DEATH TAX 
This is a made-up term that people usually use interchangeably  to refer to Estate Taxes and Inheritance Taxes.    It’s a generic term probably brought into existence to show opposition to the tax laws being churned in Congress once upon a time.

ESTATE TAX
Estate taxes can be imposed at the federal level and the state level.   These are the taxes that are imposed on the transfer of an estate over and above an exemption amount.    The next question you should ask is there a state estate tax for the my current state.       It looks like Texas does not have an estate tax or an inheritance tax, but that can all change in the future as you know.   But for 2012, you can pretty much rest assured that there is no estate tax at the state level here in Texas.    If you are out of state, check on it to be sure.

On the federal level, it’s a different story.   Currently, there is a $5 million individual exemption for 2012.   That means the first $5 million is estate tax free, then the value over and above that $5 million is taxed at 35%.    Know Congress will be “discussing” the future of this tax rigorously before the end of the year to determine what will happen next year.

The estate consists of an accounting of everything you own or have certain interests in at the date of death – note this also includes life insurance.   Yowza!   I found a handy  Estate Tax Calculator on the Smart Money website that nicely illustrates the assets that are included in an estate.     State Tax Exposure Meter 

INHERITANCE TAX
Inheritance taxes are imposed by state and are based on how much an individual inherits, not the total value of the estate.    There are only a handful of states that actually collect inheritance and Texas isn’t one of them.

To my clients who fall into the high worth category (and you know who you are), be aware of the tax changes that will be surfacing at the end of the year.   Start looking at it now.    You can quickly evaluate your assets in the financial section of your Survivorship Plan and keep an eye out for when that tax exemption changes.    Right now, it’s $5 million, but next year, it could go back to a $1 million exemption.     Double yowza!    

The good thing we did discover is the unbelievable resources we have here in Austin.      Lance Armstrong’s LIVESTRONG organization has a Cancer Navigation Center that is a free service to all their clients.   I went with my friend to her initial visit there and met with some of their counselors to learn about their resources.       Not only do they offer yoga classes, health classes, nutrition information, one-on-one counseling support, they have a patient advocate that helps people deal with insurance companies, bills and resources to help you through.        They have an unbelievable amount of services and it is available for you when you are facing this life threatening disease.     My advice to you:

1. Work on your Survivorship Plan now!   Before an illness becomes your reality.
2. If you are facing cancer, contact the Livestrong Foundation first and get very familiar with what they have to offer.   (Cancer Navigation Center)  At first you may think you don’t need services, but as you go through the treatments, you will find they offer so much you will need.

Educate yourself and take action…………….

Last week, I had coffee with Stephen Hanson, a licensed acupuncturist at Turtle Dragon Health Services.     I wanted to know more about how acupuncture helps people work through emotions such as grief.     I consider myself a neophyte when it comes to body and healthcare, but I was all ears that day.       It was fascinating to learn that the Chinese or Eastern philosophy believes that all disease has an emotional component.   This is a concept that those of us in the West probably don’t acknowledge  until we are faced with health problems.    He educated me on the five basic emotions that are key foundations to our health –  Anger, Joy, Worry, Grief  and Fear .    When he got to grief my ears perked up.   He said it usually manifests itself and has direct ties to the lungs and the lungs in turn control the liver.    If the lungs become weakened by grief, then the liver is not regulated and the imbalances occur.  A disturbance in the lungs can cause a disturbance in the abdomen (in Stomach, Liver, Gallbladder, Bladder, Pancreas) and in the pelvis area (Intestines, Kidneys, Prostate) and vice versa.     (My friend has now a history of recent bladder cancer so I was wondering if this was a potential contributor to his cancer.)

Stephen now had my attention – interesting – the potential of physical manifestations related to emotions.    I questioned him further about how this would work for someone experiencing prolonged periods of grief versus going to counseling or would both be appropriate.   My thoughts were racing right about now………   alas, he said a most profound thing.       “Sometimes people can’t verbally express their grief and acupuncture is a way for them to get that release.”     (again, thoughts of my friend who cannot seem to approach counseling as a potential treatment).   Why didn’t I think of that?    Just a few weeks earlier, I had gone over to my friend’s  house to check on him as he was experiencing sleep-depriving back pain.   I had him lie on the floor and rubbed the knots in feet as I do for my “other half” who also has back pain on a regular basis.     For the first time in weeks, I saw his face soften from the pain and realized quickly that “touch” was so important in relieving the tension of pain.    He said he felt so much better the next day and even had a little more spring in his step.      Now I started connecting the dots while I had coffee with Stephen.   Emotional and physical manifestations, emotional and physical options for treatments.   As Stephen said, “people get stuck and they feel they have lack of options.”    This I truly believe.     Talking to some friends who have gone to acupuncturists, they agreed that acupuncture could be a super tool in working through the murky waters of grief.       I am glad to have stumbled upon this conversation and knowledge.    Thank you Stephen for graciously letting the conversation go for 2 hours after I said I only wanted an hour of your time.    If you have questions or would like more information on acupuncture and helping someone through grief, ask your friends if they know a good acupuncturist or contact Stephen Hanson.     You can reach him at the Turtle Dragon Health Services 512-452-1410.

I have a friend who told me today that it is now three years and one month since the death of her ex-husband and his estate is just now being settled per his wishes – well some of his wishes.    During these three years,  things have been sold that should not have been or they have been “lost” somewhere in time.     The suspicions between family members has strained family relations and now after all the checks have been cut, it looks like the attorneys are the ones that ultimately win.   Their cut of the estate is significant and it has left the family members all staring at each other in sadness and dismay that it ended up this way.

The discord is happening more and more as the older generation leaves behind significant questions, personal items and wealth to an extent not experienced before in our history.    So what is a viable alternative to getting family members to talk about it and come to agreements before attorneys have to step in to “legally” define the grounds of property disposition?        Try working with a mediator – yes, I said a mediator.

I recently sat down for a discussion about this subject with Nancy Wise of Wise Mediation to learn more about how a mediator can help the situation.     I had never met a mediator before, so learning about her process was interesting – and applicable.        Couple of things I learned about mediators:

1. Everyone has to be willing to come to the table to discuss their opinions and views.
2. The mediators provide a “safe” environment with a level playing field for the discussion.
3. The mediator does not tell them how to solve their problem, nor do they take sides.
4. They provide each side with the opportunity to express themselves fully without interruption.
5. They help the parties generate options for the resolution – for example:  resolve the situation, live with a bitter family feud that can last for years even generations, or prepare to challenge it in the legal system.

The common sense approach makes sense  and I can see where it would be valuable when settling estate distribution conflicts.     Going through the legal system can be costly and very time consuming.     Hard feelings can last a lifetime.    Going through mediation may be the ticket to helping families cut through the raw emotions, resolve conflicts and honor the memory of the person who has past away.

“I don’t have a lot of money or time to spend on planning.   What would be the one thing you would recommend I do for my elderly parents who are in their 70s?”

If I was in your boots, I would get all of the legal paperwork in place ASAP.    Having UP-TO-DATE legal paperwork in place is the cornerstone of making a transition as smooth as possible for your family and gives them the tools to carry out your parents’ wishes.    This goes for your own needs also!  If a person dies intestate (without a will) the state will determine how the estate will be divided.     Most people object to that course of settlement.     Without the proper Legal Power of Attorney, Medical Power of Attorney,  or Living Will,  family’s are hindered in their ability to act on your behalf in the event you become incapacitated.       The chance that an emergency can arise without these in place is a chilling thought to say the least.      This would be my first course of action.   For a list of the basic legal documents that you need, go to the Help Yourself page and you can download the list there.

Here are a couple of things to keep in mind:

Not Having a Beneficiary Designation on Your IRA
The question that comes up on a regular basis is, “What happens if I die without a beneficiary designation in place?”   “Your estate would be the default beneficiary,” is my usual response.   That would mean your heirs would eventually get the money…..along with a significant tax bill that could have been avoided.

Different Scenarios of Inheritance Require Different Actions
IRAs can be inherited from a spouse or a non-spouse.    These two scenarios are treated differently in the eyes of the IRS and have different options dictating what you can do with each of these.       Inheriting an IRA from a spouse is a little more straight forward while inheriting an IRA from a non-spouse has a few twists and turns.       Regardless of which one applies to you, talk to your tax adviser or CPA to make sure you take the best route and not give Uncle Sam more than he deserves.

Moving an IRA
I was surprised to learn that some custodians/companies holding IRAs forbid the transfer of an IRA to another custodian via a trustee-to-trustee transfer.   So… if you have an IRA with COMPANY A and your beneficiaries would want to transfer it to COMPANY B, you will need to check with the custodian of your current IRA account to ensure that it can be moved by your heirs without triggering an unnecessary tax bill.     This is a hidden surprise that is usually discovered after a death.

Required Minimum Distributions
If your 75 year old mother leaves you her IRA, note that she is under the IRA rule that requires her to take out a minimum distribution every year after she reached 70 1/2 years old.    If she passes away, make sure that the required minimum distribution (RMD) has been taken out BEFORE you transfer or take out any money.    There is a 50% penalty by the IRS if this is not done.      50% of the RMD could be significant.        So note the age of the person leaving you the IRA and take action accordingly.

If you are setting up your Survivorship Plan and it includes IRAs, 401Ks and/or annuities, make sure you let your heirs know that these have tax consequences associated with them and to see their CPA BEFORE they do anything with the money.     If you are on the receiving end as a beneficiary, you will also want to consult with your tax adviser or CPA.   It’s just one of those little “gotchas” that people don’t see coming.

Kevin Underhill’s heart was donated as a gift of life to a man named Ron Murray – a man who had only months to live, was very active and rides a bike!    Can you imagine your life if you were waking up daily knowing you had only a few months to live?   Better yet, can you imagine what his donor would have felt like to know he was able to give the gift of life?     It’s provocative to think through the situations from both sides.       Fortunately, to the credit of the Austin American Statesman and Ron Murray, they put together a short video to give you a look inside someone who is home to a new heart.      Take a quick look at this video now and come on back to this page and read further.   Go ahead, you have a couple of minutes.  
View the video.
Now doesn’t that just make you think, “what should I do if I fall into unfortunate circumstances and have the option to help someone live on and express their gifts?”         Personally speaking, I have always wanted to be an organ/tissue donor.    I signed the card years ago, but started questioning if I am “good to go?”    So a couple of days ago, I confirmed my desire to be a donor.     Here’s how I did it.

1.   I went to  www.organdonor.gov to get updated information.

2.  From there, I went through all the information they had on organ donation.

3.  I clicked over to our local/state Organ Procurement Organization (OPO) and registered with one of the 58 sites they have in TX.   I personally went over to TOSA .

4.  Entered my information in the form.

5.  Last step.   I am waiting on my donor card to get here in the mail.

It’s as easy as that.       Organ donation may not be for everyone, but I believe the majority of the people would be donors if they did a little research and learned more about it.      It’s one of those issues of Survivorship Planning that need to be ironed out way before your family is in the position to make that decision.

I bet if you ask Ron Murray, he might sing you a song if you register to be a donor.     What a sweet song that would be.  Think about it.

As time goes by, it is natural to change your mind on this and decide all-together.  I have had this happen with a couple of different clients.    They bought burial plots and then changed their minds to favor cremation instead of burial.    This is becoming more of a mainstream idea since traditional burials are not a “green, good for the environment” practice.    So what can you do with a burial plot when you are not going to need it?     Can you sell it?      The answer is yes in most cases.        I became curious about his concept so I did a little research.  There are websites built just for this purpose.        I was shocked to see how many websites are the “Craigslist” of burial plots.    Here are a few that I found:

• • • • Grave Solutions
      • The Plot Exchange
      • The Final Arrangements Network
      • Buy and Sell Cemetery Plots
      • Ebay – there were 274 sellers on there looking to sell their burial plots.

These are just a few of the sites I found dealing with the sale and purchase of burial plots and there are an endless stream of these around.    I did a little testing to see what burial plots go for.  First, from my small home town in NM.    There was one for $49.       I went to New Orleans, LA and found some over $100,000.        California boasted a few pricey ones also with a lot of them averaging  $8000 or so.       As for Austin, TX?    I found them anywhere from a $1000 to $9000 for a double occupancy grave.      I found this little cottage industry fascinating!   I had no idea there were so many businesses that help you “list” and “locate” your burial plots!

One of the better resources I stumbled across is the website:    Funeral Planning 101     This is an interesting site with lots of information and of course some “built in advertising.”    None-the-less, it’s a pretty easy to read site of information.

Since most people find this subject hard to discuss and may find themselves holding a valuable piece of property, I thought this would be worth exploring – if only for exposing the issue.

1.  how your accounts are set up.

2. how your family perceives they will have access to that money when you are gone.

As parents age, it is common to add a child or children to the account giving them the ability to write checks on the account to help in managing the money.     It does not mean that they are joint “owners” of the account.     In the financial and legal world, this is known as adding convenience signers to the account.     As part of a comprehensive Survivorship Plan, one looks at how the costs for the funeral are going to be covered as well as funds available to settle unfinished personal business such as pay bills or miscellaneous expenses.        You will be surprised to find out how controversial this can get among siblings trying to decide how a $10,000 funeral is going to be covered or how bills are going to be paid until an estate is settled.     They naturally assume that access to that account will be there to cover these expenses.     Not so says the Texas Probate Code, Section 438A.

d)  On the death of the party, the cosigner shall have no right of survivorship in the account and ownership of the account remains in the party.

This means that the account is part of the estate and will be treated as such by the bank.    Take note to visit with your bank and/or attorney to make sure this assumptions doesn’t trip your plans for your survivors.