Cava Faulkner

With more and more Baby Boomers reaching retirement age each year, our country is undergoing an unprecedented demographic transformation that’s been dubbed “The Greying of America.” This population shift stands to affect many aspects of life, especially your relationships with aging parents and other senior family members.

By 2060, the number of Americans aged 65 and older is projected to nearly double from 52 million in 2018 to 95 million, which will account for 24% of the total population. And as early as 2030, the number of those 65 and older is expected to surpass the number of children (those under age 18) for the first time in history.

Coinciding with the boom in the elderly population, the number of Americans suffering from Alzheimer’s and other forms of dementia is expected to increase substantially as well. The Centers for Disease Control (CDC) estimates that the number of Americans with Alzheimer’s disease will double by 2060, when it’s expected to reach 14 million—more than 3% of the total population.

Although Alzheimer’s is the most common cause of dementia in older adults, it’s not the only one. In fact, the National Institute on Aging estimates that nearly half of all Americans will develop some form of dementia in their lifetime. And while the cognitive decline brought on by dementia affects a broad array of mental functions, many people aren’t aware that one of the first abilities to go is one’s “financial capacity.”

Financial capacity refers to the ability to manage money and make wise financial decisions. Yet cognitive decline brought on by dementia often develops slowly over several years, so a diminished financial capacity frequently goes unnoticed—often until it’s too late.

“Financial capacity is one of the first abilities to decline as cognitive impairment encroaches,” notes the AARP’s Public Policy Institute, “yet older people, their families, and others are frequently unaware that these deficits are developing.”

Ironically, studies have also shown that the elderly’s confidence in their money management skills can actually increase as they get older, which puts them in a perilous position. As seniors begin to experience difficulty managing their money, they don’t realize they’re making poor choices, which makes them easy targets for financial exploitation, fraud, and abuse.

Now that we’re in the peak of the holiday season, you’re likely spending more time with your aging parents and other senior relatives. This provides an ideal opportunity to be on the lookout for signs that your loved ones might be experiencing a decline in their financial capacity. The University of Alabama study “The Warning Signs of Diminished Financial Capacity in Older Adults” identified six red flags to watch for:

1. Memory lapses: Examples include missing appointments, failing to make a payment—or making multiples of the same payment—forgetting to bring documents or where documents are located, repeatedly giving the same orders, repeatedly asking the same questions.

2. Disorganization: Mismanaging financial documents, and losing or misplacing bills, statements, or other records.

3. Declining checkbook management skills: Forgetting to record transactions in the register, incorrectly or incompletely filling out register entries, and incorrectly filling out the payee or amount on a check.

4. Mathematical mistakes: A declining ability to do basic oral or written math computations, such as making change.

5. Confusion: Difficulty understanding basic financial concepts like mortgages, loans, or interest payments, which were previously well-understood.

6. Poor financial judgment: A new-found interest in get-rich-quick schemes or radical changes in investment strategy.

If you notice your parents or other senior family members displaying any of these behaviors, you should take steps to protect them from their own poor judgement. It’s vital to address their cognitive decline as early as possible, not only to prevent financial mismanagement and exploitation, but also to ensure their overall health and safety.

There are several estate planning tools that can be put in place to help your aging parents and other senior family members protect themselves and their assets from the debilitating effects of dementia and other forms of incapacity. In part two of this series, we’ll discuss the specific planning tools available for this purpose, and provide some guidance on how to address this sensitive subject with your elderly loved ones.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.

It’s a simple fact of entrepreneurship: Small businesses fail all the time and for many different reasons, some of which are outside of the owner’s control. If you’re falling deeper and deeper into debt by keeping your company open, sometimes the best business decision you can make is to shut down the business and cut your losses. Let’s uncover why Chapter 7 bankruptcy might be good for your business.

When it comes to closing a debt-laden business, bankruptcy is one option that can allow you to stop bleeding money and get a fresh start. However, filing for certain types of bankruptcy may not be available for your business entity or the best way to go for your personal situation.

There are multiple types of bankruptcy filings, each with their own benefits and drawbacks. Here we’ll look at what’s involved in a Chapter 7 bankruptcy, discuss its pros and cons, and find out how it affects different types of business entities.

Both individuals and protected business entities—partnerships, limited liability companies (LLCs), and corporations—can file for Chapter 7 bankruptcy. Business owners can file Chapter 7 for themselves or their business, but since a sole proprietor is personally liable for business debts, the entire financial situation of both will be included when they file for a personal Chapter 7.

Chapter 7 is a liquidation bankruptcy, which means all of your non-exempt assets will be sold off by a court-appointed trustee to repay your creditors.

As a sole proprietor, Chapter 7 lets you wipe out both personal and business debt in a single filing. And even though your personal assets will be included in the bankruptcy estate, you can use exemptions to protect some—and maybe even all—of your property.

Indeed, if you don’t have a high income or significant assets, you might be able to use exemptions to protect all of your money and property through what’s known as a “no-assets case.” This is designed to ensure that small business owners have enough assets to sustain themselves while they start over again.

That said, the amount of property you can protect in Chapter 7 bankruptcy varies greatly from state to state and also depends on the value of your assets. Given this, you should consult with us as your Creative Business Lawyer to review your state’s exemptions laws.

If your business is a partnership, corporation, or LLC, Chapter 7 is an easy and transparent way to close your business and liquidate its assets, as the trustee becomes responsible for selling off assets and paying your creditors. This provides you with a convenient way to wash your hands of the failing business and start with a clean slate.

Only sole proprietors receive a discharge of business debts by filing Chapter 7. Also, business entities are unable to use exemptions to protect assets in Chapter 7, which means the trustee will sell off all of your business assets to pay creditors, and your business will be closed for good.

What’s more, even if you own a protected business entity, if you’re personally liable for any of your business obligations (i.e. you personally guaranteed a business loan), you’re still on the hook for that debt unless you file for personal Chapter 7 bankruptcy. This is why many business owners file for Chapter 7 on behalf of both their business and personal liabilities.

If you use Facebook to share, track, and report on important life events, it can provide an intimate snapshot of your life, and it can also serve as a key part of your legacy—and one you’ll likely want to protect following your death. With this in mind, as with any other digital asset you own, you should include your Facebook profile as part of your estate plan.

While you’ll want to include your Facebook profile in your plan’s inventory of digital assets, Facebook also offers a special function, known as a “legacy contact,” for managing your profile after death. Using a legacy contact, you can choose someone to look after your account and control the activities of your account once you’ve passed away.

If you are interested in preserving your digital legacy using Facebook’s legacy contact, here we’ll break down the basics of how this function works. To learn more about protecting and passing on the rest of your digital assets, meet with us, as your Personal Family Lawyer®, to discuss the different options available.

Managing Your Digital Afterlife

At the time of your death, Facebook allows your account to be “memorialized,” so friends and family can gather and share memories of you and your life. To have your account memorialized, Facebook requires proof of the account holder’s death using a special request form and evidence of death, such as an obituary. Facebook accounts can be memorialized regardless of whether or not a legacy contact has been selected.

Once your account has been memorialized, only confirmed friends can see your profile or find it in a search. Your memorialized profile will no longer appear in friend suggestions, nor will anyone receive birthday updates or other account notifications.

When your account is memorialized, the word “Remembering” will be added next to your profile name. Depending on your privacy settings, friends and family members can post content and share memories on your timeline. A memorialized account is locked, so its original content cannot be altered or deleted, even if someone has your password information.

What Your Legacy Contact Can Do

If you’ve designated a legacy contact, once your account has been memorialized, that individual will be able to manage your Facebook account based on the permissions you’ve granted him or her. As with any other person you select to manage your assets after your death, you’ll want to carefully consider who to name as your legacy contact, as this individual will have control over your memorialized Facebook account and therefore also control your legacy to some extent.

Your Facebook legacy contact can perform several functions, including:

• Write a pinned post for your profile to share a final message on your behalf or provide information about your memorial service.
• View posts, even if you had set your privacy to Only Me.
• Decide who can see and who can post tributes on your memorialized profile.
• Delete tribute posts.
• Change who can see posts that you’re tagged in.
• Remove tags of you that someone else has posted.
• Respond to new friend requests.
• Update your profile picture and cover photo.
• Request the removal of your account.
• Download a copy of what you’ve shared on Facebook, if you have this feature turned on.

What Your Legacy Contact Cannot Do

However, it’s important to point out that your legacy contact doesn’t have unlimited control over your account. To this end, your legacy contact cannot take the following actions:

• Log into your account as you.
• Read your direct messages.
• Remove any of your friends or make new friend requests.

Alternatively, if you’re not interested in having your Facebook account continue after your death, you can choose to have your account permanently deleted upon your passing. For instructions on choosing your legacy contact and to learn more about your options for managing your Facebook account after death, check out Facebook’s Help Center FAQs.

Preserve Your Digital Assets

Since social media and other digital assets play such a big role in our lives, you should work with us, as your Personal Family Lawyer®, to ensure that all of your digital property is protected by your estate plan. With our support, we will inventory your digital assets and include instructions on how you want them handled in your planning documents, so they can pass seamlessly to your loved ones upon your death.

What’s more, we can also help you name a digital executor, who will be in charge of managing your digital assets upon your passing, so that those assets can bring the most benefit to your heirs for generations to come. Contact us today to learn more.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.

Being asked to serve as trustee can be a huge honor—but it’s also a major responsibility. Indeed, the job entails a wide array of complex duties, and trustees are both ethically and legally required to effectively execute those functions or face significant liability.

To this end, you should thoroughly understand exactly what your role as trustee requires before agreeing to accept the position. Last week, we highlighted three of a trustee’s primary functions, and here we continue with that list, starting with one of the most labor-intensive of all duties—managing and accounting for a trust’s assets.

Before a trustee can sell, invest, or make distributions to beneficiaries, he or she must take control of, inventory, and value all trust assets. Ideally, this happens as soon as possible after the death of the grantor in the privacy of a lawyer’s office. As long as assets are titled in the name of the trust, there’s no need for court involvement—unless a beneficiary or creditor forces it with a claim against the trust.

In the best case, the person who created the trust and was the original trustee—usually the grantor—will have maintained an up-to-date inventory of all trust assets. And if the estate is extensive, gathering those assets can be a major undertaking, so contact us as your Personal Family Lawyer® to help review the trust and determine the best course of action.

The value of some assets, like financial accounts, securities, and insurance, will be easy to determine. But with other property—real estate, vehicles, businesses, artwork, furniture, and jewelry—a trustee may need to hire a professional appraiser to determine those values. With the assets secured and valued, the trustee must then identify and pay the grantor’s creditors and other debts.

Be careful about ensuring regularly scheduled payments, such as mortgages, property taxes, and insurance, are promptly paid, or trustees risk personal liability for late payments and/or other penalties. Trustees are also required to prepare and file the grantor’s income and estate tax returns. This includes the final income tax return for the year of the decedent’s death and any prior years’ returns on extension, along with filing an annual return during each subsequent year the trust remains open.

For high-value estates, trustees may have to file a federal estate tax return or possibly a state estate tax return. However, Trump’s new tax law of 2017 doubled the estate tax exemption to $11.2 million, so very few estates will be impacted. But keep in mind, this new exemption is only valid through 2025, when it will return to $5.6 million.

During this entire process, it’s vital that trustees keep strict accounting of every transaction (bills paid and income received) made using the trust’s assets, no matter how small. In fact, if a trustee fails to fully pay the trust’s debts, taxes, and expenses before distributing assets to beneficiaries, he or she can be held personally liable if there are insufficient assets to pay for outstanding estate expenses.

Given this, it’s crucial to work with a Personal Family Lawyer® and a qualified accountant to properly account for and pay all trust-related expenses and debts as well as ensure all tax returns are filed on behalf of the trust.

While trustees are nearly always permitted to hire outside advisers like lawyers, accountants, and even professional trust administration services, trustees must personally communicate with those advisors and be the one to make all final decisions on trust matters. After all, the grantor chose you as trustee because they value your judgment.

So even though trustees can delegate much of the underlying legwork, they’re still required to serve as the lead decision maker. What’s more, trustees are ultimately responsible if any mistakes are made. In the end, a trustee’s full range of powers, duties, and discretion will depend on the terms of the trust, so always refer to the trust for specific instructions when delegating tasks and/or making tough decisions. And if you need help understanding what the trust says, don’t hesitate to reach out to us for support.

To keep them informed and updated as to the status of the trust, trustees are required to provide beneficiaries with regular information and reports related to trust matters. Typically, trustees provide such information on an annual basis, but again, the level of communication depends on the trust’s terms.

In general, trustees should provide annual status reports with complete and accurate accounting of the trust’s assets. Moreover, trustees must permit beneficiaries to personally inspect trust property, accounts, and any related documents if requested. Additionally, trustees must provide an annual tax return statement (Schedule K-1) to each beneficiary who’s taxed on income earned by the trust.

Given such extensive duties and responsibilities, trustees are entitled to receive reasonable fees for their services. Oftentimes, family members and close friends named as trustee choose not to accept any payment beyond what’s required to cover trust expenses, but this all depends on the trustee’s particular situation and relationship with the grantor and/or beneficiaries.

What’s more, determining what’s “reasonable,” can itself be challenging. Entities like accounting firms, lawyers, banks, and trust administration companies typically charge a percentage of the funds under their management or a set fee for their time. In the end, what’s reasonable is based on the amount of work involved, the level of funds in the trust, the trust’s other expenses, and whether or not the trustee was chosen for their professional experience. Consult with us if you need guidance about what would be considered reasonable in your specific circumstance.

Since the trustee’s duties are comprehensive, complex, and foreign to most people, if you’ve been asked to serve as trustee, it’s critical you have a professional advisor who can give you a clear and accurate assessment of what’s required of you before you accept the position. And if you do choose to serve as trustee, it’s even more important that you have someone who can guide you step-by-step throughout the entire process.

In either case, you can rely on us as your Personal Family Lawyer® to offer the most accurate advice, guidance, and assistance with all trustee duties and functions. We can ensure that you’ll effectively fulfill all of the grantor’s final wishes—and do so in the most efficient and risk-free manner possible. Contact us today to learn more.

We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge. Schedule online today.