Eli Akhavan Esq. Managing Partner of the Akhavan Law Group LLP: “If you fail to plan the government and state law default rules will step in and determine how your assets should be distributed.”

F

inancial planning for a secure old age is of critical importance yet most people do not sufficiently address this need while they are still fully employed. Between multiple school tuitions and summer camps clothing food and other expenses of a growing family concerns about later life can seem very remote. Many assume their financial needs in later life will decrease. However this is not always the case as health and everyday living arrangements change. Social Security is not sufficient as a sole source of income nor does Medicare fully cover all of one’s health needs. (InIsrael government and standard insurance services are similarly inadequate to fully meet the financial demands of the senior years.)

The elephant in the room is that the costs associated with home care or a long-term care facility can be exorbitant. According to Sarah Moskowitz an estate litigator and managing partner of the Moskowitz Legal Group the most basic facility-based care inNew Yorkcan cost over $100000 a year. Depending on the patient’s needs 24/7 home care can easily cost some $15 000 per month. Personal assets may be drained too quickly to provide for the extended years of your loved one’s 120.

Taking Responsibility

We asked attorney Baruch (Brian) Greenwald of Greenwald Weiss Attorneys at Law LLC how children can best plan for their elderly parents. He answered with a question of his own: “Why wait until the client is elderly and his or her children are dealing with the issues? Planning for yourself while you still can will help avoid stress heartache and expense later. The responsibility shouldn’t be left for children to handle when faced with a crisis.”

Careful estate and legal planning can alleviate the financial burden of care by ensuring eligibility for government benefits. One important way senior citizens and their families can prepare for the high costs of care is to transfer assets to an irrevocable trust. Your lawyer will meet with you to draft documents that officially appoint a trustee to manage the assets. Because the transferred assets no longer belong to you you will be eligible for government benefits such as Medicaid for which you would not have qualified before. (However Mr. Greenwald cautions that in order to avoid unintended tax consequences make sure to talk to your lawyer about how to best handle the tax ramifications that may be associated with transferring assets to a trust in your particular situation.)

It’s a worthwhile step because the levels of government benefits and services depend greatly on the amount of personal assets in one’s possession. For exampleNew YorkandNew Jerseywill not assist with home care or placement in a nursing facility if there are personal assets above a certain sum.

Remember assets don’t just mean figures in the bank. In fact attorney Hillel Weiss also of Greenwald Weiss points out that many people’s greatest financial asset is their house. The house can be transferred to a trust that allows the parents retain their right to remain in their home but legal ownership is transferred to the trustee.

Is an attorney needed to prepare these documents? Weiss cautions that although there are websites that offer to prepare your documents for a nominal fee there are so many variables that might render the process questionable that even a brief consultation with an attorney in the field can protect families and individuals from major crises down the line.

Empowered to Care

What happens when financial decisions come up that aging loved ones are no longer able to handle? Mr. Weiss is unequivocal: “The most important document for anyone to obtain when he or she is fully competent is a power of attorney document naming an agent to manage his or her financial affairs in the event of incapacity.”

The power of attorney legally enables an agent often a spouse or an adult child to act and make financial decisions on a person’s behalf should she find herself unable. It isn’t like flipping a switch though; a parent who got sick and then gets better can take back control of her financial decisions once she’s up to it. The amount of power needn’t to be absolute either. The client works with her lawyer to draft a power of attorney document that specifies how much decision-making power is given over and to whom.

A third party may be required in the most delicate matters such as determining if a parent is showing signs of cognitive impairment because children cannot necessarily be objective about a proper course of action. Official documents can also specify who that third party should be.

In the rough and tumble of daily life making the time to set up financial plans and legal documents can be a hassle but the alternative isn’t pretty. “When a financial power of attorney has not been set up and the individual is unable to manage their finances on their own the family may need to go to court to obtain legal guardianship over the incapacitated family member a process which can be both costly and time consuming ” explains Weiss. The emotional toll can’t be discounted either.

“Many people feel there is a certain age when planning should be addressed” adds Greenwald. “But it’s better to complete the process sooner rather than later. There’s no downside especially since many estate plans can be revised at a later time.”

The Long Long Term

If nobody wants to have a conversation about how to handle parents’ long-term care nobody wants to have a conversation about the distribution of their assets after death. Yet failure to put proper legal papers in place can result in the court stepping in at great cost and complications for heirs. Proper legal preparation also minimizes the impact of taxes which can amount to 40 percent and upwards of the value of the estate; and it can keep assets inherited from parents or grandparents from getting into the hands of business or family creditors.

The area that deals with the distribution and protection of assets after death is called Estate Planning. Eli Akhavan managing partner at The Akhavan Law Group inManhattan explains that firms like his offer many ways to legally protect loved ones.

For example an irrevocable life insurance trust (ILIT) can be set up to insure that a client’s wife and children cannot be penalized by tax issues impacting his life insurance policy after his passing. If placed in a life insurance trust then the death benefit proceeds are not subject to federal and state estate taxes which can make a big difference. Additionally by placing the policy in the trust you can ensure that the proceeds of the death benefit policy will be managed and distributed as you prefer.

Another important way to protect your assets is business succession planning to ensure the transfer of a family business from one generation to another. Mr. Akhavan cites research showing that only about 30 percent of all family-owned businesses survive into the second generation and only 12 percent survive into the third generation. By the fourth generation and beyond only 3 percent of what were once family businesses have stayed in the family.

Smart planning with firms like Mr. Akhavan’s can change that.

“We’ve Seen It All”

Sarah Moskowitz an estate litigator and managing partner of the Moskowitz Legal Group works together with Mr. Akhavan to deal with situations where estate plans have not been correctly put into place and to help beneficiaries to resolve disagreements without the costly and greater conflict of going through the court system. “We’ve seen it all ” she admits “And I can’t stress enough the need to get documents drawn up before there is a crisis.” In particular parents who still have young children should have proper legal guardians designated as well as specific allocations of assets to head off any possible reason for the courts to intervene in the event of the loss of one or both parents.

Estate plans must be halachically as well as legally compliant notes Mr. Akhavan especially when dealing with such potentially conflicting issues as pi shnayim for bechor daughters inheriting and other halachic issues. Having documents prepared by someone with expertise in this area averts conflict.

Although a painful subject to face taking the time to plan your estate ends up being a tremendous kindness down the line.

Empowered to Care

What happens when financial decisions come up that aging loved ones are no longer able to handle? Mr. Weiss is unequivocal: “The most important document for anyone to obtain when he or she is fully competent is a power of attorney document naming an agent to manage his or her financial affairs in the event of incapacity.”

The power of attorney legally enables an agent often a spouse or an adult child to act and make financial decisions on a person’s behalf should she find herself unable. It isn’t like flipping a switch though; a parent who got sick and then gets better can take back control of her financial decisions once she’s up to it. The amount of power needn’t to be absolute either. The client works with her lawyer to draft a power of attorney document that specifies how much decision-making power is given over and to whom.

A third party may be required in the most delicate matters such as determining if a parent is showing signs of cognitive impairment because children cannot necessarily be objective about a proper course of action. Official documents can also specify who that third party should be.

In the rough and tumble of daily life making the time to set up financial plans and legal documents can be a hassle but the alternative isn’t pretty. “When a financial power of attorney has not been set up and the individual is unable to manage their finances on their own the family may need to go to court to obtain legal guardianship over the incapacitated family member a process which can be both costly and time consuming ” explains Weiss. The emotional toll can’t be discounted either.

“Many people feel there is a certain age when planning should be addressed” adds Greenwald. “But it’s better to complete the process sooner rather than later. There’s no downside especially since many estate plans can be revised at a later time.”

The Long Long Term

If nobody wants to have a conversation about how to handle parents’ long-term care nobody wants to have a conversation about the distribution of their assets after death. Yet failure to put proper legal papers in place can result in the court stepping in at great cost and complications for heirs. Proper legal preparation also minimizes the impact of taxes which can amount to 40 percent and upwards of the value of the estate; and it can keep assets inherited from parents or grandparents from getting into the hands of business or family creditors.

The area that deals with the distribution and protection of assets after death is called Estate Planning. Eli Akhavan managing partner at The Akhavan Law Group inManhattan explains that firms like his offer many ways to legally protect loved ones.

For example an irrevocable life insurance trust (ILIT) can be set up to insure that a client’s wife and children cannot be penalized by tax issues impacting his life insurance policy after his passing. If placed in a life insurance trust then the death benefit proceeds are not subject to federal and state estate taxes which can make a big difference. Additionally by placing the policy in the trust you can ensure that the proceeds of the death benefit policy will be managed and distributed as you prefer.

Sarah Moskowitz Managing Partner Moskowitz Legal Group: “We’ve seen it all and i can’t stress enough the need to get documents drawn up before there is a crisis.”

Another important way to protect your assets is business succession planning to ensure the transfer of a family business from one generation to another. Mr. Akhavan cites research showing that only about 30 percent of all family-owned businesses survive into the second generation and only 12 percent survive into the third generation. By the fourth generation and beyond only 3 percent of what were once family businesses have stayed in the family.

Smart planning with firms like Mr. Akhavan’s can change that.

“We’ve Seen It All”

Sarah Moskowitz an estate litigator and managing partner of the Moskowitz Legal Group works together with Mr. Akhavan to deal with situations where estate plans have not been correctly put into place and to help beneficiaries to resolve disagreements without the costly and greater conflict of going through the court system. “We’ve seen it all ” she admits “And I can’t stress enough the need to get documents drawn up before there is a crisis.” In particular parents who still have young children should have proper legal guardians designated as well as specific allocations of assets to head off any possible reason for the courts to intervene in the event of the loss of one or both parents.

Estate plans must be halachically as well as legally compliant notes Mr. Akhavan especially when dealing with such potentially conflicting issues as pi shnayim for bechor daughters inheriting and other halachic issues. Having documents prepared by someone with expertise in this area averts conflict.

Although a painful subject to face taking the time to plan your estate ends up being a tremendous kindness down the line.