For Clients, Community and Advisors.  Every day, we assist our clients in transferring assets to their trusts to ensure that the goals and objectives of their estate plans are accomplished.  Once the assets are transferred, we endeavor to verify  that the assets are correctly titled.  I would venture to say that every year, we deal with hundreds of financial institutions.  Some are easier to work with than others.  When we collaborate with financial planners, CPAs and investment advisors, the task is almost always easier.  However, recent changes in the banking laws have made working with many banks a little more difficult.  For the most part, all these institutions realize that they exist because of their customers.

There is one exception that looms large.  In professional meetings across the country, I have heard one nightmare after another recited by attorneys and paralegals about dealing with this national institution – particularly after the death of a client.  While our office has had some frustrations before, they are nothing like what I personally have experienced recently.

My parents live in Tucson, AZ.  They have both been sick recently.  I have been handling their finances.  Late last year, I took their standard power of attorney to their bank at a time when both of them were hospitalized.  The bank refused to honor the power of attorney.  The reason?  They dreamed up an oddball technicality – a provision that ALL attorneys normally use in well drafted powers of attorney.  I was fit to be tied!

Then, late this week, Mom needed money in her checking account.  They have a money market account at the same bank.  Both accounts are in the name of “Mom and Dad”.  No problem, right?  I drove over to the local branch with a $15,000 check.  The teller called over the manager who proceeded to give me the third degree as though I was a thief!  Then, she told me that she could not accept the check, she could not tell me why, and insisted that my 83 year old mother call her so she could let her know!  Then, right in front of me, she tore up the check and the deposit ticket.  I was livid!  I called my parents.  My sister was with them.  She took them over to the branch in Tucson.  Within an hour all of their money was removed from the bank and taken to their competitor.

Who is the bank?  Bank of America has a really bad reputation among estate planning attorneys and financial planners across the nation.  They are obstructive and they are difficult.  In an era where the customer experience is paramount, Bank of America does not understand anything but hard and fast rules.  Eventually, the marketplace will catch up them and either they will come to understand or they will continually lose market share.  In the interim, we will be recommending other financial institutions who are customer oriented.

For Clients, Advisors and Community.  There was recent news that Facebook users could register as organ donors.  This development gave great publicity to the fact that 70% of individuals would accept a donated organ if needed but only 30% are registered to be organ donors.  The result has been a well publicized shortage of needed organs for transplantation.

Please note that looking for an organ donor page on FaceBook and reading the stories there is an ineresting source of information.  However, “liking” a page on FaceBook does not register you as an organ donor.  You must find a specific website for organ donation to be registered.  There are several on FaceBook. 

How in Illinois do we most effectively indicate our desire to act as organ donors?  Or, conversely, how do we indicate that we do not want to be organ donors?  There are several steps.

First and foremost, make sure that your loved ones and, in particular, your agent under durable power of attorney for health care knows your intention.

Second, the new statutory form of health care power of attorney has a place to indicate whether or not you want to be an organ donor.  And, if you do, whether or not you want to place any limitations on donation.

Finally, if you want to be an organ donor, you should know that the best way to indicate your desire is to register with the donor registry sponsored by  the Illinois Secretary of State.  The indication on your driver’s license is not legally binding.  However, if you register at http://www.lifegoeson.com your decision will be legally binding upon your loved ones, perhaps reducing or eliminating conflict at a difficult time.

I’m a believer in organ donation.  I’ve seen how this selfless act has enriched the lives of others.  As an attorney, however, my obligation  is to see that my clients’ desires are fulfilled irrespective of my personal beliefs.

Indicating your desires via Facebook is one way to inform your family and loved ones about your intentions.  It is also a great way to remind your friends and family concerning this important and timely topic.

For Clients, Community and Advisers.  I am often asked about the mechanics of implementing a DNR (Do Not Resuscitate) Order.  Many elder or infirm clients do not want to spend their last months dragged through extraordinary medical procedures.  Rather, they choose to have a natural death without having the medical establishment bring out the paddles every time they arrest or have breathing trouble.  There is a pronounced tendency toward a nuanced and calm end, at home with loved ones – not in a hospital with a sterile environment.

In our practice, we always offer our clients a durable power of attorney for health care as part of their estate plan.  (In Illinois, normally do not use the “living will” as its equivalent provisions are included as part of the durable power of attorney for health care.  In other states including Florida and Wisconsin, it is different.)  Many of our older clients come in to the office asking that we include a DNR order in their power of attorney.  What is a DNR order and how does it work (under Illinois law)?

There was a new DNR order form developed by a task force and issued by the Illinois Department of Public Health in 2005.  It requires the signature of the patient (or his /her legal representative such as an agent under power of attorney if he or she in incapacitated and cannot make a decision or sign) and a witness.  To be valid, it must be signed by the patient’s physician.  The physician’s signature is required not for consent, but rather to ensure that patients are getting appropriate counseling concerning a critical life and death decision.

There are basically two options.  The first is whether or not CPR should be attempted in the event of cardiopulmonary arrest.  Typically, for an individual who wants a valid DNR order, the answer would be, “no”.  (Do No Rescusitate)  The second is whether or not CPR should be attempted in the event of a pre-arrest emergency (when breathing is labored or stopped, but the heart is still working).  Here, the answer could be yes or no.

In appropriate circumstances, we will prepare the DNR paperwork for our estate planning clients as well as those clients who are members of our Family Lifetime Care Program (our continuing service program.  For more information, call me).  It is important to keep in mind, however, that a valid DNR requires a physician’s signature.  The DNR order should be completed well in advance of any emergency.  A copy of the document should be kept in your medical record with your physician, the hospital you normally use and a copy handy in your home for any emergency.

End of life care decisions are always sad and often difficult.  Nonetheless, all of us need to face them at some time.  Planning makes this task much easier for each of us when our time comes; but also for our families and our loved one.

For Clients, Advisors and Community

A recent Wall Street Journal article states that women owned businesses struggle when revenues get to the level of $250,000-$499,999. It also cites a 2011 study conclusing that the proportion of woman owned businesses with revenues of $1 million and more is about the same as it was in 1998.  I wonder why this is the case.  If you would like to see the article, please send an email to jay@kaufmanlawgroup.com

It is often (but not always) true that our firm’s clients represent a fair picture of what’s going on in the business world. We are honored to represent woman owned businesses, minority owned businesses and disabled veteran owned businesses. Even in this difficult business environment, all of them are thriving. Many have done well particularly because of the benefits available to minority owned businesses combined with the expertise and enterpreneurship of the owners. From my perspective, almost all of them are among my favorite clients.

By and large, the law has given minorities in this country unprecedented opportunities. From the perspective of my world, I’ve seen many successes.  On that basis, I think the program may be underutilized.  Do you know anyone who is a woman, Hispanic, African-American, other minority ethnic or a disabled veteran?  A business opportunity awaits.

The laws of our country provide special opportunities for women owned businesses and “set aside” programs (particularly in the construction industry) for disabled veteran and disadvantaged business enterprises (DBE). For the DBE program, an individual “graduates” (and can no longer participate in the program) when he or she attains a net worth of $1.32 million (exclusive of the net equity value in his or her home and the value of his or her business). Hence, an individual could have a net worth up $4 million and still be disadvantaged. From a policy perspective, does this make sense?  I’d be interested in my readers’ thoughts on this topic.  Please send me a comment via this blog.

For Clients, Advisors and Community.

Do you have a vacation home? Perhaps you celebrate every Christmas at a mountain lodge built by Grandpa, take the kids on a spring break to a beachside condo, or spend summer weekends at the old farmhouse so the little ones can catch fireflies.

How do you pass on your vacation home to the next generation so that everyone still enjoys spending time together there? An article published by the Wall Street Journal deals with this question. (Click here to see the article.)  The article examines some of the complex issues involved, including paying expenses and determining access and use. It’s a great article for you if you’re considering leaving such assets, as well as for those who inherit them.

Families Are Not Simple
Once you pass away, how will the costs to maintain the vacation home be paid? This includes taxes, insurance, utilities and repairs (i.e., a new roof).

There are other complex, family-oriented questions that take more than a spreadsheet to figure out:
• Should every child get an equal share?
• When children get married, can we protect the property from a divorce?
• How will it be decided who gets to use the property and how often?
• If one child “wants out” of the arrangement down the line, will this force a sale?

While one generation of siblings might successfully share a mountain cabin, the next generation might not. Later generations won’t have the same attachment to a property, so an exit strategy should be considered as part of the plan.

Strategies to Consider
The WSJ article suggests putting the home in a trust and funding it with life insurance. A professional trustee manages the property and insurance proceeds cover expenses. If one of your kids wants to sell, the money in the Trust can be used to buy him out. The trustee might decide on a schedule of use and whether the property should be rented out occasionally to cover expenses.

Working with an estate planning attorney will help you and your family (or your clients) decide which strategy will best fit their needs, and ensure that the next generation enjoys the property for many years to come.

On first glance, it looks like the recently signed “Illinois Residential Real Property Transfer on Death Instrument Act” would only interest lawyers, title companies, and the government.  In fact, this new law, which goes into effect on January 1, 2012, will allow a majority of our clients to “have their cake and eat it, too”, just by addressing how their residence title is issued.

Until now, assuming there are no estate tax considerations, we have been faced with a dilemma when planning for the asset protection of a married couple’s primary residence. We could have the residence titled in the name of one or
both spouse’s revocable trusts, avoiding probate costs, delays, and creditors. Unfortunately, doing so meant that both husband and wife had to previously surrender important asset protection against potential judgment creditors and others.

When a residence is held as “tenancy by the entireties”, a spouse’s creditors could not foreclose on the residence because of the other spouse’s interest. So, if there were a car accident with a large judgment, financial mistakes, or other circumstance, the property was at least temporarily protected for the remaining spouse.

Last year, the General Assembly tried to create a law where married clients could put property in trust AND still retain the asset protection benefit of tenancy by the entireties. But, the legislation was drafted in a way that no
attorney could understand how to accomplish it, so we were stuck without a solution.

One solution we’ve recommended for clients is to have the residence owned by an Illinois land trust, which gives them the advantages of a trust (including flexibility, private administration and reduced costs) and the asset protection of entireties property. But, this solution comes with an annual cost to a bank or trust company, so it’s not perfect.  And, only one residence can have entireties protection from judgment creditors.

Now, using the new “Transfer on Death Act” provisions, we can help clients protect their property assets without the attendant cost of maintaining a land trust. We draft these provisions into the conveyance instruments, and
once they are properly recorded, they are immediately effective.

The residence can be owned by the spouses as tenants by the entireties.  Upon the death of the first spouse, the survivor is instantly and automatically the owner. Upon the death of that surviving spouse, the property is conveyed into the trust, by providing only a copy of the death certificate and a form affidavit.  There is no probate, no delays, no creditor interference.

The Residential Real Estate Transfer on Death Act doesn’t just apply to married couples.  Single individuals can convey their property to heirs through a Transfer on Death Deed, and avoid the probate process. Under most circumstances, holding a single individual’s property in a revocable trust may be a better, more comprehensive solution.

The act also simplifies planning for non-traditional couples, including those taking advantage of Illinois’ new civil union laws, though the benefits of entireties property do NOT apply in these cases.

In light of the new legislation, we will take time at each client’s annual review to re-examine how the residence title is held. If changes are appropriate, based on client objectives, we will recommend and implement them.

If you have questions about how your residence is titled, please call our office.

For Clients, Community, Professional Advisors.

Recently, business and estate planning attorneys have increasingly focused on assisting their clients in protecting their assets from loss due to unexpected circumstances.

The typical business owner will respond, “But, my business is structured as a corporation/limited liability company (LLC).  It’s already protected”.  This is only partly true.

The business has inside protection.   That is, the assets inside the corporation have asset protection.  In other words, if there is an accident in the business, the owner’s personal assets cannot be taken away.  That’s the key advantage of using a corporation or a limited liability company.  However, there is a separation between the business assets and the owner’s personal assets.  It’s a form of asset protection.

In a world of creditors, predators, unforseeable circumstances and divorces, it’s important to take active steps to protect our assets.  In the above situation, the assets inside the business may have some protection, but the ownership interest (the shares or membership interests themselves),-  the  “outside interest” – is not protected in any way.

If the owner of the business is in a major car accident and has a large judgment against him or her, he or she could lose his or her interest in the business in a moment’s time.  Having a corporation does not protect the outside ownership interest in the business from potential judgment creditors and other predators.  Many very smart and sometimes very wealthy business owners fail to understand this fact.

A recent study in New York demonstrated that there were a surprising number of judgments in the prior five year over $5 million dollars.  The study found that there was no correlation between the amount of insurance carried and the amount of the judgment.    Under many court rules, once there is a judgment against you, the court can issue supplementary process to find out all of your assets– no matter where they might be.  This is called a Citation to Discover Assets.  Hence, advance planning is important.

Many states have passed new laws designed to protect the outside interest of shareholders and particularly members of limited liability companies.  As we review our clients’ estate plans and prepare for our business clients’ annual meetings, it is our obligation to bring these new techniques to our clients’ attention.  We have already seen situations in our practice where using simple asset protection techniques has saved our clients and their families significant dollars.

Look for further articles in my blog and for additional information on our website concerning asset protection tools and techniques.

For Clients, Advisors & Community

On June 1, 2011, legislation establishing civil unions went into effect in Illinois.  This is a major step in marital rights for gay and lesbian couples.  What’s interesting, however, is that the law potentially impacts, perhaps in a major way, heterosexual couples as well.

This article will outline the features of the new law as well as its impact on some of our clients and their families.  A follow-up article will discuss the choice of civil union versus marriage and the tax and benefits issues relevant to civil unions.

What is a civil union?  A “civil union” is a legal relationship between two persons of either the same or opposite sex.  It excludes relationships involving more than two people.  The parties to a civil union in Illinois are “spouse”, “family”, “immediate family”, “dependent”and  “next of kin”.

There’s a set procedure in Illinois for a civil union to be valid.  It requires a license and a certificate be issued, much like a marriage.  The Illinois law recognizes civil unions legally entered into in another state. It does not apply to common law marriage.  It also allows issuance of licenses and certificates for civil unions to individuals who live in or intend to live in another state,  as long as that jurisdiction does not have its own law prohibiting civil unions.

Many laws that apply to a married couple apply to unions under the civil union act including separation, divorce, alimony, custody, child support, inheritance, right to take a minimum share under will, right to make health care decisions and right
to visit in a hospital.

Also, under the Illinois Spousal Continuation Act, a spouse and dependent children who lose health care coverage due to the death or retirement of the employee (or due to divorce of the employee) are entitled to continuation of coverage under certain circumstances.  It appears that the civil union spouse of an employee would be entitled to this benefit.

This is by no means a comprehensive list of benefits available.  Suffice it to say that there are many benefits
available to a spouse under the new civil union law in Illinois.

There are some questions, burdens, and responsibilities that come along with being a “spouse” under the new law.  First, under the Family Expense statute, married couples are responsible for family expenses including, in particular, medical expenses.  A spouse under the civil union law would be responsible for the medical expenses of his or her spouse under this statute.

In addition, the law concerning “tenants by the entireties” protects a husband or wife from a creditor taking their home due to a judgment against the other spouse.  However, the law in this case specifically states, “husband” or “wife”.  Hence,  unions under the civil union law do not at this time appear eligible for protection as tenants by the entireties.  Once the legislature changes the statutory language from “husband and wife” to “spouse”, this benefit might become available.

Because of the (Federal) Defense of Marriage Act, there is a “disconnect” between Federal law and Illinois law when it comes to taxes and certain Federal benefits.  These significantly impact the decision, particularly of whether an older same-sex couple should choose the traditional marriage route or a civil union.  I will address these and other related concerns in the follow-up article on civil unions.

For Clients, Professional Advisors

Since my March 3, 2011 posting on inherited IRAs, there has been an interesting precedent. A Federal Court in Texas has issued an important appellate decision. The case is Chilton v. Moser.

What happened? Shirley died in 2007 naming Janice as beneficiary of her $170,000 IRA. Janice opened an IRA titled, “Janice, beneficiary of Shirley IRA” and transferred the funds to this account. Janice filed a bankruptcy petition in December, 2008. Janice sought to protect the IRA from the bankruptcy estate, claiming that the assets were exempt from her creditors under Federal law. The United States Trustee objected. The bankruptcy court judge held that the assets were part of the bankruptcy estate and that they could be distributed to the creditors. Janice appealed to the Federal District Court.

In a well-reasoned appellate decision, Judge Ron Clark reversed the bankruptcy court decision. He held that in order for inherited IRA funds to be exempt from creditors in a bankruptcy (a) they must be tax exempt under §401 or §408 or §403 (or other) section of the Internal Revenue Code (covering individual retirement accounts, pension and profit sharing plans and certain non-profit organization annuity plans) and (b) they must be retirement funds.

The court went on to conclude that Shirley’s funds were both tax-exempt and were retirement funds. Therefore, the exemptions under the bankruptcy code applied and the money was in fact Janice’s. Her creditors in the bankruptcy case would be unable to reach them!

Can Illinois residents rely on these cases? The trend of the decisions is clear. All Federal District Court Decisions to date and one Appellate Court decision has been consistent with the holding in Chilton v. Moser.

However, one cannot say for certain that this is the law of the land. There is some likelihood that the Federal appellate courts will differ in how they apply the bankruptcy code to IRAs. Nationally respected IRA and tax expert Bob Keebler recommends that professionals continue to offer clients an individualized IRA trust for asset protection. It provides certain asset protection.

Until the matter is resolved by the Seventh Circuit Court of Appeals (Illinois, Wisconsin and Indiana), or if the circuits disagree, by the United States Supreme Court, we continue to offer our clients with large IRA accounts an individual retirement plan trust that provides the asset protection they need.

Why take a chance if a deal goes bad?

For Clients, Advisors & Community.

An attorney who represents seniors is concerned about their well being. He is often involved as well helping the “sandwich generation” children who are concerned about the parents they love.

But I also speak from experience as one of those “sandwich” children. A few years ago we had to take the car keys from my father-in-law. It was a difficult experience, but one we had to do.

Those who know me would think this article about senior driving dangers would be about my parents or Karen’s, not my own. I’m not 78 or 85 years of age. I’m only 57. I’m a proud member of the “baby boomer” generation. I still work in my profession. In most places, I can’t even get a senior discount on a movie ticket!

I bought a new car in October, 2010. In the three months following, I was involved in two car accidents involving significant damage to my car and to other vehicles involved in the incidents. Thankfully, no one, was hurt. Legally, both were my fault. And because I’d had a couple other little fender benders in the past, my family was increasingly uncomfortable with my driving.

Instead of chalking it up to coincidence or bad luck, we decided to see if something was really wrong.

I am currently in the midst of a complete “driver rehabilitation” evaluation through a local hospital. For example, I today had a four hour eye examination from a nationally recognized ophthalmologist and her residents at the University of Illinois. She looked in depth at an uncorrected vision problem I’ve had since I was an infant. I learned that I don’t need eye surgery.

Most importantly, though, I’m recognizing that I’ve become much too cavalier about day-to-day driving. Until very recently, an installed radar detector was standard equipment in my car, so I could evade the speed traps. Now I adhere to the speed limit. Period.

Until very recently, I talked on the phone and returned client calls while I was on the road. Now, I ignore the phone while I’m in the car, and I have my passengers do my texting for me.

I’m learning that when we hit our 50s and 60s, our reflexes slow down and cognitive changes happen. These may be subtle. However, they can make a major, perhaps life altering difference, at 60 or more miler per hour. With the addition of so many distractions into our daily lives, it’s time to reassess, change our habits, and make sure that we’re safe on the road.

Karen and I are going to take the AARP Senior Driver Education class at the end of April. Some of our friends have taken it and say that it’s time well spent. In short, I’m learning to drive – all over again.

So, if you call my cell or text me, and I don’t respond right away, I’m not ignoring you. I’m keeping my focus on the road. I’ll get back to you when I’m safely at my next stop.

We “baby boomers” don’t quite yet consider ourselves to be “seniors”. Though at the same time subtle cognitive changes are occurring and our reflexes are becoming gradually slower. Please believe me when I tell you that an ounce of prevention is better and far easier than a pound of cure.

My car was in the shop for two months after my last accident. It was just returned to me on Friday. I want to keep it. So, I’ll be driving the speed limit. Care to join me in the right lane?