New Office

I am pleased to announce that I have a new office located in the heart of Homewood. Our new address is 3410 Independence Drive, Birmingham, Alabama 35209. Please feel free to drop by for a visit!

Back to School

It's that time of year- students are returning to school. Many college and graduate school students may find themselves moving many miles away from home. It is important to consider some of the legal issues that may arise, especially with these potential long distances.

There are two documents that parents and students may find useful: a Durable Power of Attorney and an Advance Health Care Directive. A Durable Power of Attorney would allow students to appoint someone to make financial and business decisions for them if they are unable or unavailable to make them for themselves. There are times where a parent or family member "back home" may need to make decisions or sign paperwork on behalf of a student. A Power of Attorney would make this possible (and much easier).

An Advance Health Care Directive allows individuals to appoint someone to make health care decisions if they are unable to make them for themselves. Students may want to leave a copy of this document with their respective student health centers in order to clarify who would make day to day health care decisions for them.

Although many students would not have a need for these types of documents, it is a great (and simple) insurance policy in case the need should ever arise.

Estate Planning in a Digital Age

I recently read an article about estate planning for younger clients. One of the more interesting sections addressed the particular challenges of estate planning in a digital age. Many individuals have their own webpages, domain names, e-mail accounts, twitter accounts, etc. Even though these are not traditional "tangible" pieces of property, it is prudent to consider these items assets for estate planning purposes.

First, it is important for an individual to leave a list of usernames and passwords that would allow an agent under a Durable Power of Attorney or a Personal Representative under a Will to access these items. There are obvious security concerns with creating such a list, and it would probably be prudent to make an effort to safeguard this information. Where a client has a significant amount of "digital" property, it may even be advisable for any Will or Power of Attorney to include specific language referencing the power to manage and control digital assets.

Second, an individual may want to make specific reference to these properties in a Will to dispose upon it on death. Even though the Will may address this property, it will also be subject to the terms and provisions of any agreement with the e-mail or host provider. For example, I was curious about whether my twitter handle (@jackcarney) could survive my death and be left to ... well, probably another Jack Carney. Twitter's terms of service do not address this issue and it would probably be something my Personal Representative would need to resolve (assuming anyone thought my twitter handle was a valuable resource). I have not yet sold an item on Ebay, but if I did and should die before the end of the sale, my Personal Representative would be responsible for canceling or closing the sale, in addition to collecting any proceeds. At the very least, he or she would need access to my Ebay (and possibly Paypal) account.

There will likely be more significant developments regarding estate planning and digital property within the next several years, as these assets are becoming a more common part of everyday life.

The Bright Side of the Economy

The economic situation is adversely affecting a lot of people. However, there may be a bright side in the area of transfer tax planning. The federal estate and gift taxes are meant to tax the transfer of wealth from one generation to the next. The tax is based on the value of one's assets. As many of our assets (homes, stocks, properties) are at historically low values, this environment can be a perfect opportunity to transfer wealth at a low tax cost.

Now I am not telling anyone to die, but rather to consider making lifetime gifts of assets. Each individual can pass up to $13,000 to another individual without gift tax consequences (spouses can split a gift and give up to $26,000). In this environment, you can gift more shares of stock using the $13,000 umbrella than you could have three or four years ago. If the shares increase in value after the gift, then that appreciation will be out of the donor's taxable estate and will be included in the estate of the recipient.

Another aspect of this current environment is historically low interest rates. These interest rates can be important for certain wealth transfer vehicles (such as a Grantor Retained Annuity Trust or GRAT), but also for some simple transactions, such as intra-family loans. A family member loaning money to another may not want to charge an interest rate. However, the IRS has established a minimum rate that must be charged in order to avoid having the failure to charge interest treated as a gift. These minimum rates are currently low and therefore it may be an excellent time to explore these options.

As always, these words are not meant to apply to anyone's specific situation. If you have any questions or concerns, please consult your legal or tax advisor.

Updates

I often receive questions about when to review estate planning documents (such as Wills, Powers of Attorney, etc.). Here are some general guidelines to follow:

-Consider personally reviewing your documents at least once a year to ensure they still conform with your wishes. You may wish to make it a yearly habit (at the start of a new year, your wedding anniversary, etc.) or you may wish to share copies with another advisor with whom you will meet with anyway every year (such as your CPA or Financial Planner).

-Consider a more formal review with your attorney every three to five years. You attorney would be able to review your current situation and determine whether your documents are still the most effective. Furthermore, you can discuss whether there have been any changes in the law that may warrant a change in your documents.

-Review your documents upon the occurrence of a life changing event, such as a death, marriage, divorce, etc. My general rule of thumb is that if you have to ask yourself if something is a life changing event, then it is probably a life changing event.

A change in circumstance does not necessarily mean that you will have to change your legal documents. For example, the birth of a new child would most certainly constitute a life changing event, but most estate planning documents provide for “afterborn” children and therefore no change would be necessary. Nevertheless, for many individuals s, a regular review can at least provide you with some comfort that the documents you have contain the best estate design for you and your family.

Happy Easter

As I spend an Easter Holiday with family, I realize that holidays are such a good time to consider how our loved ones are faring and if they might need any special assistance. If a parent might seem to be having some trouble keeping up with his or her personal finances or just seems a little more forgetful than usual, then it might be a good idea to begin thinking about putting a personal financial security system in place (with tools such as a revocable living trust or durable power of attorney).

It is important to note that any such steps are best taken with the full support of all parties involved (including siblings). Having a frank and open discussion at the outset can go a long way to preventing suspicion and angst later that may derail any attempts to help.

New Procedure at Probate Court

Effective April 1, 2009 the Jefferson County, Alabama Probate Court will begin requiring the production of a certified death certificate in order to open an estate administration. Even thouogh it may cause some additional delay for families, it is probably a good practice. I had always been surprised it was not a requirement before!