ancestors, the estate goes to his brothers and sisters (and to the children of the deceased siblings) in equal shares.

Prince’s estate is worth approximately $300 million, according to the Celebrity Net Worth website. That figure could grow exponentially if any of his unreleased music sees the light of day. If history is any indication, when a legendary musical performer dies, there is sure to be a legal battle over all of the above. However, this may be a non-issue, since Prince was a faithful Jehovah’s Witnesses, and some have speculated that he wished to leave all of his money to the church (although, it is unknown if this is documented anywhere).

Lessons Learned

Harper Lee and David Bowie appeared to have taken the proper steps with their estate planning. Prince, on the other hand, may have died without planning in place.
Had Prince done proper estate planning and used a Living Trust, then his estate wishes would be private and not in the public eye.  The cost of settling a Living Trust range anywhere from less than 1% to 3% of your assets — much less than the costs of probate, which is another huge advantage of the Living Trust.

In the past, we looked at other celebrities, whose estate planning you can also learn from, as follows:

• Amy Winehouse didn’t have an Estate Plan, leaving behind a $6.7 million estate;
• Whitney Houston didn’t have a Living Trust and her Will was filed publicly in probate court;
• Michael Crichton didn’t update his estate plans, leaving his wife and baby empty-handed;
• Etta James didn’t have a Durable General Power of Attorney, causing a father/son feud in court;
• James Gandolfini left his heirs $70 million and a hefty tax bill;
• Philip Michael Hoffman hadn’t updated his estate plan in 10 years, leaving his companion $35 million and a hefty tax bill, and his young daughters empty-handed;
• Robin Williams put a lot of thought into his estate planning, and made some wise decisions. For instance, he was very careful with the money he left his children, splitting their trust funds into three equal shares that they will each receive when they turn 21, 25, and then 30.

We advise that our clients should almost always use a Living Trust as their primary Estate Planning tool, in order to protect assets at death from having to go through the nightmare of probate.  A Will allows you to direct who receives your assets (i.e., who are your beneficiaries) and who manages your estate (i.e., who acts as your executor), but a Will does NOT protect your assets from becoming public knowledge and going through probate.  Only a properly-funded Living Trust protects your assets from going through the nightmare of probate.

Please keep in mind that a Living Trust does always not eliminate the need for a Will. A Pour-Over Will is still important to pass on any assets you have not transferred to the trust.

Estate Planning is Important for Everyone

We here at The Law Firm of Evan H. Farr, P.C. have strategies in place to help all types of people plan for themselves and their loved ones (whether or not you are rich and famous . . . and most of our clients are not!) With advance planning, each person can retain the income and assets it has taken a lifetime to accumulate and the peace of mind that their child(ren)’s needs will be adequately and properly addressed. If you or members of you family have not done Incapacity Planning or Estate Planning, or if a loved one is beginning to need more care than you can handle, please contact us as soon as possible to make an appointment for a no-cost initial consultation:

Fairfax Estate Planning: 703-691-1888
Fredericksburg Estate Planning: 540-479-1435
Rockville Estate Planning: 301-519-8041
DC Estate Planning: 202-587-2797

Critter Corner: Burial and Memorial Benefits for Veterans

Dear Baxter,

My wife and I were talking about where we would like to be buried when we die. We are both honorably-discharged veterans. Do you know about our options? Thanks for your help.

Barry L. Forvetz

—-

Dear Barry,

The Veterans Administration offers a number of burial and memorial benefits to veterans who were honorably discharged, as follows:

• National and State Cemetery Benefits: Eligible veterans can be buried in one of the 131 national or 93 state VA cemeteries at no cost to the family. This includes a gravesite; opening and closing of the grave; perpetual gravesite care; a government headstone or marker; a United States burial flag that can be used to drape the casket or accompany the urn (after the funeral service, the flag is given to the next-of-kin as a keepsake); and a Presidential memorial certificate, which is an engraved paper certificate signed by the current President expressing the country’s grateful recognition of the veteran’s service. National cemetery burial benefits are also available to spouses and dependents of veterans.

• Private Cemetery Benefits: Benefits available include a free government headstone or marker, or a medallion that can be affixed to an existing privately purchased headstone or marker; a burial flag; and a Presidential memorial certificate. There are no benefits offered to spouses and dependents that are buried in private cemeteries.

• Burial Allowances: In addition to the many burial benefits, some veterans may also qualify for a $734 burial and funeral expense allowance (if hospitalized by VA at time of death), or $300 (if not hospitalized by VA at time of death), and a $734 plot-interment allowance to those who choose to be buried in a private cemetery. To learn more about eligibility, see benefits.va.gov/benefits/factsheets/burials/burial.pdf.

Certain forms may need to be completed which are always better to be done in advance. For a complete rundown of burial and memorial benefits, eligibility details and required forms, visit www.cem.va.gov or call 800-827-1000.

Hope this is helpful!

Baxter

Military Caregivers: Challenges and Strategies

Q.  My father, Steve, is a retired Marine who is recently widowed. My mother used to provide care for him full-time until she passed away suddenly. My brothers and sister live far away, and my father needs assistance now. He has Parkinson’s Disease, post-traumatic stress disorder, and is depressed over the loss of my mom. I reduced my hours last week to become his live-in caregiver, and I really don’t know what to expect, and how to deal with challenges as they arise. (I have no experience with caregiving, whatsoever.) Do you have any suggestions?

A. More than five million caregivers assist veterans in need with activities of daily living, including bathing, dressing, feeding, toileting, and walking or using a wheelchair. They often provide care continuously, day and night, and put the well-being of their loved ones before their own.

These caregivers also provide emotional support and help their loved ones manage mental health problems, such as Post Traumatic Brain Disorder (PTSD) and depression. Data from the U.S. Department of Defense and studies of mental health problems suggest 30.3% of those deployed meet criteria for PTSD or depression. Therefore, caregivers play a significant role in balancing their loved one’s emotional stability.

Caregiver needs are many; however, there are resources available that can help. It is a good idea to be proactive (as you are doing) and make note of some of the challenges military caregivers face, and strategies/resources to overcome them.

Challenge: Complex Medical Tasks

Advances in medical technology now require family caregivers to handle medical procedures that used to be performed by trained nurses in hospitals.

Strategy: There are some training resources that could help. For instance, the Rosalynn Carter Institute for Caregiving recently released free training webinars on all aspects of caregiving. In addition, the Family Caregiver Alliance has posted instructional caregiving videos on YouTube, and major medical centers are also producing print and video instruction for caregivers. If the medical tasks become more than you can bear, you should consider hiring an aide to come in and assist you or find alternate arrangements for your father, such as assisted living or a skilled nursing facility.

Challenge: Mental and Emotional Distress

Caregivers commonly experience grief as they adjust to their new roles. They grieve what they thought their lives would be, and they miss the people their loved ones were.

Depression is an emotional state common to military caregivers, with studies reporting that 40 -70% of them experience it, a much higher percentage than non-caregivers. What’s more, military family caregivers who care for service members/veterans with PTSD are at greater risk of becoming depressed sometime during their caregiving journeys than other military family caregivers.

Strategy: Take time for yourself. Respite can be as simple as having one of your father’s friends come over to watch a movie or sporting event or to take him fishing. It can mean taking your father to an adult day care program for a short period of time. Your first reaction may be that you can never get away from being a caregiver, which is not true. You can always find ways to lessen your caregiving burdens by turning them over to others for a short period of time, or indefinitely. The VA Family Caregiver Program offers respite services. Learn more here. You can also find details about respite services on the Fairfax County Website, Montgomery County Website, and DC Respite Website.

In addition, if you suffer from depression, please know that it is a treatable medical condition, and caregivers who experience signs of it should seek medical help. These are resources that can help military caregivers experiencing depression:

The Defense Centers of Excellence: Provides 24/7 help for psychological health issues.

Military One Source: Provides non-medical counseling services online, via telephone, or in-person, as well as access to other mental health resources.

Military Pathways: Provides free, anonymous mental health and alcohol self-assessments for family members and service personnel in all branches including the National Guard and Reserve, as well as referral information provided through the Department of Defense (DoD) and Veterans Affairs (VA).

Challenge: Stress and Apathy

All caregivers experience stress during their caregiving journeys. Unfortunately, in many cases, caregivers do not take care of themselves, or do not seek medical help until crises arise. Military family caregivers are twice as likely to report having a chronic health condition and to have higher mortality rates than non-caregivers.

Strategy: A high proportion of military caregivers (68%) consider their situation highly stressful. The good news is that the Veterans Administration now offers a comprehensive program for assistance, thanks to the Caregivers and Veterans Omnibus Health Services Act of 2010. However, only about 22,000 are receiving this extensive assistance, because the eligibility criteria are very limiting. Read more about it here. Luckily, there are other resources that can help.

Peer Forums

The Military Caregiver PEER Forum Initiative utilizes Military Family Life Counselors to organize and conduct forums that provide non-medical counseling opportunities for military caregivers on topics such as managing stress, nutrition, financial wellness, and more. Military caregivers may join their peers virtually in an online forum on the fourth Thursday of every month to discuss topics that they choose, share their expertise, and network with others who are experiencing similar challenges.

Therapeutic Pets

Therapeutic pets can be helpful for veterans with PTSD and their caregivers. Paws for Purple Hearts is one of four experimental programs nationwide that pair veterans afflicted by PTSD with Labrador and Golden Retrievers. Read our blog post, Lending a Paw for Veterans, for more details.

Additional Resources

The Caregiver Resource Directory is designed to help empower military caregivers with information about national-level resources and programs specifically for them. Topics include: helplines, advocacy and benefit information, military caregiver support, and more. You can download the CRD online or request hard copy print versions.

Challenge: The Potential Length of the Caregiving Journey

43% of caregivers caring for veterans expect to provide care for the long term. In general, estimates show that military family caregivers provide care for much longer periods of time than other populations of caregivers of adults.

Strategy: Most people want to stay in their home for as long as possible. However, if the time comes that living at home is a strain for your father and your duties as a caregiver are much more than you can handle, it may be time to consider other alternatives.

Whether the outcome is in-home care, assisted living, or nursing home care in the future, it is always wise to work with an experienced Elder Law Attorney such as myself. Life Care Planning and Medicaid Asset Protection is the process of protecting assets from having to be spent down in connection with entry into assisted living or nursing home care, while also helping ensure that your loved ones get the best possible care and maintain the highest possible quality of life, whether at home, in an assisted living facility, or in a nursing home.

Veteran’s Aid and Attendance

Your father may qualify for a special pension benefit called Veteran’s Aid and Attendance. As an Accredited Attorney with the U.S. Dept. of Veterans Affairs, I understand both the Aid and Attendance Benefit and the Medicaid program and the interaction between both benefit programs. The Veterans Aid and Attendance benefit can provide more than $25,000 annually for an eligible married veteran, more than $21,000 annually for a single veteran, and almost $14,000 annually for the surviving spouse of a qualified veteran.

Eligibility criteria includes:

• Those over 65 do not have to be disabled; veterans under 65 must be 100% disabled. The veteran or spouse must be in need of regular aid and attendance due to inability to dress oneself, feed oneself, loss of coordination or other conditions, as described on our website, and there must be actual ongoing caregiving services being received from someone else.

• You or your spouse must have served on active duty for at least 90 days, at least one day of which occurred during a period designated as wartime (see our website). There must have been a non-dishonorable discharge as well. Single surviving spouses of such veterans are also eligible.

For more details about Veteran’s Aid and Attendance and other veterans’ benefits, please sign up to receive my Aid Attendance 4-Part Mini Series here.

Keep in mind that a 3-year look-back is soon going to be imposed on transfers of assets, including gifts to persons, trusts, or purchases of annuities. Benefits could be denied for up to 10 years due to transfers. All gifts in the look-back period will be presumed to have been made to qualify for benefits. And, there will be no allowance to give away money to your church, for a wedding gift to a grandchild, etc. I just taught a 90 minute continuing legal education class to attorneys around the country on this topic yesterday.  Read more about this new rule change here.

Applying for Veteran’s Benefits

Applying for veteran’s benefits, such as Veteran’s Aid and Attendance, is always a confusing and arduous task, fraught with perils along the way. Here at the Farr Law Firm, we work with veterans and their spouses to evaluate whether they qualify for the Veterans Aid and Attendance Benefit and/or Medicaid, and we take care of all the paperwork. If you are a veteran or the surviving spouse of a veteran, and are worried about the need for long-term care in the future, please contact us as soon as possible to make an appointment for a no-cost consultation:

Fairfax Veteran’s Attorney: 703-691-1888
Fredericksburg Veteran’s Attorney: 540-479-1435
Rockville Veteran’s Attorney: 301-519-8041
DC Veteran’s Attorney: 202-587-2797

P.S. Another benefit of being a veteran is a 10% discount off all services at the Farr Law Firm. We hope to see your family soon!

The Most Important Awareness Day of the Year (and only 20- 30% realize it!)

Anne is 71 years old, and her health is rapidly declining. When her time comes, she is confident that she wants to donate her organs to help someone else live a longer and healthier life. She also wants to be buried next to her second husband, Joseph. Anne has three children — two from her first marriage and one from her second marriage. The child from her second marriage has passed on, leaving Anne a granddaughter, Emma.

Anne knows that her two surviving children, Sharon and David, are not comfortable with the concept of organ donation and that they want her buried next to their father. When Anne was admitted to the hospital, she was asked about her health-care power of attorney (or Advance Medical Directive), but she didn’t have one. She wrote down on paper that Emma is the only one who has the power to make anatomical gifts on her behalf, and the only one who can authorize the disposal of her remains. She signed the paper, and also felt confident because organ donation was checked off on her driver’s license. She discussed her wishes with Emma, who agreed to make sure that her organs will be donated, if possible, and that she will be buried next to her second husband.

Will Emma be able to carry out her grandmother’s wishes? Unfortunately, she may not. The reason is that Anne did not have a proper Advance Medical Directive in place. Advance Medical Directives are legal documents that enable you to plan for and communicate your end-of-life wishes. Should you become unconscious or too ill to write or speak, they give you a voice in your medical treatment. Without an Advance Medical Directive, these critical decisions could be made by people—including doctors, judges, and family members—with whom you’ve never shared your wishes.

Only About 20-30% Of Americans Have Completed an Advance Medical Directive

If you’re like Anne in our example and many others, you may not have taken the time yet to discuss healthcare decisions with your loved ones and plan for incapacity with a Certified Elder Law Attorney. Advance Medical Directives are extremely important in that they allow you to give instructions to your health-care providers and loved ones, relieving them of the burden of guessing what you want. They also enable you to convey your personal values, beliefs, preferences, and discussions with loved ones. If you can’t make your wishes known, how could you make sure they are respected?

National Healthcare Decisions Day (NHDD) Raises Awareness

National Healthcare Decisions Day (NHDD) is an annual observance that was celebrated this past weekend to raise awareness about Advance Medical Directives.  It is an extremely important day because of the awareness it brings, especially for anyone who is:

• reluctant to talk about death;
• is experiencing declining health and doesn’t want to discuss loss of decision-making control;
• has a hard time making decisions, so nothing gets done;
• feels medical choices should be kept private;
• never thinks much about end-of-life health-care issues;
• thinks about getting professional help for legal affairs, but never gets around to it.

Why Plan Ahead?

Many families do not discuss incapacity planning until a crisis occurs. Then it may be too late. Once a person suffers mental incapacity, options are reduced and procedures become more complicated and costly. Others who may be unaware of a person’s wishes—such as social workers, physicians, lawyers, judges, court-appointed guardians, and conservators—may become involved in the decisions.
Planning ahead can:

• protect your family from being forced to make decisions in crisis;
• ease decision-making during inevitably difficult times;
• decrease the likelihood of family dissention and possible court actions;
• reduce disagreements between brothers and sisters about “what Mom or Dad wants”;
• reduce stress—emotional and financial—later on;
• assure that an individual’s life-style, personal philosophies, and choices are known and protected;
• increase the options open to older people and their families.

Fostering Communication Among Loved Ones

Few of us find it easy to talk to family members about end-of-life issues. We may have ideas about what kinds of medical treatment we would or would not want and who we would trust to make the best possible decisions for us when we are no longer able to make them for ourselves. Sharing these thoughts with our families can seem awkward, and approaching other family members about what they would want seems even more difficult. However, there are many appropriate times to have discussions about these topics. One instance when many people consider doing so is when they are making arrangements for a long vacation. Other times are when a friend, neighbor, or other family member has recently died. Still other times can be when a news story sparks the conversation.

The best situation to foster communication among family members may be a formalized meeting to address concerns. Conducting end-of-life discussions during emotionally demanding events, such as holidays and family celebrations, may not be the best time for some families, however they may be the only occasion when you can gather together. For more details on starting the conversation, please see our posts, Joan Rivers Death Reminds us to Have End-of-Life Conversation, The End-Of-Life Conversation: What if it NEVER happens?, and Facing the Elephant in the Room.

Any Time After You’ve Turned 18 Is A Good Time to Start Planning

Preparing an advance care plan is about making decisions and having conversations with loved ones and other health, legal and financial professionals letting them know your personal preferences before you find yourself in a crisis situation. Any time after you’ve turned 18 is a good time to start planning!
Once the important conversation with your loved ones (and your physician, if you choose) occurs, and important decisions are discussed, it is important to work with a Certified Elder Law Attorney, such as myself, to make sure that you have proper incapacity planning documents in place. These include not only the Advance Medical Directive, but also a properly-drafted General Power of Attorney and an Advance Care Plan, also called a Lifestyle Care Plan. When you or your loved ones are ready, please call us to set up an appointment for a no-cost initial consultation:

Fairfax Incapacity Planning Attorney: 703-691-1888
Fredericksburg Incapacity Planning Attorney: 540-479-1435
Rockville Incapacity Planning Attorney: 301- 519-8041
DC Incapacity Planning Attorney: 202-587-2797
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Critter Corner: Can My Sister Retire on Social Security Alone?

Dear Commander Bun Bun,

My sister seems to think that she can live on Social Security alone. Do you think that is possible, and if so, do you have any tips I can share with her?

Thanks,

Nada Nuffmunney

—

Dear Nada,

Millions of people count on Social Security as their primary source of retirement income. In fact, Social Security was at least 50% of income for 52% of beneficiary couples and 74% of single beneficiaries, and at least 90% of income for 22% of couples and 45% of singles. So it is possible to retire on Social Security alone, but it is less than ideal. Below are some tips you can suggest to your sister to make living on just her benefit check a little easier:

1. Wait to start Social Security: If she hasn’t started Social Security, the best thing she can is to wait to claim her benefits.  When she reaches 66 (normal retirement age), she can access 100% of her benefits. For each year after that, up to age 70, her benefits will increase 8%, meaning she can access 32% more at age 70 than at age 66.

2. Share housing: Remember the Golden Girls sitcom from the 80’s? Similar to that, when two or more people share a house and household expenses, the money goes further, whether you’re renting or sharing a mortgage payment.

3.  Prioritize: Living on Social Security without any other income may make it impossible to do everything you want. However, retirement is an excellent time to take stock of what you have and what you want, so you may just need to prioritize your wants.  If your sister knows what is most important to her, she can set goals to live within her means.

4. Cut Expenses: Your sister should try keeping a record – in a notebook, a spreadsheet, a software program or on your phone – of EVERY dollar she spends. Many people are surprised to learn how much little things add up over the course of a month. Documenting expenses may also help her see things she can cut.

5. Plan: Your sister should consider her finances both now and well into the future to see what she needs to get by. The Retirement Estimator, on the Social Security website, can help.

6. Pay off debt before you retire: Before retirement arrives, she should pay off as much debt as she can. This will free up a lot of room in her budget for other expenses. This applies to credit cards as much as it does her home and vehicle.

7. If she is healthy, she should do her best to remain healthy by eating right and exercising. Health care can easily kill a monthly budget when you are only drawing Social Security, so she should do what she can to stay healthy.

8. Tap her home equity: Homeowners have a built-in emergency fund if unexpected expenses occur in retirement. Retirees who are at least age 62 may be eligible for a reverse mortgage, which can often be taken out even if there is an existing mortgage on the house, in which case the existing “forward” mortgage gets paid off by the reverse mortgage. This will eliminate a monthly mortgage payment, which will help make things more affordable for her. Read more here.

Hop these tips are helpful!

Commander Bun Bun

April 29 Marks the End of a Major Social Security Loophole

Q. I remember reading an article that you published last fall about The Bipartisan Budget Act of 2015, where you mentioned that the end of file-and-suspend would be happening in six months. I am concerned about the impending deadline. Can you explain exactly when it is and what it means for those who would still like to take advantage of the loophole?

A. Not only is today tax day. It also marks two weeks until the last day those who qualify can take advantage of the file-and-suspend Social Security claiming strategy. After April 29, 2016, file-and-suspend becomes a thing of the past.

As discussed in the article you are referring to, the Bipartisan Budget Act of 2015 was signed into law in November 2015, resulting in the end of several unintended loopholes, including file-and-suspend. To understand the changes, I will explain how file-and-suspend used to work, and how it will work now.

How File-and-Suspend Worked (for married couples)

• Originally, file-and-suspend allowed someone who reached full retirement age to file for Social Security retirement benefits, and then immediately suspend them.

• Since benefits had been filed for, a spouse became eligible for spousal benefits(Spousal benefits could not be claimed until the primary worker also filed for benefits.)

• Since the benefits of the primary worker were suspended – and therefore were not actually received – the original filer could still earn delayed retirement credit with increases of 8% per year for waiting.

How File-and-Suspend Will Work Starting April 30 (for married couples)

Under the new rules in Section 831 of the Bipartisan Budget Act of 2015, when the spouse who reaches retirement age suspends his or her benefits, he or she will suspend not only his or her benefits, but any/all benefits payable to other individuals based on his earnings record.

How File-and-Suspend Worked (for single people)

Although it was more common for married couples to use the file-and-suspend strategy, it was a viable option for singles, too.

At full retirement age, an individual who planned to delay benefits until full retirement age could choose to file-and-suspend. While doing so, he or she would earn the same delayed retirement credits that were available by just delaying outright. However, if the individual elected to file-and-suspend and changed his or her mind later, it was possible to retroactively claim all benefits going back to the date of the original suspension.

How File-and-Suspend Will Work Starting April 30 (for single people)

The Bipartisan Budget Act of 2015 created a new Social Security Act section 202(z), which defines the rules for how voluntary suspension will work in the future. The new rules stipulate that suspended benefits can only be resumed in the next subsequent month after the request is made, or at age 70. In other words, the new rules don’t have the option to reinstate going back to a prior month, which effectively means the optional-lump-sum-reinstatement strategy is no longer viable.

However, for anyone who has already requested a suspension of benefits, or who does prior to the effective date of the legislation (by April 29, 2016), the opportunity remains. Any suspension that begins after the effective date, though, will not be eligible for a subsequent retroactive reinstatement.

Other scenarios you should be aware of include:

Unmarried divorced spouse: A divorced individual could choose to file and suspend, and can still do so by April 29, 2016. The restricted application tactic is still available to a divorced individual at Full Retirement Age, provided his or her former spouse is also older than age 62. If he or she were under age 62 in 2015, then the divorced individual would not be eligible to file a restricted application.

Surviving spouse: The new rules are not applicable for a surviving spouse. He or she can still independently choose the timing of when to start survivor and individual retirement benefits. In other words, if you are a widow or widower, Congress hasn’t changed the rules for you. A restricted application strategy is still available. For instance, you could take the widow’s payment as early as age 60, then switch to your own at 70. Or for many people, the opposite path is best: take your own Social Security at 62, then switch to your widow’s payment at 66.

Grandfathering of File-And-Suspend

Under the final version of the Bipartisan Budget Act of 2015, the new limitations on file-and-suspend will apply to anyone who requests a suspension of benefits more than 180 days after the effective date of the legislation. With the law being passed November 2nd of 2015, that means new suspensions occurring on April 30, 2016 (when the deadline kicks in) will be subject to the new more restrictive rules (so file-and-suspend must occur on/by April 29, 2016 to be grandfathered before the “Social Security loophole” is closed).

Social Security is Complex

As you can see, Social Security rules and strategies are very complex. Before making any decisions, be sure to educate yourself. Below are tools related to Social Security and retirement planning, that can provide more details:

• For lots of additional details about Social Security, including spousal benefits, please visit our Social Security FAQ page.

• Read our articles: Ask the Expert: Can You Explain Social Security, please?,  Can You Retire On Social Security Alone?, and What She Doesn’t Know About Social Security Could Cost Her Thousands.

• Check out AARP’s Social Security Planning guide.

It’s important to consider your options when filing for Social Security benefits. It is also important to keep in mind what could happen if you are living on Social Security alone and you or a loved one becomes incapacitated. You must take this into account when planning for retirement.  Every adult over the age of 18 should have an Incapacity Plan that includes a Financial Power of Attorney, an Advance Medical Directive, and an Advance Care Plan. If you don’t have an Incapacity Plan in place, now is the time to get started.  Please call the Farr Law Firm as soon as possible to make an appointment for a no-cost consultation:

Fairfax Social Security Law: 703-691-1888
Fredericksburg Social Security Law: 540-479-1435
Rockville Social Security Law: 301-519-8041
DC Social Security Law: 202-587-2797

Have You Hugged Your Certified Elder Law Attorney Today?

. . . well, if you haven’t, then maybe you should. Why? Because, today is “Be Kind to Lawyers Day.”

“Be Kind to Lawyers Day” falls on the second Tuesday of April every year. This was the date of choice, ironically, because it is strategically sandwiched in between April Fool’s day and Tax Day, April 15th.

How “Be Kind to Lawyers Day” came to be

Steve Hughes, a non-lawyer from St. Louis, worked with attorneys for many years. Whenever he merely mentioned lawyers, he was met with snide comments, jokes and scowls.  He heard things like, “Lawyers?  I bet that’s a treat.”  Or, “Lawyers?  You poor thing.”  So he asked himself, “Is it too much to ask to be nice to lawyers for just one day?”  And in answer to his question, the idea for “Be Kind to Lawyers’ Day” was born.

According to Hughes,” Lawyers all over the globe get a lot of grief…just for being lawyers.  Jokes are made about them and they consistently rank as one of the least respected professions on the planet.  (Sandwiched between financial planners and cigarette manufacturers.)  Yet, when regular people need help writing a will, running a business or avoiding jail time, who do they flock to?  Lawyers!” So, after extensive planning, detailed research, and countless reviews by a team of legal experts, “Be Kind to Lawyers’ Day” was established as an annual holiday!

Why I Love Being a Certified Elder Law Attorney

Being a Certified Elder Law Attorney is an extraordinarily fulfilling calling. Why? Because every day I and my team provide people the utmost peace of mind that their wishes will be met, their hard-earned assets will be protected, and their quality of life will be preserved.  Most of our clients come to us in some type of pain — whether physical pain, cognitive decline, caregiver burnout, or emotional distress. This pain may stem from the physical and/or mental decline of a parent of other loved one, fear of catastrophic nursing home and medical expenses, or just fear of an unknown and uncertain medical and/or financial future.  It is truly a joy for us to be able relieve this pain of our clients.  For me and the rest of our team here at the Farr Law Firm, there is nothing more rewarding than giving our time and expertise every day to truly help others overcome pain and distress.

So, How Do You Celebrate “Be Kind to Lawyers Day?”

• Abstain from telling lawyer jokes for 24 hours.
• If you can’t abstain, tell your funniest lawyer joke but switch out the lawyer with your profession. (I bet it’s still funny.)
• Do some simple repairs around the house with a gavel instead of your trusty hammer.
• Take notes at a meeting on a legal pad. Don’t you just feel smarter looking at the glorious yellow hue of that 8-1/2″ x 14″ pad? or
• Let us know how you think we’re doing with a review!

Take just a few minutes to review us . . . and get up to 3 different Autographed Best-Selling Books as a thank-you!

Your feedback is extremely kind to us and helpful for us as a firm, and a great way to let others know about the unique services we provide here at the Farr Law Firm. Also, if you are kind enough to give us a review, we will return your kindness by giving you an autographed copy of one of my 3 best-selling books:
1.      How to Protect Your Assets from Probate PLUS lawsuits PLUS
Nursing Home Expenses;

2.      Nursing Home Survival Guide;

3.      Protect and Defend

It is very easy and will take just a few minutes of your time. For simple instructions on how to post a review, click on the following links: Google, Avvo, Yelp (only if you are already registered with Yelp). If you post a review in one place, you can choose one book. If you post in two, choose two books. If you post in all 3, we will send you all three books as a token of our appreciation. It really is simple! Once you post, simply e-mail renee@farrlawfirm.com to let her know where you’ve posted and which book(s) you would like.

Thanks so much in advance, and thanks for celebrating “Be Kind to Lawyers Day” with us!

Critter Corner: Should I Have a Caregiver Contract?

Dear Angel,

I will be quitting my job to care for my father next month. He will be paying me, since I have no other income to support myself.  My dad used to have a caregiver through an agency, and the agency had a written contract. But as an individual, I’ve never had a contract for any job I’ve ever had. So in this situation, do you think we should have a contract between me and my dad?

Thanks for your input!

Kahn Tract

—-

Dear Kahn,

If you regularly provide paid care to a parent or other family member, it’s essential to have a properly-written caregiver agreement setting out the exact terms of your arrangement.  This agreement (also known by other names, such as a personal care contract or a family care contract), must set out your duties as caregiver and the exact terms of your compensation.

However, you can’t just have your father pay you any amount you want. The amount you get paid, and the hours you work, and the type of care you provide must be approved in advance by a professional skilled in assessing the care needs of older adults, such as a Geriatric Care Manager / Aging Life Specialist. This contract is also not something that you should do on your own, or you risk running afoul of Medicaid and IRS rules. Rather, this type of agreement should only be done as part of a comprehensive Asset Protection Plan prepared and supervised by an experienced Elder Law Attorney.

The following are reasons to have a properly-drafted caregiver agreement:

◾It is important for Medicaid eligibility: The money a parent pays to a family caregiver, absent a properly-drafted caregiver agreement, will be deemed a gift by Medicaid, causing a period of ineligibility during which the parent will not qualify for Medicaid. How? At the time of a parent’s Medicaid application, Medicaid will total all the payments made to a family caregiver, along with all other gifts, in the past 60 months and divide that total by the relevant “penalty divisor.” The quotient is the penalty period, which equals the number of months Medicaid will not pay for nursing-home care. In Northern Virginia the penalty divisor is $8,367, and in the rest of Virginia it’s $5,933.  In DC, it’s $10,333, and in Maryland it’s $7,940.  As an example of how this works, let’s say a parent pays a family caregiver $60,000 over the course of three years and then applies for Medicaid. Without a proper caregiver contract in place, Medicaid would deem those payments as gifts, causing a penalty period of over 7 months in Northern Virginia ($60,000 divided by $8,367), over 10 months anywhere else in Virginia ($60,000 divided by $5,933), 7.5 months in Maryland, and 5.8 months in DC.

◾It sets boundaries: A detailed caregiver agreement makes clear the extent of the services being provided by a family caregiver and the amount of money the caregiver is getting paid. A caregiver contract sets the understanding about the requirements and limits of the relationship.

◾It explain tax ramifications: A well-drafted caregiver agreement makes clear the tax ramifications of the agreement, such as the fact that the child must be treated as an employee and the parent must be treated as a household employer and must withhold income taxes and payroll taxes.

◾It helps avoid misunderstandings with other family members about the care being provided and the money changing hands. If the agreement doesn’t solve a particular disagreement with family members, you may be able to add something to the document, or change its terms, to address the problem.

◾It offers security and peace of mind: A caregiver contract can offer family caregivers security that they will not suffer undue financial consequences. At the same time, the agreement can also offer the care recipient peace of mind that she or he has a caring advocate to manage care needs.

Paying a Family Caregiver is One Medicaid Asset Protection Strategy

Even though most family caregivers want to help, and feel a sense of duty to care for a loved one without pay, the fact is that it is a job – and a very difficult job with heavy time commitments and heavy physical and emotional responsibilities. If there is money with which to pay, family caregivers deserve to be paid (and to have their Social Security funded as household employees), but the payment arrangements must be done through a properly-drafted caregiver agreement that only an experienced Elder Law firm, such as ours, can prepare.  When done properly, a Family Caregiver Agreement can be a very good Medicaid Asset Protection Strategy – one of over two dozen different Medicaid Asset Protection Strategies available.

Caregiver Contracts at the Farr Law Firm

At the Farr Law Firm, we prepare caregiver contracts frequently as part of our Level 4 Planning / Life Care Planning / Medicaid Planning, and the contract is always supported by an independent evaluation that we obtain from a professional Geriatric Care Manager / Aging Life Specialist.  But just because family care is being provided does not mean that a Caregiver Agreement is always the best strategy to use. For example, sometimes it’s better for a child to provide the care for free and have the parent make a gift to the child in lieu of paying the child.  Which combination of asset protection strategies is best for each family depends on numerous factors, which is why a Caregiver Agreement should only be done as part of a comprehensive Asset Protection Plan.

Hope this is helpful,

Angel

How Caregivers Can Collect Social Security Benefits and Reduce Work Hours

Q. My mother had a stroke and really needs my help until we can find other arrangements. I’m afraid I’ll lose my job and wind up unemployed if I take time off work to care for her. Do you know if I have any rights under the Family Medical Leave Act (FMLA)?

A. Millions of family members leave the workforce every year to take care of loved ones. They take months off of work, and some ultimately become full-time unpaid family caregivers, often exhausting their own savings to care for a family member. In many cases, for their self-sacrifice and devotion, they are sadly penalized by losing pay and Social Security benefits.

Before you quit your job, it is important to learn about your options as a caregiver and what is out there to help you get the support you need. In addition, there may be a way to avoid a big reduction in Social Security benefits when you retire because you took care of a loved one. Below are details on options for while you are still working, and if you need to quit to care for your mother full-time.

The Family and Medical Leave Act (FMLA)

The Family and Medical Leave Act (FMLA), a federal law, provides certain employees in all states unpaid leave to care for themselves, a sick family member (limited to a spouse, child, or parent), or a new child, without losing their jobs or health insurance.

Under the FMLA, employees may take up to 12 weeks of leave in a 12-month period. Employers must comply with the FMLA if they have at least 50 employees for at least 20 weeks in the current or previous year, and other requirements, as described here.

Since its inception, FMLA has been used more than 100 million times, helping 35 million people keep their jobs and health insurance while they cared for a family health crisis or a new baby. But FMLA still has a long way to go. Because FMLA leave is generally unpaid with eligibility and use restrictions, many who qualify for it can’t afford to take it; others suffer financially when they do, and millions more who’d like to benefit from it are excluded.

Family Caregiver Support Program (FCSP)

Unfortunately, very few programs will pay family members or friends to provide care on a regular basis. However, sometimes caregiving families can obtain some relief for specific purposes, such as for respite care, to purchase goods and services that relate to their role as a caregiver, or for certain home health services.

The Family Caregiver Support Program (FCSP) is a federally-supported program under the Administration on Aging that provides services to help ease the financial burden of caregiving to a person 60 years and older.

According to the Administration on Aging, nationally, over 700,000 caregivers received services through the Family Caregiver Support Program. These services helped them better manage their caregiving responsibilities while ensuring their loved ones remained in the community for as long as possible.

Service highlights include the following:

•Access Assistance Services provided over 1 million contacts to caregivers helping them locate services from a variety of private and voluntary agencies.

•Counseling and Training Services were provided to over 125,000 caregivers with counseling, peer support groups, and training to help them better cope with the stresses of caregiving.

•Respite Care Services were provided to more than 64,000 caregivers with 6.8 million hours with temporary relief—at home, or in an adult day care or institutional setting—from their caregiving responsibilities.

This FCSP program is available through your local department on aging (in Fairfax County, Rappahanock area, Montgomery County, and DC). Services at these agencies include information and assistance; counseling and support groups; education and training; respite care to give you a break; and supplemental services, including the purchase of consumable supplies, emergency response systems and home modifications.

Social Security Caregiving Credit Act

The Social Security Caregiver Credit Act (H.R.3377) was introduced last July by Nita Lowey, a Congresswoman from NY, and is still pending in the House Ways and Means Committee. The purpose of this proposed Bill is to alleviate some of the financial burdens of people who face the unsettling prospect of trading off their retirement in order to care for a loved one. The bill would allow caregivers in this situation to collect Social Security benefits and reduce work hours, so they can spend more caring for loved ones.

Lowey describes her legislation as a measure that would provide a “modest” boost in future Social Security benefits for qualifying individuals, including those who:

•Spend more than 80 hours a month providing unpaid care to a dependent relative or chronically dependent individual.

•Earn no more than the average national wage (around $45,000 for an individual).

A spokesperson with Lowey’s office explained the credit varies on an income-based “sliding scale,” so someone who does not work would receive a credit of around $22,000 a year, while someone who earns $33,000 would receive a credit of about $5,500. If they worked part time as well as served as a caregiver, the amount credited would be reduced. While not a complete answer to the problem, the bill would be of great help to those at the lower end of the earnings scale. We will continue to keep you up-to-date with this bill’s progress and hope for the best.

Caregivers Can Get Compensated

Many caregivers struggle with heavy financial responsibilities, especially if they’ve had to quit their jobs or reduce their hours to provide care. Imagine that you could get compensated for driving your father to the doctor, helping him get dressed, and administering his medications. I am happy to say that in some places, and in some cases, you can. Please read our blog post, “Can Family Caregivers Get Compensated?” for ways your commitment to your mother can result in more money in your pocket — either from direct cash payments or federal income tax breaks.

Medicaid Planning in Virginia, Maryland, and DC

Medicaid planning can be started while you are still able to make legal and financial decisions, or can be initiated by an adult child acting as agent under a properly-drafted Power of Attorney, even if you are already in a nursing home or receiving other long-term care. In fact, the majority of our Life Care Planning and Medicaid Asset Protection clients come to us when nursing home care is already in place or is imminent.

If you believe your mother may need long-term care in the not so distant future and if you or your mother have not done Long-Term Care Planning, Estate Planning, or Incapacity Planning (or had your planning documents reviewed in the past several years), please call us as soon as possible to make an appointment for a no-cost initial consultation:

Fairfax Medicaid Planning: 703-691-1888
Fredericksburg Medicaid Planning: 540-479-1435
Rockville Medicaid Planning: 301-519-8041
DC Medicaid Planning: 202-587-2797