According to the New York Times, “an estimated 38 million Americans provide care to an aging relative.” With numbers like this you would think this would be a frequent topic of conversation within families, but this is rarely the case. Unfortunately, because we tend to avoid the uncomfortable subject of our parents aging, most families are unprepared when mom or dad begins to need help (either physical or financial). But denial can’t stop the inevitable from happening; it only means that you and your siblings will be unprepared when the time does come to care for mom or dad.

What this article in the New York Times stresses is the importance of planning as a family. Parents may think that by keeping their troubles to themselves they’re saving their children stress and heartache, but evidence shows that sons and daughters do end up shouldering part of the burden—financially, physically and emotionally. It stands to reason that if they’re going to share responsibility, these responsible children should have some part in the planning process as well.

The Times article offers some suggestions on how to discuss the issue of aging with your parents and your siblings, and how to prepare for the future together, including how to:

• Open the conversation with your parents and siblings.
• Assess financial conditions and options—including Medicare.
• Learn about care options and their costs.

Don’t wait to have this conversation. As financial gerontologist Rosanne Roge is quoted as saying, “The most important thing is to recognize that it’s likely that elders who live a long time are going to need some help… and you have to pay for it some of the time.” The best time to prepare is now.

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Do you have an e-mail account?

Do you participate in Facebook or other Social Networking sites?

Do you do any of your banking, bill paying or investing online?

If you answered yes to any of these questions then you might want to think about this next question… what will happen to all of your online assets and accounts when you die?

As we move further into the 21^st century more and more of our lives are moving into the digital realm. This includes friendships, networking, business and banking. The beauty of this is that it gives us unprecedented freedom and global access; the downside is that huge portions of our lives are locked away behind password protected accounts, many of which our friends and relatives aren’t even aware of. Online accounts are incredibly convenient, but they can create huge problems if your executor or agent has no way to retrieve your online passwords, assets or contacts after you die.

Some large online service providers are developing policies to deal with the transfer of accounts upon the death of the user, as noted in this article by Alejandro Martínez-Cabrera, “but the process is rarely a simple one.” Some companies require a death certificate before they will agree to shut down an account or turn over the contents, but rarely will an online company transfer actual ownership. It could take months or years of headaches and frustration before your heirs have access to any assets or information locked behind these online protections.

What this means for estate planning is that when you talk to your attorney about your will or your trust it’s not just about physical assets anymore; digital and online accounts and assets must be part of the conversation.

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Everybody seems to know (from popular TV shows, if nothing else) that DNR means “Do Not Resuscitate”, but do you know what “Do Not Resuscitate” means in your own personal healthcare directive or living will? Too often, when talking with clients about the healthcare documents in their estate plans, they don’t know the extent of their own (or their parent’s or grandparent’s) instructions.

“Do Not Resuscitate” can cover a wide array of options, which is why it is so important to define what “life-saving procedures” means to you, and exactly when you would like your DNR to go into effect. Here are some examples of “life-saving procedures” that you (or your elderly relatives) should talk about with family, medical staff, and your estate planning attorney:

Artificial Nutrition and Hydration When grandma decides to stop drinking fluids orally and begins to dehydrate, does the nursing staff have permission to keep her hydrated via IV fluids? What about if you are in a non-reversible coma and unable to drink liquids on your own?

Antibiotics or Other Medicines Do you include antibiotics in your definition of “life-saving procedures?” Do you still if you have been declared irreversibly brain-dead by two independent physicians? When you are 102 and confined to a bed in a nursing home, do you want to be given medicines to combat pneumonia or other illnesses?

Chemotherapy A point similar to the paragraph above; if you are 102, afflicted with dementia and confined to a bed, do you want to receive expensive and painful chemotherapy treatments if the doctors discover cancer?

Blood Transfusions Blood Transfusions are fairly universally considered “life-saving procedures”, and they should be addressed in your healthcare documents. Do you have religious reasons for refusing a blood transfusion? Do you still want one if you are severely and irreversibly disabled?

Organ Donation Though obviously not considered a “life-saving procedure”, organ donation is a topic you should discuss with your family, medical providers, and estate planning attorney to prevent any misunderstandings or delays in treatment if and when the situation arises.

A healthcare directive is one of the most important documents in your estate plan. State-specific healthcare directives or living wills can often be found for free online or at your doctor’s office, and in a pinch these will work; but they cannot take the place of a conversation with a knowledgeable estate planning attorney who will ensure that all aspects of your decision-making process are addressed and put down in writing.

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Many parents spend a lot of time and money ensuring that their estate will go to their children exactly when and how they want it to; they work with the best advisors to create a plan that will transfer their assets as smoothly as possible to their children and grandchildren when the time comes. Ninety-nine percent of the time these parents have in mind that the inherited estate will be used responsibly to help their children and grandchildren pay for schooling, make it possible for one parent to stay home with young children, be put away for retirement, etc. But according to Pamela Black at financial-planning.com, “while estate planners are 98% effective at preparing these assets to be passed on, that preparation goes to waste in 70% of the cases… [because] no one is preparing the heirs for assets.”

When considering how to pass your estate on to your heirs, it is important to take the time to consider how your heirs are likely to handle the new responsibility. While many parents have numerous discussions with their advisors about how they would like their money to be handled, they neglect to have these important conversations with their children because they assume (often erroneously) that they and their children share the same financial values.

Death and money are two of the most uncomfortable subjects for discussion between parents and children, and many families will simply avoid these conversations. But financial advisors and estate planners have seen too many cases of families and carefully crafted estate plans falling apart in the wake of the death of a parent; we know how important it is to have these difficult discussions.

Do you need to spend more time preparing your children for their eventual inheritance? Pamela Black has included in her article a preliminary “Wealth Transition Checklist” to give you an idea of how well prepared your family is for the transition. Bring your kids in with you to your next appointment and let them share in the process of planning for their future. The more they know the better prepared they will be.

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Do you have a will or a trust?

Has your will or trust been reviewed or updated in the past 3-5 years?

If you answered yes to these questions then you are two steps ahead of 2/3 of the rest of Americans. But the next question is the big one:

Does your family or executor know where your legal documents are stored, and are they able to access them?

Having a will or a trust is essential, but it doesn’t do any good if nobody can find it after you’re gone. Olympic medalist Florence Griffith Joyner (“Flo-Jo”) supposedly had a will when she tragically passed away at the age of 38, but because her husband was never able to locate the original document, a neutral administrator had to be appointed by the court to execute the estate; and whether her estate was executed according to her wishes is anybody’s guess.

A will or a trust often contains sensitive and emotional information, and for that reason many people (understandably) want to keep these documents private; but spending any amount of time or money on your estate planning documents won’t help your family if they can’t locate—or don’t have access to—those documents after your death.

We suggest having an earnest conversation with your family (or one or two select members at the very least) about the existence and location of your personal documents. Although they don’t have to know what is in your will or trust, knowing where those documents are can ensure that the time and money you spent creating them isn’t wasted.

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The recent repeal of the estate tax is having unintended consequences for responsible husbands and wives who already had a will or trust in place to protect their spouse and family—instead of protecting them, that existing will could now end up leaving surviving spouses with nothing. Jonnelle Marte at the Wall Street Journal has this to say:

“It’s a common practice for people to use formulas in their wills designed to send the maximum amount of assets not subject to the estate tax into a trust, often for their children. The remaining assets are usually left to the surviving spouse. But this year, there’s no limit on the assets people can pass to their heirs without being subject to federal estate tax. So all of the assets could go into a trust and the surviving spouse would get zero.”

Does this mean you’ll have to get your will or trust updated every year? No. But it does mean that you’ll want to get your will or trust reviewed by an estate planning attorney this year. A review of your estate planning documents is a quick and easy process, especially if you don’t have any other significant changes to make. One thing is for sure, the small amount of time you spend making sure your documents are current is well worth the protection and benefit your spouse and family will receive from it.

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Where you live is a defining aspect of your character throughout your life. Your “hometown” often plays a large part in the formation of your character; as adults we decorate our homes to reflect our interests, hobbies and loves; and the neighborhoods in which we choose to raise our children (city, farm, suburb) tell us a lot about our underlying values and where we feel safe and secure.

The idea that where you live is an important part of who you are doesn’t diminish as you get older—in fact, the longer you’ve lived in a place the more it seems to become a part of who you are, and vice-versa—so it’s no wonder that seniors are as choosy about where they live as any of the rest of us. What follows are some of the options for senior living arrangements. What you and your loved one will choose will depend on health, finances, community support, and of course—your family.

Most seniors would prefer to stay in the home they’ve known and loved. A senior or retirement community may look perfectly nice to a son or daughter; but mom or dad may see the retirement community as a first step toward losing their independence and being forgotten. Many senior citizens can stay in their homes for quite some time so long as they have the support of family and community and perhaps the help of an in-home caregiver.

Another option for housing is a senior or retirement community. These are often independent communities which provide age-segregated living opportunities for seniors who are still active. They usually provide social activities, regular transportation around town, and some personal care or nursing services. These communities can be the perfect solution for a still active senior who is unable to drive anymore, but be very cautious when choosing a community; with no regulation or governing body the non-social services they provide can be suspect.

A nursing home is the most drastic option for senior living, and is usually reserved for chronically ill people who need medical care and regulation in addition to help with the most basic of daily tasks. The decision to use a nursing home is a difficult and emotional one, and should not be put off to the last minute. Not only because nursing homes are expensive, and require as much advance financial planning as possible, but also because finding the right nursing facility for your loved one can take time.

Whatever housing option you are looking for, don’t be afraid to ask for professional help or advice. A Geriatric Care Manager, Elder Care Support Services, or an Estate Planning or Elder Law Attorney can help your family make and implement this tough decision.

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Among the many changes in tax law to go into effect in 2010 was the change in cost basis for inherited assets. Previously, all inherited assets were “stepped-up” from their original value at date of purchase to their fair market value at date of death. In this way, if inherited assets were sold shortly after death, no capital gains tax was owed. However, in 2010 inherited assets do not receive this automatic “step-up”; instead they will be valued at the lesser of the decedent’s basis or the fair market value as of date of death. The result is that for decedents dying in 2010, the decedent’s tax basis and the fair market value as of date of death will have to be determined for every asset. As you can imagine, this will cause paperwork nightmares for heirs.

What we suggest is making a list of your assets and their values and tax basis information now, while you are still alive and your memory is fresh. This is not a list that has to be shared with anybody until after your death, but the mere existence of your list of assets will save your family and heirs hours of headaches (and heartache) later on.

If the thought of taking the time and energy to sort through files and records to gather this information makes you want to run for the hills, imagine how your heirs will feel! To ease the burden, try making your list one asset at a time, over the course of many days. However you choose to create your list, you can be sure your heirs will thank you.

(Note: There is an exemption amount of $1.3 million of gains from this carry-over basis rule, and another $3 million exemption applying to assets inherited from a spouse.)

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January of 2010 has brought with it a lot of change that is keeping financial and estate planners on their toes. In addition to the repeal of the estate tax (discussed in a previous post), we have been presented with new Roth IRA rollover rules that took effect January 1st, and which now allow anybody, regardless of income, to convert their traditional IRA to a Roth IRA. The question now is: Is it worth it?

The answer to that question will be different for everybody, because the amount that will be taxed upon conversion depends entirely on the kind of contributions you have made to your traditional IRA in the past. If you have made more non-deductible contributions than tax-deductible contributions to your traditional IRA you will almost definitely want to take advantage of the conversion opportunity. If you have made fewer non-deductible contributions you may be looking at a higher tax bill. However, the fact that the tax bill can be spread out over two years (but only if the conversion is made this year) should give even those who have made mainly tax-deductible contributions reason to consider the switch.

If you think you may want to make the switch, talk to your advisor. Your financial specialist can tell you the pros and cons of switching based on your personal IRA history. The nice part is that if you do decide to take advantage of the new rules, the decision doesn’t have to be permanent. Those who convert their traditional IRA to a Roth IRA in 2010 will have until October 15, 2011 to change their minds and switch the account back to a traditional IRA.

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Creating an estate plan often involves serious discussion with your advisors about tax planning, asset protection, and charitable giving; but it is important to remember that at its core, estate planning is about protecting your family—and as this article in the Wall Street Journal reminds us, for many people the word “family” also includes our four-legged friends.

Some people will be tempted to roll their eyes and joke about Leona Helmsley at the mention of including your pet in your estate plan, but most will agree with article author Max Alexander that ensuring your pet will be taken care of after your death is not a frivolous indulgence but a simple matter of responsibility.

Providing for the care of your cat or dog does not necessarily mean leaving millions of dollars in a pet trust, what it really means is taking steps to ensure your pet doesn’t end up out on the street or in a cage in the local animal shelter. The Wall Street Journal suggests four simple steps pet lovers can take when planning their estate, including:

• Choosing a “pet guardian”
• Deciding whether or not to provide financial assistance for the care of your pet
• Adding language to your will or trust regarding the care of your pet
• Writing down a list of instructions for your caregiver

Over 50% of U.S. households own a dog or a cat. Those pet owners know that in return for companionship, love, and devotion pets rely on their owners for the basic necessities: food, shelter and protection. Why gamble with the future when ensuring their care can be so easy?

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