What should I do if My Parent or Spouse is Incompetent

What should I do if My Parent or Spouse is Incompetent
By Alan Orlowsky

Let's Talk about what to do if your parent or spouse is Incompetent and how taking over a loved one's financial affairs can be tricky. 

 Ellen was alarmed when her 83 year old husband Barry hired a contractor to repair the couple's roof. The contractor had knocked on the door one day, convinced Barry that he needed work done on the roof, persuaded Barry to fill out and sign a loan application to pay for the work and took a check as a down payment. The roof was not in need of repair and now the contractor had the couple's personal and financial information and vanished.

This was not the first time Eleen noticed Barry's good judgement was slipping. Sometimes he didn't know what day or month it was, and he's forget important appointments. More than a few times he locked himself out of the house and car, and he even occasionally forgot his children/s names and where they lived. Ellen knew she had to take control of their financial affairs to prevent Barry from making potentially disastrous mistakes.

The couple met with their attorney and drew up powers of attorney for property and health care, which gave Ellen the authority to make all the couple's decisions without Barry's participation or consent, as long as Barry's doctor considered him mentally impaired. Ellen then obtained a letter from the doctor to that effect.

Resistance

Ellen was one of the lucky ones, because Barry (and his doctor) cooperated with her. Many people aren't so fortunate - their loved ones resist giving up control, and family members are forced to initiate guardianship proceedings, which can result in deep embarrassment, strained relationships and costly legal fees.

 The Kind & Gentle Solution

First and foremost, you should ensure that your spouse or elderly loved one is in a healthy and safe environment, is receiving good nutrition and medical care, and is maintaining social interactions.

Secondly, have a heart-to-heart talk with your loved one. You may want to have other family members present, especially adult children, but try to resolve dissension or disagreement among yourselves before approaching the mentally impaired individual.  Try to persuade that individual to yield control of the family’s financial affairs and to sign powers of attorney if he or she hasn’t already. This may be difficult, because many people, especially those who have been “in charge” all their lives, are afraid to give up their independence and let others make decisions for them. If the individual is uncooperative, before you go to court you should seek help from a neutral third party to mediate, such as a trusted professional adviser, psychologist, clergy member or family counselor.

Legal Proceedings

If the kind and gentle approach doesn't work, you may have to engage an attorney. In most cases, going to court to have a loved one declared incompetent is very messy and depressing for all involved, which is what you should try everything in your power to avoid it.

Under Illinois law, the legal term "disabled person" is used to describe an individual who is mentally impaired, incompetent or incapacitated. A disabled person is one who is  at least 18 years old, who is not fully able to manage his or her personal estate because of mental deterioration, physical incapacity, or mental illness.

To have a individual declared legally disabled requires a guardianship proceeding in a court of law, and an actual finding of disability by the judge. If legally found disabled, these individuals would be deemed unable to manage their own affairs, which would include signing a contact, will, trust or power of attorney. You or another relative or trustee, would be appointed to assume responsibility for that individual's affairs. Once declared disables, there is usually no going back..

The legal process is both difficult and costly for all parties. Unless there is overwhelming proof, such as medical records, doctor's testimony and witnesses, it is not easy to gain a finding of disability. The elderly can have an off day and have more cases of dementia but that is not always enough to find them mentally incapable of managing their affairs.



Even if you have the best of intentions, it's natural to feel some guilt and pain as the person who is taking his or her spouse or parent to court. No one wants to see a loved one impaired, much less prove it to the world. Moreover, if the judge disagrees with you and finds your loved one competent, there is usually no further recourse available to you.

Doing Nothing is the worst option

Although legal action is the less preferable course to take, it is often better than failing to take any action. The Elderly are frequent targets of scams and frauds, and can be unduly influenced by unethical parties. You and your children have a lot to lose by failing to protect your estate. You can not stop an adult from making rash and harmful decisions, and even the most well-planned estates and the harmonious of families can be tested by the ravages of old age. Quick and thoughtful intervention with the help of experienced legal and financial advisers will help minimize the damage.

And What is You Become Incompetent?

Let's face it, at some point before our deaths many of us will become mentally unable to manage our own affairs. We hope this does not occur at all, but it is best to plan now while we are healthy, fully cognizant and still able to make smart decisions.

Many elderly people avoid such planning until they are urged to do so by their children. Even then some tend to deny that they will ever need help managing their affairs, and others react in a hostile way toward their children, fearing they'll lose control of their lives. The consequence of failing to plan for the possibility of your own incompetence, however, can be devastating to your family, not to mention your own well being.

The best planning tools are standard estate planning documents, healthcare, power of attorney, durable power of attorney and living trusts. Assuming that you execute those documents while you're still competent, they ensure that you alone determine how and whom your estate will be managed during your lifetime, or in case of your disability and death. Without those documents in place, if you do become incompetent, it may require costly court action to determine who will manage your affairs and in what manner.

For more information about estate planning tools, or if you are questioning what to do if your parent or spouse becomes incompetent please contact the Law office of Orlowsky & Wilson y calling 847-325-5559, or visit our website at www.orlowskywilson.com for more information.

Estate Planning - Take Me Out To The Ballgame

Take Me Out To The Ballgame - Estate Planning in Northbrook, IL
By Alan Orlowsky

Let's Talk About.....It’s summer and time for baseball.You might ask what that has to do with estate planning and we intend to answer that question. In this blog we will look at the situations of three famous people associated with major league baseball, Larry Pogofsky, Hall of Famer Kirby Puckett and finally, baseball great, Ted Williams. All have had litigation that sprung up among their heirs after their deaths. In all cases, it seems clear that none of the people mentioned above would have wanted things to turn out this way.

Strike One

Let’s start with the tamest of the three stories; Larry Pogofsky, a longtime Chicago White Sox fan, team investor and longtime autographed baseball collector. He was reportedly so proud of his autographed baseball collection that he would dedicate time daily just to admire the display. He had the autographs of the famous Lou Gehrig, Mickey Mantle, and Roberto Clemente, to name a few. Pogofsky even had one signed by Babe Ruth, which one dealer said could fetch $25,000, depending on its condition.

His goal was to have a baseball signed by every member of the Baseball Hall of Fame.

Sadly, Larry died last year, unexpectedly. He left a wife and two sons. Neither of his son’s were apparently entitled to the collection, but both reportedly interested in making it theirs.

Probably because Larry died unexpectedly, nothing about the collection was written down.

One son (Brad) says the collection was always promised to him, and based on this, took a number of the baseballs. He was later arrested for this.

The other son (Benjamin) said that the baseballs were promised to him and possibly in writing. Although no writing has been put forth that we know of, Ben’s mother seems to back up his story. There is even an allegation that Ben got the local police to go after Brad to get the baseballs back. The moral of this story, you never know when you’re going to be struck out. If something is important to you, write it down properly in a will or trust and have it witnessed and notarized and let everyone know what you have in mind.

Strike Two

On to the second strike, this one involving a dispute over the ashes of Kirby Puckett, a centerfielder and Hall of Famer who died unexpectedly of a stroke at 45 years of age.

It turned out that after being cremated, there were two sets of interested parties waiting to claim his ashes. Up first were Kirby’s two children. Batting second was Kirby’s fiancée, Jodi Olson.

After some litigation, an Arizona court awarded the ashes to Kirby’s children, since they were his next of kin. As one reporter noted, the ashes were actually given to Kirby’s ex wife, as the mother and guardian for the children. Possibly not someone Kirby was extremely close to.

Whether its one’s ashes or burial instructions, the lesson to be learned here is to document your final instructions (wishes) and let your family know how you want them carried out. A dispute like this means an umpire will be brought in from outside to decide whether you are safe or out.

Strike Three

Our last story, involves Ted Williams. It is truly bizarre.

In 1996, Williams signed a will stating that he wished to be cremated and to have his ashes spread out at sea. After his death in 2002, however, the executor of his estate claimed that Williams wanted to be cryogenically frozen. Two of his children supported this action, citing a piece of paper Williams had signed in which the three all agreed to be frozen so that they would, according to an article from the AP, "be able to be together in the future, even if it is only a chance." His eldest daughter fought against the disposition of his body, but gave up after running out of money. Williams is currently frozen, with his head separated from his body. His son died of leukemia in 2004 and was also frozen.

What can we learn from all of these baseball players and fans? After all, baseball players aren’t the only families who experience this type of family disharmony. The courts are filled with cases involving disputes that may appear minor, but that are important to the people involved. Usually those fighting feel like they are trying to do what’s right.

The best way to minimize these types of disputes is to be clear with our loved ones about what is important to us and to be clear as to how you would like to see things happen after your death.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559 or visit our website www.orlowskywilson.com.

The Many Benefits of Life Insurance in Your Estate Planning

Lets Talk About.........The Many Benefits of Life Insurance in Your Estate Planning

By Alan Orlowsky

Life insurance is a contract between an insured (insurance policy holder)and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum. Other expenses (such as funeral expenses) are also sometimes included in the benefits. Source: http://en.wikipedia.org/wiki/Life_insurance

 Many of my clients are in the process of building wealth but it may be years before they realize the fruits of their investments or labors. If such a client dies prematurely, life insurance can be used to create wealth immediately for heirs and loved ones. Here are 10 ways to accomplish the creation of wealth, using this unique asset of Life Insurance within your estate plan.

Life Insurance can be used to accomplish any of the following:

1. The creation of an estate where circumstances have kept the estate owner from accumulating sufficient assets to care for his loved ones in the event of a premature death.

2. To protect a business value due to the loss of key employees.

3. For debt reduction. Personal and business loans can be paid off with life insurance proceeds.

4. To equalize inheritance. Most estates are made up of various illiquid assets and the liquidity nature of death benefit proceeds allows for equalization among children.

5. Accelerated death benefit. Terminally ill individuals can receive a portion of their death benefit prior to death on an income tax free basis to pay for medical bills, and other expenses and/or to prevent dying destitute.

6. To pay for death taxes and/or estate settlement costs. These costs can exceed 50% of the fair market value of an estate.

7. Pay off a home mortgage.

8. Fund a business transfer. Many businesses have multiple stockholders. Life insurance proceeds upon the death of one stockholder provide ready cash to finance the transaction.

9. To replace charitable gifts. If large assets are gifted to charity there are fewer dollars that can pass as an inheritance. Life insurance can replace that lost inheritance.

10. To supplement retirement funding. Certain life insurance products can supplement retirement funding by accumulating additional funds for retirement years.


Of course the amount of the inheritance can be tailored to the needs and wants of a particular person. Where one person might feel comfortable leaving a sum of $100,000, another might want to leave an inheritance in the millions. Generally speaking, either goal can be achieved.

Many taxable estates do not have sufficient liquidity (cash) to pay estate taxes within nine months after death. Clearly, estate assets could be sold to the detriment of the beneficiaries, and if the market for those assets is strong, this might be a satisfactory solution. On the other hand, if the market is down or if the people charged with selling the assets do not appreciate their true value, a sale could result in devastation of the estate value.

Therefore, life insurance (if structured properly) can provide the estate with immediate liquidity to buy time and flexibility for the executor and heirs to determine the best course of action. Life insurance proceeds guarantee that the assets can be sold in an orderly manner, including holding the assets to a later date if the market is in a slump.

The amount of life insurance needed will depend on a variety of factors including:

• How the insurance is to be used
• Whether or not you own a business and your plans for its succession
• Whether or not you have a taxable estate
• The liquidity of your assets
• Your age and current earning capacity
• And many more.

Your advisory team, using detailed financial modeling and reasonable assumptions, can help you quantify the amounts needed for these various coverage needs. Your life insurance agent or financial planner may have software that helps with these calculations as well.

Should you have questions regarding more benefits to of Life Insurance in Estate Planning contact Alan Orlowsky by calling 847-325-5559 or visit our website: http://www.orlowskywilson.com

Business Law - Best Practices when Hiring Freelancers

 Best Practices When Hiring Freelancers
 By: Alan Orlowsky

 Let's Talk about.....Business Law and Hiring Freelancers and how to treat them as independent contractors, so you wont be liable for their payroll and healthcare benefits. These best practices can can apply to new Business Formations, Partnerships or Existing Businesses.




In the 1990's Microsoft Corp. supplemented its workforce by hiring "freelance" computer programers. The freelancers signed agreements when they were hired, stipulating that they would work as independent contractors, receiving cash payments for their services. In the agreement the freelancers also stated that they would be responsible for paying their own social security, unemployment, and workers' compensation taxes.

By Treating those workers as independent contractors, Microsoft believed it could avoid the cost of providing benefits and paying employment taxes. Microsoft made a very costly mistake. The company integrated the freelance programmers into its workforce. They worked on projects with regular employees, under the same supervisors, using the same supplies and equipment, during roughly the same hours, performing similar tasks, and on the company's premises. Microsoft believed that merely executing a formal agreement, in which the freelancers classified themselves as independent contractors would insure the freelancers independent contractor status.

Logo courtesy of http://www.microsoft.com

The IRS on the other hand, believed Microsoft was treating the freelancers as if they were employees. As a result of an IRS action, Microsoft agreed to pay all the freelancers back employment taxed plus penalties. But the company was in for an even bigger shock.

In 2000, the United Court of Appeals, reviewing the case of Vizcaino vs Microsoft, decided that since the freelancers were really employees, Microsoft should have provided them the same benefits that all regular employees enjoyed - including group health insurance and 401 (k) plans. Now Microsoft must pay those freelancers millions of dollars in back benefits.

 Guidelines, not Laws:

The rules for hiring and compensating independant contractors are not precisely defined or uniformly applies. The IRS might view your situation one way, and the National Labor Relations Board or the Wage and Hour Division of the Department of Labor might see it another way. Your State department of revenue might not agree with the Fed.

Although the government does not provide clear, concrete rules for distinguishing freelancers from employment, the guidelines given below can help you when hiring freelancers. Be sure to consult your attorney and your accountant to formulate your hiring policy, and any work contracts, before you engage a freelance newsletter writer, editor or designer.

Control over Work Methods

The most important test of weather a worker qualifies as an independent contractor is how much control he or she has over the methods and means to accomplish the assignment. For Example:

• An Independent Contractor (IC) should be free to decide how, when and where the assignment work is done.
• The IC should use his or her own equipment, transportation and supplies whenever possible.
• The employer should not have to train the IC for the assignment.

Compensation
An IC should be paid by the job, upon submitting an invoice or series of invoices to the employer, and not according to a monthly or yearly salary. At the end of each year the employer should file Form 1099 for each IC who was paid at least $600 during the year.

A Freelancer should run a Real Business
The IC usually has his or her own office that they operate out of, even if it's little more than a desk and a phone in a spare bedroom. If you provide the IC regular desk space on your premises, the IRS might consider that worker your employee. Other considerations include:

• Most Freelance writers, editors and designers make their services available to many publishers in the marketplace. If yours is the only 1099 attached to an IC's income tax return, expect an IRS audit.
• ICs should have the ability to subcontract the work you assign to them, or reassign the work to an assistant who works for the IC.
• Workers are more likely to be considered ICs if they advertise their services, use their own printed business cards and letterhead, carry business insurance and have a separate  business telephone line.

Industry Standards
Some industries - including publishers, professional practitioners, consultants and marketing firms - customarily hire freelance writers and designers more than other industries, and the IRS knows who the are. If your company is any of those fields, you are more likely to convince the IRS that the ICs you hire are really not your employees. If your company reports significantly more IC compensation than is standard in your industry, you'll attract IRS attention.

Contracts
As in the Microsoft case illustrated above, a written contract won't guarantee a worker IC status if all the other factor point to a classification of employee. Getting an IC's signature on a work-for-hire contract will help reinforce your efforts to comply with the rules. At the very least, such a contract should spell our the nature of the assignment, deadlines, compensation and acknowledgement of the worker's IC status. Always check with your attorney for contract laws and business transactions.



If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559 or visit our website www.orlowskywilson.com.

Wills & Trusts - Leaving Someone Out of your Will

Wills & Trusts Northbrook, IL

Leaving someone out of your Will.

By: Alan Orlowsky

Let's Talk about.....Leaving someone out of your will.

The main purpose for executing a will is to decide exactly who will inherit your property at your death. You can leave family and friends out of your will, and there's not much they can do about it. However, some state laws don't allow you to disinherit minor children or surviving spouse.

Disinheriting a Spouse

Many states use a concept known as "elective share" to ensure that a surviving spouse isn't entirely disinherited from a will.Generally, a disinherited spouse can take between one-third and one-half of the estate, regardless of what the will says or doesn't say. Some states use a sliding scale approach and look to the number of years a couple was married to determine how much of the estate a surviving spouse can claim. In other words, the longer the marriage, the more property the surviving spouse gets.

Disinheriting Minor Children

In most states, your adult children are not entitled to any property in your estate unless you specifically name them as heirs in your will. Some states forbid the exclusion of minor children from your will, despite what you say in your will, and will award them part of your estate.

Homestead Laws

If you die before your spouse or have minor children at the time of your death, state homestead laws may preclude you from leaving a primary residence to someone else in your will. Other states may exempt certain types of property, such as your home, or provide a minimum sum of money from your estate that must go to a surviving spouse and minor children. As a result, intentionally disinheriting your spouse or child may not be wholly effective if your state has one of these laws on their books.

Clearly State Your Intention to Disinherit

If the law in your state permits you to leave a child or spouse out of your will, it may be a good idea to include a few lines in your will that names the individuals you're intentionally leaving out and the reasons why. Since your will can be contested in court after your death by people who are disinherited, including such statements can discredit any argument that you made a mistake and didn't intend to disinherit anyone.

A Trusts and Estates Lawyer can help explain the laws surrounding leaving someone out of your will. Our Firm has clients throughout the North Shore assisting with the complexity with this issue; Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact Orlowsky & Wilson to see how we can help with any questions you may have.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559, or visit our website at http://www.orlowskywilson.com

Just Let Go! Estate Planning and Losing Control

Just Let Go! Estate Planning and Losing Control
By: Alan Orlowsky

Let's Talk about.....The biggest obstacle to smart estate planning, the fear of letting go.

Stan (not real names) was a successful business man living in Northbrook, IL. Over the past few decades he had made all the right moves, was a success in both his business and personal life and had set up a Estate Plan to ensure his life's work would take care of his biggest asset his Family. On the advice of his financial and legal advisers, Stan set up a special needs trust for the benefit of his disabled son Dan. Not only would the trust help reduce estate taxes, because it held assets outside of Stan's estate for tax purposes, but it provided a professionally manages fund for Dan, the beneficiary, after Stan's death. The same year he set up the trust, Stan gave a $12,000 gift to each of his other children so they would not feel slighted. Doing so also reduced the value of his estate for tax purposed, without incurring gift tax consequences, thanks to the annual gift tax exclusion.

Unfortunately, Stan made one of the most common estate planning mistakes. He neglected to transfer to the trust valuable assets that he acquired years later, and so the trust was now inadequately funded, and those assets ended up in probate when he passed years later. He had worried that once he transferred assets to the trust he would lose access to them in case of emergency. This fear was true, because the trust was irrevocable. Stan had also stopped giving annual exclusion gifts towards the end of his life.  His advisers assured Stan that he had enough wealth, as well as insurance coverage, to survive just about any emergency, and still to give generously to his loved ones. Stan's biggest issue was he could not let go. Luckily, after Stan's death one of his well-to-do children helped to take care of Dan, otherwise Dan would have had to rely on the state for support.

Security is in your mind. The fear of letting go is a common affliction among people who are planning their estates, especially those who are accustomed to being in charge.  The irony is, gifting and transferring assets can actually make you feel more secure rather than less. Advisers often have a hard time persuading people that giving up control of their money, or giving it away, or move from being active investor to a passive investor, is in their best interests. Knowing that you have provided for your loved ones in the event of your death can give you more peace of mind than mountains you of wealth. It can also improve family relationships and let you enjoy the gratitude you earn during your lifetime from your beneficiaries. It's so important to understand how estate planning can enhance, rather that destroy, your financial security. Below is a brief guide to some of the basic estate planning tools and their benefits.

• Revocable Living Trust - Assets that you transfer into a living trust will pass to your heirs outside of probate, sparing your heirs delays and extra costs. You have access to all trust funds at any time, and you can amend, terminate or revoke the trust as well.
• Irrevocable Trust - You can;t revise or revoke it, but you can rest assured that your estate will not pay estate tax on the assets that you transfer to it. You can use irrevocable trusts to accomplish various goals from minimizing estate taxes, like Stan's special needs trust. 

Other kinds include incentive trusts, irrevocable life insurance trusts, trusts for minor children from previous marriage (which also keeps the funds out of the ex-spouse's control), and Trusts for the spendthrift beneficiaries or others who are not ready or able to manage an outright inheritance. Knowing that the trust beneficiary is going to be well cared for, and/or the funds will be managed by a competent trustee after your death will help you sleep better at night.

• Annual Exclusion Gifts - You can give away $12,000 ($24,000 for married couples) to any recipient, and to as many recipients as you wish, free of gift tax consequences. Gifting also reduces the value of your taxable estate. At the same time, you can help your loved ones make a down payment on a home, pay college tuition, take a vacation, or simply pull through a rough period. Of course you would not give money away if you really need it for your own survival and comfort, but you should always consult your financial adviser before the end of each year to decide whether you are in a position to make exclusion gifts.

•  Durable Power of Attorney for Property - A durable Power of Attorney gives your agent the authority to manage your financial affairs if you become incapacitated. As long as you are competent (as determined by your own physician and/or judge), you do not give up control. But if you do become unable to make sound decisions, the person who takes over is the person you selected. If you do not have a durable Power of Attorney and become incapacitated, a judge will appoint an agent to make decision on your behalf.

The Best time to take action - You will probably derive greater satisfaction sharing your wealth now, while you are able to enjoy the gratitude of your loved ones, rather than after your death. If you have not created an estate plan, or have neglected to transfer assets to your living trust or irrevocable trust now is the time to take action. Your options only narrow as you age.

If you have questions about this post or about a particular legal situation, please contact Alan Orlowsky by calling 847-325-5559 or visit our website http://orlowskywilson.com/