Three Key Documents Every College Age Child Needs to Sign

ClassroomThe middle of August is a time when families look towards Fall sports, cooler temperatures and the kids going back to school.  For those families with children starting college, this time is fraught will all sorts of emotions, checklists, logistics and large bills.  It is also often a time that parents forget that their little one, who has now grown to an adult, is treated as an adult in the eyes of the law.  Moreover, this is also a time when adult children are not yet entirely independent of their parents, but their parents may not be permitted to help because the child is deemed to be an adult.  Age 18 is the age of majority for pretty much every activity, including signing contracts and making healthcare decisions.  Thus, to avoid circumstances where parents and their children are separated by legal requirements, here are three key documents every 18-year-old should have. 

General Durable Power of Attorney – This document permits the child to name his or her parents to help make financial decisions.  It allows the parents to deal with financial institutions, housing issues, such as speaking with a landlord, insurance questions, like car insurance or renter’s insurance, and generally stand in the shoes of the child, if the child is unable to act.  It also allows parents to speak with the educational institutional, which typically means that grades can be accessed.  This may be a downside for the child and he or she may hesitate to sign the financial power of attorney.  However, most other sources on the subject argue that if the parents are footing the bill for the education, the parents have a right to make certain demands and receive certain information like the child’s grades.  But, regardless of the motive, the discussion surrounding the need for a financial power of attorney should hopefully generate some thoughtful discourse between parents and children regarding how financial transactions and other legal, contractual transactions will be handled.

HIPAA – The Health Insurance Portability and Accountability Act of 1996 (“HIPAA“) regulates the use and disclosure of protected health information.  HIPAA was intended to add a layer of protection for individuals so that their medical history or health status could not be wrongfully used against them.  However, HIPAA brought with it many more hoops to clear in order to receive medical information.  Having a familial relationship, like parent and child, does not get around the requirement that a child has to have given their parents access to their medical records.  So, if a child is in a car accident and ends up in the hospital unable to communicate, if there is no HIPAA release in place, the parents may be left in the dark regarding their child’s status.  A separate HIPAA release allows the child to nominate individuals who can give and receive medical information.  It does not necessarily mean that those same people have a right to make medical decisions.  However, at a minimum, it allows parents to be present.  

Advance Medical Directive – This document permits the child to name his or her parents to make medical decisions.  College is a time when lots of new adventures occur, and sometimes, those adventures go awry.  There are times when accidents do indeed just happen, like car accidents or a slip and fall.  In those circumstances, if a child is at a medical center on campus or off campus, the parents have no right to find out what is going on and to help make decisions unless their child has given them access and authority to do so.  Access can be granted by way of the HIPAA release mentioned above, which could also be a part of the Advance Medical Directive.  But, actual authority to make decisions is only granted by way of a Advance Medical Directive or healthcare power of attorney, if the child is unable to communicate.  Without it, parents may be able to be present, if a HIPAA release is in place, but have no right at the decision-making table.  Thus, similar to the financial power of attorney, the discussions surrounding the need for a healthcare power of attorney should help enlighten parents and children about medical wishes and desires.  It is also a good time to talk about extraordinary measures if a catastrophic event occurs, which may lead to conversations supporting the creation of a Living Will (a fourth document).  Although, for an 18-year-old, it may be too difficult to focus on that specific possibility.

So, if you are part of a family with college bound children, having these key documents in place will help avoid added stress during emergent situations, which is when these documents are most likely necessary.  Moreover, both parents and children get to plan their journey during life’s next chapter.  Therefore, speak with your professional advisor about getting these important documents in place, and if your child has already left, Homecoming, Fall break and Thanksgiving are right around the corner!  #estateplanning #collegebound #incapacityplanning #powersofattorney @bgnthebgn

The Increase of Crowdfunding in Estate Planning

Crowdfunding seems to be everywhere, but does it have a place in estate planning?  Wikipedia defines crowdfunding as “the practice of funding a project or venture by raising monetary contributions from a large number of people…”  Thus, it seems that in the beginning crowdfunding was a form of venture capitalism with the public at large.  Websites like Kickstarter and GoFundMe allowed for individuals to present an idea and raise capital to get the project off the ground.  However, in relatively recent history, crowdfunding has taken on a prominent role in response to any tragedy.  Now it seems that if there is a sudden illness or death, crowdfunding appears to help defray costs.  But for those both using or donating through a crowdfunding website, there are a few questions to consider.

Are there any tax consequences to a donation? – In general, giving to a fund that benefits an individual is not a taxable gift so long as you stay below certain thresholds.  An individual can give up to $14,000.00 per year to each of any number of different people under current law without incurring any gift tax consequences.  Typically in crowdfunding, the fund is set up and smaller contributions are requested or simply contributions of any amount, big or small, are accepted, so hitting that threshold is not an issue.  Also, keep in mind that your contribution to such a fund is typically not tax deductible.  If the contribution is not to a public charity or other qualified tax-exempt organization, then you are not otherwise allowed to deduct your contribution from your personal income taxes.

Are there fees associated with crowdfunding? –  The answer is it depends on the site being used to support the fund.  Kickstarter applies a 5% fee and then there are processing fees of approximately 3-5% if the campaign is successful.  GoFundMe charges a 5% fee and then approximately an additional 3% processing fee.  The fees are charged against each contribution.  The donor or person contributing is not charged the fees, but the person receiving the funds does not receive 100% of the monies contributed.  Thus, if I give $100 to a GoFundMe fund to help pay for costs associated with the illness of a friend’s child, my friend will only see $92 of my gift.   This reality then begs the question as to whether it is simply better to write a check directly to my friend.  That way my friend receives $100.  Of course the theory behind crowdfunding is that if everyone else is contributing then you will want to do so as well, and therefore, perhaps the fees are worth it if in the end more monies are raised.

How do you determine that the request is legitimate? – You need to be careful that you are going to the actual fund page.  Spoof pages can pop up or emails that look legitimate can arrive in your inbox. You may click through and donate not realizing that you are not donating to the actual cause or person that you intended.  Thus, you should take care to ensure that the URL for the fund that you are using is from a source you know and trust.

Overall, it appears that recently during times of hardship and tragedy, crowdfunding has become a way that people can express their sympathy and/or support for others.  I would expect that any monies received are welcomed and appreciated, but may not be enough.  Furthermore, crowdfunding is not a substitute for financial and estate planning where questions relating to life insurance, disability insurance, retirement assets, fiduciaries, guardianship and the like are discussed and analyzed to ensure that in the event of the unexpected, covering expenses does not create additional stress.  So the question to ask yourself is, what preparations have you made for the unexpected?  #crowdfunding #estateplanning @gofundme @kickstarter @bgnthebgn

The Marriage of Divorce and Estate Planning

In case you missed the series about the impact of divorce on estate planning, here is a brief recap of some points to consider.

1.  The Property Settlement Agreement may require that you maintain life insurance for any minor children.  If that is the case, then have you revisited your estate plan recently?  What obligations to maintain life insurance do you have?  Does the Property Settlement Agreement have certain requirements for the creation of a trust, and if so, what are those requirements?  Have the requirements of the Property Settlement Agreement been fulfilled or incorporated through your estate plan?  Are there any provisions of the Property Settlement Agreement that will survive death?

2. When was the last time you updated your beneficiary designations on qualified retirement accounts (e.g., 401(k) or IRA accounts), annuities, life insurance or payable on death or transfer of death designations on bank or brokerage accounts?

3.  What should happen to your real and personal property?  Are there steps you need to take to ensure your real and personal property are distributed to the individuals or entities you want to have benefit?

4.  If you are divorcing and have a disabled child, how is that child being provided for upon the incapacity or death of a parent?  Is eligibility for public benefits preserved through a properly structured special or supplemental needs trust?  Who has authority to make healthcare decisions for the child and in what manner?  Has guardianship been determined and the terms in which parents plan to share guardianship specified, if applicable?

5.  What happens if an estate plan already exists and you do nothing to update it?

#estateplanning #divorce @bgnthebgn

ALERT – Valuation Discounting Impacted By New Regulations

Estate planners and valuation experts have been advising clients for the last year that the IRS and Treasury would be issuing new regulations that would make it harder to transfer business interests without incurring estate or gift tax.   The proposed regulations are now here and will reduce the availability of discounting for transfers of business interests that are subject to certain restrictions (e.g., restrictions on marketability).  The proposed regulations will go through a 90 day public comment period and a public hearing is scheduled for December 1, 2016.  The proposed regulations will be effective as to transfers that occur on or after the date the regulations become final, and in certain circumstances, as to transfers occurring 30 or more days after the regulations become final.  Thus, those who hold interests in closely held businesses should contact their professional advisors to determine whether they need to take action before the regulations are finalized.  #valuationdiscounts #2704regulations #businessvaluations #estateplanning #businessplanning @bgnthebgn