Interesting Cases

Monday, May 14, 2012

Estate Planning & Online Accounts

Who gets access to your online accounts after you die?

You may have a plan for what to do with your physical belongings after you die, but what about your online accounts? In today's social media-dominated world, a person's digital presence lives on online even after he or she is gone. But who has the right to access those accounts? States have begun addressing this issue with new digital access laws.

Under current Facebook policy, if an account member dies, Facebook will remove the account at the request of family or put it into "memorial status," but it is very difficult for family members to get access to the account itself.  Family members may want access to a deceased loved one's account to read messages left by friends or to have the ability to contact the deceased's friends. 

Under Facebook's policy, the estate can have access to a download of account data as long as it has prior consent from the deceased or if it is mandated by law.

Such mandates are beginning to appear.  In 2010, Oklahoma became the first state to pass a law giving estate executors the power to access, administer, or terminate the online social media accounts of the deceased. Two other states -- Nebraska and Oregon -- are now considering similar laws. Under Oklahoma's law, the executor automatically has the power to act on behalf of a deceased individual and access a Facebook, Twitter, or e-mail account. The executor does not have to go to court to get access to such accounts.

While states grapple with this issue, it may be a good idea to provide some instruction in your will on how to deal with your online accounts once you die. Contact your attorney to determine if this is something you should add to your will. In addition, online services have also popped up that help people pass on the digital keys to their online lives.

Monday, May 14, 2012

Reverse Mortgage News

Reverse mortgage borrowers are getting younger, and that may not be a good thing.

The age of reverse mortgage borrowers is dropping, according to a new study by MetLife. Unfortunately, reverse mortgages come with risks, so younger borrowers need to be careful.

Reverse mortgages allow homeowners who are at least 62 years of age to borrow money on their house. The homeowner receives a sum of money from the lender, based largely on the value of the house, age of the borrower, and current interest rates. The loan does not need to be paid back until the last surviving homeowner dies, sells the house, or permanently moves out.

The MetLife study found that younger borrowers are taking out reverse mortgages. Today baby boomers aged 62 to 64 make up 21 percent of reverse mortgage applicants. In 1999, only 6 percent of applicants were in this age bracket.  Of homeowners who are considering a reverse mortgage, 46 percent are under age 70.

This new trend toward younger borrowers could spell trouble. While reverse mortgages seem like a great idea, there are major downsides. The closing costs for the loans are much higher than for conventional mortgages, and younger borrowers receive less money because their life expectancy is longer. In addition, the borrower is still responsible for property taxes, homeowner's insurance, and maintenance. If the borrower runs out of money and can't pay the property taxes or homeowner's insurance, the loan will default, and the borrower could lose his or her house.

MetLife's study also found that most reverse mortgage applicants (67 percent) wanted to use the reverse mortgage to lower household debt compared to 27 percent who wanted to enhance their lifestyle and 23 percent who wanted to plan for the future. Instead of using a reverse mortgage to pay for health care that would allow borrowers to remain in their homes during their final years, borrowers are using reverse mortgages to cover short-term financial shortfalls. The MetLife study finds that strong reverse mortgage counseling is needed, and it cautions that homeowners need to consider whether to use their home equity to shore up their retirement financing or preserve this asset for major unexpected expenses in the future, such as health-related expenses that inevitably increase as people age.  (Funds for reverse mortage counseling were eliminated in last year's budget deal between Democrats and Republicans but have since been restored.) 

To read the MetLife study, click here.

For more information on reverse mortgages, click here.

Monday, May 14, 2012

Provision in Will to Kill The Cat Found Invalid

A case of estate planning for pets is decided in a Chicago court.

A Chicago judge has reversed a death sentence that has been hanging over Boots the cat for months.  The feline's owner, Georgia Lee Dvorak, died last Christmas Eve at age 76.  Dvorak left no survivors, and her will, written in 1988, included a provision directing that any cat or cats she owned at the time of her death be euthanized "in a painless, peaceful manner." 

But trust officers at Fifth Third Bank, which was appointed to manage Dvorak's $1.4 million estate, were reluctant to follow through on the will's terms when it came to Boots, age 11. 

The bank asked a Cook County (Chicago) probate court to set aside that provision of Dvorak's will.  In its arguments to the judge, the bank noted that Dvorak had left the the bulk of her estate to twelve animal-related charitable organizations.  They also cited legal precedents in which courts had spared other animals in similar legal predicaments, including two Irish setters in Pennsylvania who had been ordered destroyed in their owner's will, and horses in Vermont and Canada that had been similarly condemned.

The judge allowed the bank to search for a suitable home for Boots to live out the remainder of her life, and one was found.  Cats-are-Purrsons-Too agreed to care for Boots provided it could receive a $2,000 endowment.  On April 3, 2012, the judge ruled that $1,000 of Dvorak's estate could go toward the endowment, and the bank agreed to forego fees of $1,000, according to an article in the Chicago Tribune.   

In its fact sheet "Providing for Your Pet's Future Without You," the Humane Society of the United States warns that when a pet owner puts a request in a will that an animal be put to death, "that provision is often ruled invalid by the legal system when the animal is young or in good health and when other humane alternatives are available."

Monday, May 14, 2012

More Information on Reverse Mortgages

Under our "system" of paying for long-term care, you may be able to qualify for Medicaid to pay for nursing home care, but in most states there's little public assistance for home care. Most people want to stay at home as long as possible, but few can afford the high cost of home care for very long. One solution is to tap into the equity built up in your home.

If you own a home and are at least 62 years old, you may be able to quickly get money to pay for long-term care (or anything else) by taking out a reverse mortgage. Reverse mortgages, financial arrangements designed specifically for older homeowners, are a way of borrowing that transforms the equity in a home into liquid cash without having to either move or make regular loan repayments. They permit house-rich but cash-poor elders to use their housing equity to, for example, pay for home care while they remain in the home, or for nursing home care later on. The loans do not have to be repaid until the last surviving borrower dies, sells the home or permanently moves out.

In a reverse mortgage, the homeowner receives a sum of money from the lender, usually a bank, based largely on the value of the house, the age of the borrower, and current interest rates. For example, a 70-year-old borrower with a $200,000 house in Westchester County, New York, would be able to receive a maximum loan of $110,723 (based on 2009 figures). The lower the interest rate and the older the borrower, the more that can be borrowed. To find out how much you can get for your house, use the AARP's reverse mortgage loan calculator.

Homeowners can get the money in one of three ways (or in any combination of the three): in a lump sum, as a line of credit that can be drawn on at the borrower's option, or in a series of regular payments, called a "reverse annuity mortgage." The most popular choice is the line of credit because it allows a borrower to decide when he or she needs the money and how much. Moreover, no interest is charged on the untapped balance of the loan.

Although it is often assumed that an elderly person would want to use the funds from a reverse mortgage loan for health care, there are no restrictions--the funds can be used in any way. For instance, the loan could be used to pay back taxes, for house repairs, or to retrofit a home to make it handicapped-accessible.

Borrowers who take out a reverse mortgage still own their home. What is owed to the lender -- and usually paid by the borrower's estate -- is the money ultimately received over the course of the loan, plus interest. In addition, the repayment amount cannot exceed the value of the borrower's home at the time the loan is repaid. All borrowers must be at least 62 years of age to qualify for most reverse mortgages. In addition, a reverse mortgage cannot be taken out if there is prior debt against the home. Thus, either the old mortgage must be paid off before taking out a reverse mortgage or some of the proceeds from the reverse mortgage used to retire the old debt.

Reverse mortgages are somewhat underutilized now, but financial institutions, sensing an opportunity as the population ages and people live longer lives, are expanding their reverse mortgage programs.

The most widely available reverse mortgage product -- and the source of the largest cash advances -- is the Home Equity Conversion Mortgage (HECM), the only reverse mortgage program insured by the Federal Housing Administration (FHA). However, the FHA sets a ceiling on the amount that can be borrowed against a single-family house, which is determined on a county-by-county basis. High-end borrowers must look to the proprietary reverse mortgage market, which imposes no loan limits. On October 1, 2008, a new housing law took effect that increases the borrowing level on reverse mortgages. The national limit on the amount a homeowner can borrow is now $417,000. The limit can be increased to $625,000 in areas with high housing costs.

Is a Reverse Mortgage Right for You?

While reverse mortgages look like no-lose propositions on the surface, they also have some significant downsides. First, the closing costs for these loans are about double those for conventional mortgages. Closing costs on a reverse mortgage for the $200,000 home described above would be more than $10,000. These costs can be financed by the loan itself, but that reduces the money available to you.

Reverse mortgage payments also may affect your eligibility for government benefits, including Medicaid. Generally, these payments will not be counted as income as long as they are spent within the same month that they are received. If the funds are not spent, however, they could accumulate and push your resources over the allowable limits for Medicaid or SSI eligibility. In addition, payments from reverse annuity mortgages may be counted as income for purposes of Medicaid and SSI whether or not they are spent within the month they are received. This shouldn't be treated as income, since it simply involves withdrawing equity from one's home, but the state may view it differently since the funds come in a regular monthly check. In any case, you should consult with an elder lawyer in your state if you have any concern about how a reverse mortgage will affect your eligibility for federal benefits.

Also, bear in mind that if your major objective is to safeguard an inheritance for your children, a reverse mortgage may not be a good idea. As soon as the elderly person (or the survivor of an elderly couple) dies, it will be necessary to sell the home and much -- if not all -- of the sales proceeds will have to be paid to the lender. But if you have a pressing need for additional income and have no close heirs, or if you do not intend to benefit your children or your children don't particularly want to inherit the house, a reverse mortgage can be a way to supplement income, perhaps without jeopardizing Medicaid eligibility.

Reverse mortgages are complex products and borrowers are advised to acquaint themselves with the different options available and then carefully compare competing loan offerings. Following are two outstanding Web sites to get you started in that process:

• You can learn the basics about reverse mortgages from the AARP's excellent reverse mortgage Web site. The site includes a calculator for estimating the loan for which a borrower would be eligible. Go to: www.aarp.org/revmort
• For more details, background information, and supplementary materials, visit the National Center for Home Equity Conversion site at www.reverse.org

In addition, the names of FHA-insured lenders are available from the Federal National Mortgage Association (Fannie Mae), (800) 7-FANNIE.

Monday, January 09, 2012

Your Digital Assets

What will happen to your digital assets if you pass away?

Saturday, December 03, 2011

The $400 Million Estate Will Contest

Monday, October 24, 2011

Did Steve Jobs Have An Estate Plan?

Even several weeks after his death, people are still talking about Steve Jobs and his contributions to the technological advances we've made in the last 30 years. Just last week, there was a memorial for Apple employees, shutting down every Apple store for a couple of hours, to celebrate the life of Steve Jobs. I remember using the Mac Classic, a black and white Apple computer from the 1980’s, and being fascinated by what was then advanced technology (no WiFi, no Facebook, no internet but still great!). People are going to be talking about Steve Jobs for a long time.

As your estate planning attorney, I was intensely curious about what type of estate plan Jobs created. We have plenty of wealthy individuals who have not engaged in estate planning, and their affairs are simply a mess.  People like Elvis Presley, Sammy Davis Jr. and others lost a huge amount of their estate to unnecessary taxes because they didn’t plan properly. We can learn a lot from their mistakes. But we can also learn from those who actually did take the time to plan, like Steve Jobs. To be honest, the less we can learn about their estate plan, the better their estate plan probably was!

To read more about what Steve Jobs did and didn’t do, check out the Forbes article on his estate plan here.

Every estate plan is different. Most people don’t have the wealth that Steve Jobs had. Nonetheless, everyone needs a plan that works for them and avoids disputes, excessive taxes, and unhappy heirs. If Steve Jobs didn’t put the proper plan in place, we will surely find out sooner or later.

Have a great week!

Monday, October 17, 2011

CLASS Dismissed

Last week, the Obama administration formally shut down the CLASS Program, part of the Affordable Care Act (Obamacare). CLASS would establish a long-term care insurance program that individuals could pay into and then receive a daily benefit if they needed long term care.

But, the experts figured out that not enough people would sign up for the voluntary program. Thus, it would end up becoming insolvent, adding to the deficit and costing taxpayers.

Insolvent? Adding to the deficit? Costing taxpayers a lot? Sounds like Medicaid, Medicare and other entitlement programs!

Our political leaders just can’t seem to find a way around the problem of ballooning long-term care expenses. Meanwhile, a nursing home costs approximately $8,000 per month and at least 33% of people will spend on average 3 years in a nursing home during their lives. Do the math, and that adds up to almost $300,000.

Yes, Medicaid will cover the cost of nursing home care, but only when you have nothing left. The CLASS program aimed to fix this problem, but it was a failure.

Monday, June 27, 2011

Elder Abuse and Predatory Marriages

• Hire only someone who consents to a background check
• Hire a professional to keep tabs on the individual caregiver
• Stay in touch with your parent regularly if possible, even if you are not local

Tuesday, May 17, 2011

50/50

As an estate planning attorney, I hear about some of the craziest, outrageous estate planning matters gone awry. But those types of cases are outliers, and although they’re interesting, they’re uncommon. It’s the typical case gone wrong that really causes problems for more families.

For instance, in one relatively straightforward estate planning matter, I have a colleague who is currently representing a sister who is being sued by her sibling (brother) over some real estate their parents left them. When their parents died, they left their two children the house as equal owners – 50/50. The parents insisted that the children never had conflicts, and that the family was close. They couldn’t imagine how this simple matter could be anything but straightforward.

However, the client’s brother unfortunately got laid off in the recession, after having a secure job at a pharmaceutical company for many years. As a result, he could no longer afford his share of the expenses of the house. and needs to sell the real estate. The client doesn't want to sell as she feels they would take a big loss, as the housing market still has not turned around in many parts of the country. She would rather wait until the real estate market has recovered. Oh, and by the way, the parents named the two children as Co-Executors, something we always caution clients against doing.

Since they cannot come to an agreement, the brother sued the client to compel the property to be sold. The parents are probably rolling over in their graves, as the two siblings duke it out in court. Guess who wins? Attorneys, who spend plenty of time on cases like these and rack up many billable hours. It may take years for this family to recover from hard feelings and the conflict. Sadly, none of it needed to happen.

If you are leaving any property to your family after you are gone, talk to your estate planning attorney about establishing provisions in your will or trust to ensure that this never happens. Some ideas including setting money aside to handle the expenses (for many people, life insurance is an excellent option in a case like this). As I always say, none of us have a crystal ball, and you simply don’t know what will happen after you’re gone. Your estate plan needs to be crafted in such a way that takes into account multiple scenarios, and most importantly, the worst case scenario so that such a scenario can be avoided.

50/50 doesn’t seem so great after all. If your plan needs a fresh look, or if you know of someone who can use some assistance with estate planning, please call our office today at (215) 706-0200.

Monday, January 10, 2011

Living Wills and Difficult End-of-Life Decisions

We recently came across an informative and touching article about end-of-life decisions, in which the author followed the emotional stories of a few different families. The article gives rich insight and into what families wrestle with when a relative falls ill and it may be getting close to the end. The article explores when the 'end' really is, and how, with so much new medical technology in the last 100 years, the lines have been blurred.

All of our clients complete a living will that is part of a broader health care power of attorney tool. This allows each client to designate someone (a relative, friend, etc) as their health care agent, who will be authorized to make all decisions regarding personnel, treatment, facilities, etc. and who will also be the guardian of the client's wishes.

A living will is not a perfect document by any means, and in many cases today, it is difficult to determine when nothing more can be done to keep someone alive. 

We recommend that you have a clear living will with your preferences for end-of-life decisions, and also choose an agent that you completely trust and who will make rational decisions even in a time of great emotion. Sounds easier said than done. However, this is what we counsel clients on day in and day out. If you have not done comprehensive planning, we suggest you schedule a complementary appointment today by calling (215) 706-0200. 

In the meantime, here is the article link: Letting Go: What should medicine do when it can't save your life?
Appeared in The New Yorker, August 2, 2010

Wednesday, October 06, 2010

The Will of Teddy Pendergrass

The famed Teddy Pendergrass, who died in early 2010, is back in the news. It seems that his second wife and son are both locked into a will challenge. 

Will challenges are never fun, and as you'll see from the article, become nasty and time consuming battles.

How do you avoid what happens to Mr. Pendergrass' estate? 

• Never keep your old wills, or copies of old wills. Whenever you re-write your will, destroy the old ones immediately.
   
• Never write anything on your will, nor add or remove pages to it.
   
• Keep your will in a safe place, usually a fire proof records safe at home. 
   
• However, depending on your age and circumstances, you can leave the will with your executor (in this case, if Teddy really wanted his son not to be cut out, perhaps he should have followed my instructions, particularly this one).

Here is the article link. Enjoy: Philly.com Article

Let our firm assist you: Our firm offers a complementary estate plan review and consultation. Please call us today at (215) 706-0200 or email us.

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