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IN THIS ISSUE
DOLLARS UP, DONORS DOWN
"ABUSIVE" TRUSTS
A BROKE MILLIONAIRE
ARTICLES OF INTEREST
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Did you know that the sandwich's supposed inventor was John Montagu, the fourth Earl of Sandwich? If John knew the extent to which sandwiches have progressed since he died in 1792, or even how we have expanded the use of the term beyond its culinary applications, he might be quite impressed by his legacy.
When it comes to caregiving responsibilities, more people than ever find themselves sandwiched between providing care for their parents and providing care for their kids. People in the category are referred to as being in the "sandwich generation." Being the all-important insides of a sandwich can be gratifying but can be taxing too.
The cost of tuition for colleges had vastly outpaced inflation in the last thirty years, and students compensated with more loans, which for many meant relying on their parents for support a bit longer than previous generations. At the same time, longevity increased, so seniors live longer and sometimes require additional care. The Pew Research Center recently did a survey which found that nearly a quarter of U.S. adults were providing care in the year prior to an aging adult above 65 and an adult child or child under 18 at the same time. This applied to over 50% of those adults in their 40s!
One might be in the category of the Sandwich Generation already, and just not realize it. Many caregivers do not self-identify as caregivers as they slowly take on more and more of the tasks that their aging parents performed themselves. By recognizing that the transition has begun where more care is needed, plans can be put in place that could preserve independent or assisted living and the comfort of the parent longer. Everyone wants to stay in their homes as long as possible, and some steps can be taken to make that happen, such as retrofitting the home, but in many cases that won't be possible indefinitely.
If you start thinking of yourself as a caregiver earlier, it may also be easier to compile financial and health records. You may end up needing to have a power of attorney to take over some decisions, and should a parent become afflicted with Alzheimer's or dementia, it can be much harder to find where all their accounts are and how to access them. Similarly, finding out the passwords for digital accounts early can be crucial.
Although you may want to take over all the caregiver responsibilities yourself, it isn't inappropriate to hire help. It can be very unsettling for seniors to suddenly need help in areas they were previously doing for themselves throughout their lives. They may not want to ask for the additional help they need, and it also may feel very hard to pay for such care. Changing this mentality in smaller steps earlier on can both prevent you from being overwhelmed and your parent from feeling guilt at being a burden (though you may not think of them that way).
Help can come in many forms, not just from others in the family. Many cities and communities offer professional advice, support groups, and free resources for family caregivers. For example, you may want to consider hiring a care management agency which is a company that specializes in understanding what Medicaid and other social programs cover, and offers options and services related to aging, such as food, housing, rehabilitation, and legal issues. By choosing a care agency, you can be more confident that there will be someone to step in immediately in the case of need.
Depending on how much you'd like to delegate, you could have a fiduciary provide oversight of the care agency as well as act as Trustee of a trust. In fact, Garden State Trust Company acting as a corporate fiduciary works in conjunction with care management agencies and others on behalf of clients with our Lifecare services. This allows us to function as the concierge to many additional services to enhance our client's aging experience such as:
- Arranging for Long-Term Care Insurance when appropriate
- Arranging for Medical Reimbursement
- Arranging and monitoring In-Home Care
- Arranging for Independent or Assisted Living Alternatives
- Arranging and help with the sale of a home when moving into an Independent or Assisted Living alternative
Some steps can require advance planning as facilities may not have an immediate opening. The increasing cost of healthcare as we age is substantial, but if the parent is younger, they may be able to get long-term care insurance to ensure financial resources are available to cover those costs.
Should the parent be more affluent, setting up a living trust might be appropriate. Should they become incapacitated, the caregiver can focus on providing emotional support since the trust will provide continued management of the finances.
If you are part of the sandwich generation and caring for an aging family member, make an appointment with one of our experienced trust officers today to find out how we can help.
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MONTHLY QUESTION & ANSWER | |
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Q. My parents are retired, living in another state. They have a sizeable investment portfolio and are financially comfortable. However, as they are getting older, they are having trouble keeping up with their paperwork. Last year they were late in making tax payments, very unlike them. I would help them, but I just live too far away. Is there a service that a bank offers retirees to help in managing their money? Does it cost a lot?
A. Your parents should consider establishing a living trust.
They would transfer their investment assets into the trust, which then would be managed by a trust department or trust division, such as us. We would remit income to them as needed, file tax returns, and pay bills if they so desired. We could continue to provide this financial service even if one of your parents became incapacitated. The trust could continue to operate through both of their lives, and it would avoid probate at their deaths.
The annual fees for our trust services are determined as a percentage of the size of the trust. We do not earn commissions on sales, and we are not paid for generating transactions. Our fees grow only if the value of the trust grows.
© M.A. Co. All rights reserved.
HAVE A QUESTION ON TRUSTS, WILLS, OR INVESTMENT MANAGEMENT?
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For general informational purposes only. This information does not constitute legal advice. | |
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Did you know that there is a Generosity Commission? A new study suggests that total philanthropy is growing but it rests on the shoulders of fewer and fewer households. Read more in Dollars Up, Donors Down, one of our Informational Articles this month. In another Informational Article, "Abusive" Trusts, read about how someone trying to hide income with a trust leads to a call from the IRS.
Our Regional Manager for South Jersey and Philadelphia, Sean Rice, who is also a Senior Vice President and Trust Officer, recently shared with us that in July 2024 Pennsylvania passed the Directed Trust Act which just became effective on October 13, 2024, making Pennsylvania the 20th state to adopt a directed trust act. Why is this important to us? Because this new law allows us to provide Administrative Trustee Services in Pennsylvania. Prior to this law, we were only able to provide Administrative Trustee Services in New Jersey because of the existence of New Jersey's Directed Trustee Act but now we are excited to offer these services in Pennsylvania as well.
With Halloween just around the corner, did you know that child pedestrian injuries are more likely on Halloween than on any other night of the year. Help keep Halloween fun and safe for your family with these tips from healthychildren.org.
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Always accompany young children on their neighborhood rounds. If trick-or-treating doesn't start until after dark where you live, consider checking with your town or park district for Halloween activities offered earlier in the day. Evenings from 6 p.m. to 9 p.m. are the riskiest times of day for child pedestrians.
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If your older children are trick-or-treating alone, plan and review the route that is acceptable to you. Agree on a specific time when they should return home and get flashlights with batteries for everyone.
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Talk with kids about the risk of distracted walking. This includes text messaging, talking on or looking at the mobile phone and listening to music.
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Cross the street as a group in established crosswalks. Most (62%) child pedestrian traffic fatalities occurred mid-block, rather than at intersections. Make sure kids know not to cross the street between parked cars or out of driveways or alleys.
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Don't assume cars will stop just because they have the right of way. Motorists may have trouble seeing trick-or-treaters.
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Stay on well-lit streets and always use the sidewalk. If no sidewalk is available, walk at the far edge of the roadway facing traffic. Only go to homes with a porch light on and, ideally, a well-lit pathway.
Have a happy and safe Halloween!
Sincerely,
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The doubling of the standard deduction in 2017 meant that far fewer taxpayers would be itemizing their tax deductions. Nonitemizers get no tax benefit from their charitable contributions, and so there was great fear expressed that philanthropy could become a victim of tax reform.
As it turns out, the amount given to charity by Americans has continued to grow, despite the loss of some tax benefits for some families. But according to a new study, these larger dollar amounts are coming from fewer and fewer donors. What's more, the number of people volunteering their time to nonprofits is also falling. This isn't entirely attributable to tax incentives, but that may have played a part.
The Generosity Commission was launched in 2021 to examine these phenomena in more detail. In 2008 65.4% of U.S. households donated to a nonprofit organization. Eight years later that figure had fallen to 53% in the wake of the Great Recession. In 2018, the latest year for which the Commission has figures, the proportion dropped below 50%, to 49.6%.
The Bureau of Labor Statistics reported that volunteerism reached a 15-year low of 24.9% in 2015. AmeriCorps reported that the formal volunteering rate fell from 30% in 2019 to just 23% in 2021.
The Generosity Commission believes that a broad base of participation in giving and volunteering is an intrinsic social good to be promoted. Giving and volunteering are a means to create and participate in a pluralistic civil society. They solidify civic engagement and affirm a commitment to work with others toward some larger purpose. They foster social connectedness.
Accordingly, the Commission makes nine specific recommendations in their recent report. You can find the report at https://www.thegenerositycommission.org/report/.
(October 2024)
© 2024 M.A. Co. All rights reserved.
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A family dentist in Colorado paid $50,000 for what he may have thought was a legitimate tax shelter. He placed his dental practice into a limited liability company, then assigned 90% of its income to a trust. Two more trusts were involved in the scheme, including a charitable trust. One of the trusts was used to make mortgage and car payments as well as credit card bills, taking deductions for these expenses. The charitable trust also was used to pay personal expenses, such as season tickets for a baseball team and lending money to the dental practice. The dentist's accountant told him he thought the arrangement was "wacky," but that proved no deterrence.
The story was reviewed in detail in The Wall Street Journal by Laura Saunders ["A Tax-Shelter Crackdown Uncovers a Dentist's 'Smile High Trust,' September 27, 2024]. Last March, the IRS posted a notice on "Abusive trust tax evasion schemes." This was followed by an indictment of six tax-shelter promoters in April--one of whom was the one who sold the shelter to the Colorado dentist. An Arizona promoter pled guilty to concealing about $60 million of income for his 60 clients. The dentist was charged with concealing $3.5 million over a five-year period. He faces the possibility of prison for tax evasion, as well as the payment of back taxes with interest.
Trusts are central to many perfectly legal wealth management strategies. However, it should be clearly understood that:
- trusts do not avoid income taxes;
- trusts do not convert personal expenses into deductible expenses; and
- if it seems too good to be true, it isn't true.
A corporate fiduciary, such as a bank trust department or a trust company, is an excellent source of advice on the legitimate uses of trusts. If you are interested what a trust might do for you and your family, we would be pleased to meet with you at your convenience.
(October 2024)
© 2024 M.A. Co. All rights reserved.
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Chris Brown was a successful Australian stock trader. As his wife had already died, Chris left his entire $12 million estate in trust for his daughter, Claire. He had been providing for Claire's financial support with an allowance of $500 per week, even as an adult.
However, the trust included two stipulations. Claire needed to get a job, and she needed to contribute something to society. After Chris died, Claire refused to meet the conditions, going on welfare instead. She claimed to have a severe case of attention deficit disorder, so severe that she can never hold down a job. She said, "I have called myself a broke millionaire because I am broke constantly and can't do anything about it." A lawsuit has been filed against the trust, demanding distributions regardless of whether the conditions have been satisfied.
We don't know yet who will prevail in the lawsuit. The news reports are silent on whether Claire's symptoms might be treatable with medication, or what strategies already have been tried to help her cope with her ADD. It seems that Mr. Brown took to heart Warren Buffett's advice to give children "enough money so that they would feel they could do anything, but not so much that they could do nothing."
Some conditions for allowing a beneficiary access to trust assets are enforceable, some are not. For example, a trust cannot be used to try to break up a marriage, or to force other behaviors that are against public policy. It can be used to meet specific financial goals, such as funding a college education. Insisting that a beneficiary have a job falls into a gray area, even if the motive is laudable. What if the beneficiary has a disability much more severe than attention deficit disorder? Will a state be willing to support a beneficiary with welfare benefits when the beneficiary could have access to a million-dollar trust?
These are questions that an experienced estate planner can help to answer--and the answers may vary from state to state. Generally, a carrot and stick approach will be more successful than the all-stick strategy chosen by Chris Brown. See your estate advisors to learn more.
(October 2024)
© 2024 M.A. Co. All rights reserved.
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732-255-5000
SOUTH JERSEY / PHILADELPHIA REGION
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908-287-7188
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Because of the rapidly changing nature of tax, legal or accounting rules and our reliance on outside sources, Garden State Trust Company makes no warranty or guarantee of the accuracy or reliability of information contained herein nor do we take responsibility for any decision made or action taken by you in reliance upon information provided here or at other sites to which we link. ©2024. All rights reserved. | | | | |
