Current Events

National Healthcare Decisions Day Provides Reminder of Key Planning Documents You Need

We have all heard horror stories about family members disagreeing over end-of-life care decisions. This can result in families ending up in protracted court battles while patients are kept alive on life support. All the while, no one really knew what the patient actually wanted. Do not let this happen to you. Provide your loved ones with some relief by planning ahead for your healthcare decisions.

On April 16, 2016, organizations throughout the country tried to inspire, educate and empower the public about the importance of advance care planning. National Healthcare Decisions Day encourages people to express their wishes regarding healthcare. Ask yourself – do your loved ones know your wishes?

Here is a great video on this important issue:

Modern medicine can do some amazing things, but often requires complex and difficult decisions. Life support can keep people alive for months and even years, but people have various opinions about end of life care. Regardless of what your opinions are, your loved ones cannot act on your wishes unless they know them.

Legal documents such as Advance Medical Directives, Healthcare Powers of Attorney, Living Wills, and Do Not Resuscitate orders give agents legal authority to make decisions on your behalf. However, they generally give very little guidance on what your wishes would be in specific situations and what type of decisions you would want your loved ones to make.

Have the conversation.

Let your loved ones know what your wishes are and document those wishes. The legal document combined with the conversation is truly a gift to your helpers. This helps avoid confusion, guilt, and conflict in an already very stressful situation.

At InSight Law, we provide the legal documents, hypothetical healthcare checklists, and letters of instruction for client’s healthcare agents. If you are a client and have not completed these lists, we strongly encourage you to do so now. Please contact the firm if you need copies. Then remember, after the documents are completed the important part is the discussion with your helper. Things can happen at any time. It is important to be prepared. Additionally, keep your documents updated because your wishes may change over time. We recommend revisiting these documents to make sure your preferences remain the same.

The tools are out there. Be aware, spread the word, and help promote the importance of advance care planning.

Should You Adopt the Zuckerberg Strategy and “Donate” to an LLC?

Facebook founder and CEO Mark Zuckerberg made headlines after announcing that he would be “donating” the bulk of his $45 billion fortune to charity. In some corners, Zuckerberg was derided since his “donation” was to a Limited Liability Company, as opposed to a charitable trust or actual charity, according to the Washington Post. The Zuckerberg-Chan Initiative (the LLC) will receive $45 billion worth of Facebook shares that Mr. Zuckerberg owns. So, in reality, no real charitable donation was made. Though, Zuckerberg has publicly stated that his LLC will focus on important charitable and public causes such as curing disease, advancing education reform, and so forth.

Important question – is “donating” money to an LLC a wise estate and/or business strategy for you to consider?

Answer: possibly.

An LLC is a pass-through entity offering few tax benefits for Mr. Zuckerberg or his charitable endeavors. He may benefit from the timing of making estimated tax payments, but that is not the main value derived from using an LLC, according to CBS News.

LLC Benefits

By forming an LLC, Mr. Zuckerberg is wisely adding legal liability protection and administrative benefits to the management and oversight of his money. By managing and directing the funds through an LLC, Mr. Zuckerberg adds an important layer of liability protection so he is not personally liable if a lawsuit, for whatever reason, is filed against the LLC. The administrative benefit is that he can appoint and remove entity members as he desires. Mr. Zuckerberg can also better account for the various share classes of stock and the overall activity and expenses that are connected with this initiative, according to the aforementioned CBS News article.

The Cost-Basis Benefit

Any tax benefits will be enjoyed when Mr. Zuckerberg directs the LLC to donate the $45 billion in Facebook shares to a charitable organization, or organizations. Why? Because a large percentage of these shares have a cost basis of pennies each. Facebook’s current value, as of the date of this posting, is over $100 per share. That is a massive unrealized capital gain. Transferring the funds to the LLC and letting the LLC use the funds for charitable initiatives enables Zuckerberg, and his estate, to potentially avoid paying a huge tax on the capital gains in his Facebook shares.

So, should you run out and form your own LLC? Not so fast. Whether this strategy makes sense for you depends on a multitude of factors. Nevertheless, it has potential benefits for both the donor, and for many charitable initiatives. You need to sit down with an experienced estate and business planning attorney in your area to discuss your options.

November is Long-Term Care Awareness Month

No one wants to think about aging, becoming infirm, or being unable to dress yourself, use the toilet, etc. This is why most surveys show that people would rather ignore long-term care planning rather than tackle the issue head on. This cannot continue. November is Long-Term Care Awareness Month and a spotlight needs to be placed on this incredibly important issue.

Long-term care costs have exploded in recent years, and are expected to continue to rise for the foreseeable future. For example, the median annual cost for a private room in a nursing home is projected to cost nearly $130,000 in 10 years, according to an article published by Morgan Stanley.

Here is a video from CBS News about the crisis in long-term care:

Do you have the financial resources to cover that kind of long-term cost? The expense of long-term care services may not be covered by Medicare or other medical plans. This is why you need to have a plan in place to protect you and your loved ones if the time comes for you be admitted to a long-term care facility or hire an in-home nurse.

Reach out to the team of experienced long-term planners at InSight Law today to set up a time to discuss this important issue.

 

Naming a “Techexecutor” to Manage Your Online Accounts

People who have a Facebook account today could very well have a Facebook account up to the day they die. Facebook has become so engrained in our societal fabric that your online profile is akin to a part of your overall identity.

So what happens when you die? Who manages, or takes down, your online identity?

Well, Facebook has now given you the power to determine who makes that decision. Let’s call them you “Techexecutor.” Facebook will begin allowing its members to designate what they call a “legacy contact” to manage parts of your Facebook account posthumously, according to the Wall Street Journal. Though, you can also choose to have your profile deleted entirely.

Making such a decision now may seem somewhat morbid and depressing, but it gives you the ability to address an important estate issue that routinely causes friction and potential emotional trauma. In fact, prior to instituting this new policy, Facebook simply froze the account of a member who passed away. This resulted in angst and consternation with heirs who wanted to edit the deceased’s profile.

Benefits of Naming a Techexecutor to Manage Your Posthumous Facebook Page

A key benefit to this policy is empowering someone you know and trust to essentially turn your Facebook page into a page of remembrance and honor. Legacy contacts will have the power to write a post to display at the top of your memorialized profile page, change the profile picture, and even respond to new friend requests on your behalf, according to the Wall Street Journal article. If they’re granted prior permission, legacy contacts can also download an archive of posts and photos from the deceased, but not the contents of his or her private messages.

Restrictions to Be Aware Of

Your Techexecutor will not have carte blanche to do whatever they please to your profile. For example, they won’t be able to edit what you already posted, or what your friends and family post on your page. This means if you chose to post a photo that may appear to be embarrassing or even offensive, the legacy contact can’t do anything about it, according to the Wall Street Journal article.

In addition, you can select only one person, and no backup. This is a perplexing policy since it does not allow for the contingency that the legacy contact pre-deceases the profile owner, or if the legacy contact and the profile owner had a falling out and is no longer close to the profile owner. However, Facebook reps have stated that this new policy is subject to change and there may be the addition of “contingent” legacy contacts.

Overall Impression

As an estate planning attorney, I am pleased to see Facebook making this option available to users. It will encourage people to start thinking long-term, which is incredibly important, especially for younger Facebook users who put off thinking about their estate until they are approaching retirement age.

States are starting to recognize the importance of addressing digital assets and online profiles. Check out my blog about Virginia’s recent law regarding the management of digital assets.

Battle Royal: IRS v. The Estate of Michael Jackson

The King of Pop faced numerous legal challenges during his life, but arguably the biggest battle is taking place after his passing. The Internal Revenue Service (IRS) is seeking close to $731 million from Michael Jackson’s estate. Yes, you read that number correctly – $731 million.

How did the IRS arrive at such a huge tax bill? Well, IRS auditors determined that the value of Mr. Jackson’s estate totaled $1.17 billion. This means his estate qualifies for the top rate of the estate tax – a staggering 40 percent, according to bankrate.com. Therefore, the total tax bill includes $525.6 million in taxes and $205.1 million in gross valuation misstatement and negligence penalties,according to Forbes.com.

Obviously, Mr. Jackson’s estate challenges the calculation of such a huge tax bill. The biggest disagreements focus on the value of Mr. Jackson’s intangible and intellectual property (e.g., the King of Pop’s name, likeness and his interests in music he wrote or performed), and two trusts established to borrow against Mr. Jackson’s assets along with the ability to transfer assets to his heirs at minimal tax cost during his life. This is a huge disagreement between the IRS and the Jackson estate. You could describe it as a chasm of difference. Mr. Jackson’s estate values the assets transferred through these trusts at around $2.2 million while the IRS places a $527.5 million value for tax purposes.

Another major dispute focuses on the value of Mr. Jackson’s image and likeness. Mr. Jackson’s estate only valued it at $2,105. Conversely, the IRS claims his image and likeness was worth roughly $434 million, according to Forbes.com.

Here’s a video breaking down the tax battle royal:

Will this dispute get resolved soon? Probably not. The difference in valuation between the two sides is so drastic that it may take months or years of litigation to reach a resolution.

While this type of dispute impacts very few individuals, it just stresses the importance of having a well drafted and maintained estate plan in place.