Have You Been Cocooning Lately?

It’s been unusually cold this winter. Have you felt it deep inside your bones? Wrapped in a blanket, hunkered down. Under the weather. Sometimes we just want to cocoon for awhile, especially if our body is fighting off a cold. Occasionally, I just sit and soak up the sunshine or warmth and allow my natural body rhythms to help me back to health.

Sometimes, we cocoon when we need to slow down our life rhythm to accommodate new changes. Taking some time to take in recent experiences is a healthy way to manage stress in life. It usually gives us the refreshment we need to re-ignite the fire of our inner motivation.

Yet, there comes a point in a person’s life when this cocooning process is the dominant mode of life. Sometimes a terminal illness causes this. Or the inevitable frailty of old age causes us to cocoon. This process looks like shutting down to the outside. While a person cocoons, they hold on to only a few routines that must be done and let go of many activities that once gave them pleasure. Sometimes it is only for season, but sometimes it is a way of protecting themselves.

He Sings For The Fun Of It
When we watch those we love detach, sometimes all we see is the decline and not the inner joy. The decline scares us when we remember their earlier vitality. We wish for a return to what used to be. Sometimes they do too.

More often, people seem to sense when it is time to slow down and soak up the warmth or just enjoy simple pleasures. While we say things like "She is failing" or "He is declining", they seem to be thinking, "I am getting closer now!" For example, I know someone who has had to get his food through a stomach tube for a number of years since he had throat cancer. Even though he cannot swallow food, he sings little songs all through the day to cheer himself and his wife.

Not Failing, Cocooning
Rather than saying someone is "failing", let’s change the idea to "cocooning". Who wants to be seen as failing? We all want to be seen as capable, even if we need help in some areas of our life. I never wanted an "F" in school and I certainly don’t want it life either.

When we cocoon, we do so with hope that a re-invigorated butterfly will emerge. When in this state, whether because we are ill or frail, we need special care from those near by. This weekend my husband enthusiastically took on the job of making me soup. He helped me do a necessary task when I was not up for it. Maybe later, we’ll both need someone to cook healthy, tasty meals for us. Although, I am sure they won’t equal his.

It may take a village to raise a child, but as I have written elsewhere "it takes a stage crew for our final act". When we are older, we need to identify a trusted circle of care we can rely upon.  This will help us experience the kind of quality of life that protects us, leaving room for joy even as we prepare for "lift off".

TAP Into Your Circle of CareTM
As my mom likes to remind herself, "just because we have needs, does not mean we are needy". What keeps us from being "needy"? One way is to do an honest assessment of our needs and have conversations with others about our capabilities as we age. That way we are better able to seek and accept the type of help we’ll need at various stages of life. Even if your motto is "Need No Help", remember we all rely upon other people during our lifetime. The very fabric of our civilized lives is built upon mutual needs being fulfilled.

As we age, no matter our age, here’s the only question - what type of service can you offer and what service do you need now?

Who Shops For The Shoes?

This is a question I never considered until I became a professional fiduciary. Put yourself in these "shoes" for a moment.

Imagine you cannot drive; get a little disoriented; your feet hurt but you do not want new shoes because you like your routine; and, wearing sandals in freezing winter is easier than going shopping for shoes. Online doesn’t work because you don’t own a computer. Also, you don’t know your current size or what will feel right. Who will do this for you?

My client is a dream - she is wonderfully wise and witty - but she suffers from mild cognitive impairment. She also needs a walker to help her maneuver after a recent fall and broken bones. She wants very few personal trappings and demands nothing. To make sure she is getting the type of care she needs, I sometimes have to imagine what she needs and then try it out with her to see if she’ll like it.
　
Money Well-Spent
Scanning the selection, I picked out a variety including some that were larger than her "size" - her feet have swollen a bit since she last bought shoes. Seven pairs came back with me. I removed the size tags and we played a little game. I played the part of a Nordstrom shoe sales person, she the picky customer. That pair was not cute enough. Those were too small (her size). Ah, these were just right. Almost. She said they were "ugly as sin but comfortable". She accepted only one pair because she knew her doctor wanted her to have them. Remember, she does not like to spend money on anything frivolous. Except for cigarettes and cookies.

She now wears these shoes daily and it always makes me smile to see them on her feet. After some delicate negotiating to determine her desires; obtain her needs; and finally, to handle tasks she can no longer handle for herself or is not even aware she needs, she now has a new routine which provides her with warmth and comfort.

Even with this "dream client" - it took over 90 hours at the beginning of my work during a six week period to travel to her location (I do not charge for this time); chase down income checks lost in the mail after her move; secure the home; provide the necessary paperwork to various agencies so I could do my job as her Power of Attorney; work out a monthly budget; pay her bills timely; secure and check her mail with her - sorting her personal mail, from junk, from necessary.

Oh, and find her some new shoes.
　
Good Judgment is Valuable
What are those 90+ hours worth to the person who is being served? They can mean the difference between hearing and not hearing; or the difference of a less stressful life due to less worry about how to handle the overwhelming details. Or even more crucially, persistent follow-up and attention paid on behalf of an ill or elderly person insures a better standard of care from everyone involved. Not everyone has family who can do this for them.

What are the alternatives? If these tasks were to be handled by the family attorney or a CPA, the hourly charge for these services would be unpardonable at the normal going rate for these professionals. On the other hand, the multitude and variety of tasks required do not fit into the job description or malpractice insurance of a bookkeeper. Many times the most cost-effective and safest solution is a professional, licensed fiduciary.
　
Angels Among Us
A professional fiduciary uses his or her best judgement to find the most cost effective way to serve a client - kind of like the CEO of a small company. Even routine tasks like bill paying need someone to make sure they are being done properly. If there are changes in the situation (as there will be) or conflict between adult children or a lack of communication from health care providers these require the professional fiduciary to use good judgement, re-evaluate and find new solutions that will serve the client.

So, if you hear negative stories or comments about fiduciaries, consider the source - a disgruntled, disinherited adult child perhaps? And think about the shoes. Imagine having to go out in the blustery cold on a shuttle bus in your sandals while using your walker; without your hearing aid (lost back at the skilled nursing facility). You already know you’ll be tired before you even find the right store. Maybe a few fiduciaries have erred in judgment, but most of us are a necessary and even sometimes wonderful source of protection - like guardian angels we are unseen protectors. 

Merry Christmas to all and to all a good night!

Boo! Don’t Get Caught Short October 31

When A Trust Is An IRA Beneficiary 

We recently posted a question to our fiduciary, attorney, tax advisors and others who recieve our informative emails.  Below is the question and some helpful responses.

Caveat: This poll is not statistically significant and neither the results nor opinions expressed by participants represent legal advice, tax advice, investment advice or any other type of advice. Instead, dear reader, we encourage you to research, consider and seek appropriate counsel for your particular situation.

 

Normally attorneys do not recommend designating your trust as the beneficiary of your IRA for a number of good reasons.  Occasionally a settlor may choose to designate the trust as the beneficiary on an IRA account to avoid giving it outright to spendthrift heirs or to provide for children from a previous marriage. For whatever reason, if you are handling an estate in which the named beneficiary of an IRA is a trust, it pays to know how to handle this. Since IRA accounts can be a sizeable asset in an estate, handling this in the wrong manner can have a significant impact.
 

Question

A fiduciary steps into the role of Trustee upon Sally's death. Assume Sally died on April 1, 2012. Her husband died prior and left an IRA that she rolled into her own IRA account (note: not always the best choice). She then completes the beneficiary designation form and names her trust as the death beneficiary. If you are the new Trustee, what do you do?

A - Trustee must accept IRA assets into the Trust for Sally's beneficiaries. 

B - Trustee may decide Sally made a mistake and distribute to heirs directly.

C - Other.

 

Crucial To Know Now

If you are Sally’s trustee in the example above, you must provide a copy of the trust to the IRA custodian by October 31. 

To make sure the IRA distributions can be stretched out for longer than the maximum of 5 years allowed by the IRS, the trustee must provide a copy of a valid trust instrument; which is irrevocable; and, which has identifiable beneficiaries to the IRA custodian by October 31 of the year immediately following the year the IRA owner dies.

Poll Results

Most of our respondents chose answer “A” - Accept IRA assets as designated on the beneficary form into the trust. Since people sometimes do choose to use a trust to control the final distribution of assets held in a retirement or IRA type of account, the successor trustee would be required to follow these wishes.  BUT, there is more to the answer when you receive an IRA account to be administered in a trust: determining beneficiaries and action dates.

 

This poll resulted is some very thoughtful answers such as this one from Dave Sylvester, an investment advisor - “First determine if Sally died before or after her required beginning date (April 1 after she reached 70 ½). Second determine if the trust is considered a look-through or non-qualified trust. These two will determine the trustee’s options. When the trust is a look-through trust the trustee could pull the IRA out of the trust and set up new inherited IRA accounts for each of the name beneficiaries.”

Or, this one from Robert Telles, a Walnut Creek attorney,  “It is what it is, and those instructions should be followed. I have a client who just set up an IRA doing that very thing. The money is to be available for his second wife, but following her death it will revert to his existing children. I'm not sure there is a better way to ensure this.”

Tax Advisor Feedback

“It's important for the trustee to pay attention to key dates (all of the following fall in the year following the year of death):  September 30^th – date to determine “designated beneficiaries”, which is an individual or a trust that meets certain IRA requirements; October 31^st – deadline to provide IRA custodian with trust documents, and December 31^st – deadline for beneficiary required minimum distributions (RMD) to begin and to create separate IRA accounts if there are multiple designated beneficiaries.

 

Even when there is a mix of designated and non-designated beneficiaries in the trust, e.g. a child and a charity, with proper planning and timing it may be possible to maintain the life expectancy option for the designated benefiary. If the dates are missed, the child may be forced to take the distribution at a faster rate than desired."  -  Tim Hintzoglou, EA, CFP with Walnut Creek based Tax & Financial Services.

Attorney Feedback

“We commonly have clients name the trust as a beneficiary of the IRA(s), after the non-employee spouse, and in the case of younger children (dole-out sub trusts created under the Trust).

 

We have found that the only disadvantages are (1) the stretch IRA benefit is based upon the actuarial life expectancy of the eldest of the beneficiares; and (2) the trust wil have to remain open pending the full distribution of the IRA assets." - Peter Sproul, Walnut Creek Attorney, Mullen & Sproul, LLP

Conclusion

The trustee is responsible for determining the life expectancy of the oldest living identifiable beneficiary as this will control the length of term on distribution. In addition, if the trust language mentions at least one unidentifiable beneficiary, for example the term “child’s issue” or one that does not have a life expectancy, such as a charity, then the trustee may need to take another step to stretch the IRA distribution past five years and more closely follow the settlor’s wishes. The successor trustee might need to seek a court order to “set” the beneficiaries for the IRA based upon the currently living children and grandchildren.

Tax issues are always a factor to take into consideration when handling a trust. A fiduciary must have a basic grasp of a wide array of areas; including tax, legal, and investment management, along with heath care matters.  In all areas, licensed professional fiduciaries are encouraged to know when to seek qualified professionals for specific advice. Licensed, professional fiduciaries make it their business to know reliable professionals.  Feel free to contact us to let us know more about your professional services or how we might serve you.

 

Cashing In The Chips

The email below from my dad, with the subject line: "Cashing In The Chips" arrived in my inbox after I had learned that he had suffered a major heart attack and died on Sunday, September 23, 2012.  He was only 76 years old and a kind-hearted, creative, one of a kind guy.  When someone you love passes away, there are scenes that replay in your mind you wish you could do again or share with the person who is gone.  You also want to tell people about them.  I want to use his last email as a way to warn you. Please read-on.

My dad was unusual during the “Leave It To Beaver” days of stay-at-home moms.  He was the “at-home” parent while my mom worked as I grew up.  He would often make me lunch of ham & cheese sandwich with Miracle Whip and Campbell’s Tomato Soup (now Miracle Whip never darkens my refrigerator door, but as a kid I liked it).

He always encouraged me to go outside to get some Vitamin D when I was sick.  He seemed to like unconventional cures over medicine. He thought he needed to encourage balance in my life so he told me he only wanted me to get “A” grades in Physical Education. All other subjects I did well, but I think he wanted me to remember to enjoy being alive.

I could share more (and no doubt will at his memorial service later this week).  For now, I want to share his last email to me.  I think his cholesterol was high for a number of years but he had lost weight and thought he had a clean bill of health just a few months prior.  This is how he felt the day before he died.  He had no other warnings or heart problems prior.  My dad was gone before the ambulance reached the hospital. 

IF YOU EXPERIENCE THESE TYPES OF SYMPTOMS – GO TO THE EMERGENCY ROOM IMMEDIATELY AND TELL THEM YOU THINK IT IS A HEART ATTACK!!!!

 

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Date: Sunday, September 23, 2012, 8:23 am

From: Bill Rogers

Subject Line: Cashing In The Chips

HI,

God REALLY ANSWERED OUR PRAYER LAST NIGHT...Saturday, 9/22. This kid almost cashed in his “chips”. How? It had been happening for about two days. I have/had high blood pressure. But I lost 22 lbs, and the blood pressure went down to normal. So, all was well and good. Then, I went to the grocery store, Friday, and some guy came up behind me in line talking about shooting birds, and his cat eating one a day.  I was feeling very angry at him and in myself. But, I said nothing to the guy.  I simply thought someone had wrapped my chest and arms in a very tight cloth.

 Then, yesterday, Saturday I started to get the same feeling in my chest. I took some aspirin, and a couple other pills, and it got worse. I went to bed but tossed and turned. Donna is SUCH a great helper. She knows exactly what to do. We tested my blood pressure and it was 195/ (something). WAAAAAY to high. I could not go to sleep. My chest and body kept aching. So, about 4 AM I got up and Donna found some blood-pressure pills that I had forgotten about. I took one and then did go to sleep. I awoke TIRED, but the blood pressure reading is now 130/87/96. I will rest today. We have to find out what caused it to zoom up. WHEW...DO NOT WANT THAT FEELING AGAIN!!!!

Talk with you later.

Love and hugs,