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- A friend, whom I’ve known since college and worked with
at Price Waterhouse years ago, asked my help concerning financial
matters involving his father and mother. His 82-year old mother,
R.P., was diagnosed with Alzheimer’s disease and various
other health problems, and many matters in his parents’
financial situation needed to be addressed. Also, the family
feared she would soon lose her ability to make sound decisions,
and thus action needed to be taken quickly.
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- As a CPA and Personal Financial Specialist, I quarterbacked
the financial planning work and enlisted the help of an attorney.
We worked quickly on the planning strategies, presented the
ideas to the husband, E.P., and with him we explained matters
to the adult children, resolved issues and prepared necessary
documents. We revised her will to better reflect her current
wishes, transferred assets into certain trusts to potentially
protect them against loss, and prepared for each her and him
a durable power of attorney, health care proxy and living will.
We made sure she was still of sound mind when signing the documents,
which took many minutes for each signature given her frailty.
In addition, we put into place measures which better protected
her assets against loss, including the transfer of her variable
annuity to a company which stepped up the death benefit on an
annual basis for increases in market value and also including
selling individual stocks and reinvesting the proceeds into a
mutual fund which protected principal against loss if it were
held for 10 years. After pleading with the local bank branch
managers, I was able to get them to waive early-termination penalties
for the certificates of deposit we terminated and transferred
into higher-yielding CDs elsewhere.
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- My friend’s father,E.P., was very appreciative and started
referring several other seniors to me. He had become convinced
that last-minute steps could be critical for other people, as
in the case of he and his wife’s finances. One of E.P’s
friend, J.M., had a wife whose health was also worsening quickly,
in her case cancer. At first J.M. was resistant to my review
of his matters, partly because of the preoccupation with attending
to his wife, and partly because of relying on the recent advice
of others, including his attorney and and his stockbroker. Well,
E.P. persisted to nudge J.M into meeting me, and soon I found
myself at the dining room table one afternoon with J.M, while
one of his sons cared for his wife in the nearby bedroom. After
we discussed their assets, I reviewed their wills. I discovered
that his wife’s will did not contain a provision to fund
a unified credit shelter trust. Such a trust is a way to use
and not lose the lifetime exemption ($675,000 in year 2000) upon
$1 million) to keep under his direct control. Thus funding
an irrevocable trust putting principal outside his direct control
with him as income beneficiary would not jeopardize his own financial
security.
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- When I estimated for him the estate tax savings of over $200,000
at his own death by including a unified credit shelter trust
in his wife’s will now, he was shocked and dismayed that
his own attorney did not inform him of the choice of such a trust.
Thus my recommendation was to revise his wife’s will as
soon as possible to incorporate the trust. In case his wife
was not competent enough to execute a revised will, I developed
a back-up strategy which was complicated but which would work.
The strategy would transfer money from an existing joint investment
account to a tax-deferred annuity in her name, signed by J.M
on her behalf, with a newly-created irrevocable trust as a beneficiary
of the annuity. At her death, the money in the annuity would
become taxable in her estate, but then would fund the trust and
use up her exclusion, thus saving future estate taxes. J.M.
asked me to meet with his attorney to discuss how to proceed.
The attorney was able to assure himself that she was competent
enough to sign a revised will to include a unified credit shelter
trust, and they did so two days later. She died within a few
weeks. E.P. deserves a round of thanks from family members for
his persistence in getting his friend J.M. to engage me to review
his situation before it was too late. The estate tax savings
will be very much appreciated by the family members as they progress
through their own lives, facing scores of thousands of dollars
for the college education of their many family members. J.M.
has nine children and twenty-nine grandchildren.
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