Fort Myers | Naples Estate Planning Lawyer Blog

The Four Freedoms & Running Out of Future

You get a fascinating perspective serving as estate planning counsel for 29 years, as I have. You get to see people make major transformations, and then eventually transition into a place that they’re not quite sure how to act – namely their retirement years. I represent retired physicians, attorneys, CPAs, business owners, and executives of publicly traded institutions, among others. When these individuals first retire, they are excited to exit the busy world that wore them down over the years.

Some choose to slow down, golf, play bridge, travel and enjoy themselves. I don’t begrudge them at all. They’ve certainly earned it.

But there’s something else that I’ve noticed. When a hard-charging, ambitious, determined individual suddenly has nothing to do, things seem to change. After enjoying a “sabbatical” of several months they don’t seem to know what to do with themselves.

That’s when it gets interesting. Some will become consultants, an occupation that allows them to pick and choose the work they get involved in, while others dive into philanthropy and charitable causes. Some vigorously pursue hobbies left neglected over the years, while many spend more time with their grandchildren than they were ever capable of spending with their children.

Some, however, seem to run out of future. When this happens, a noticeable change occurs. Health often declines, as does mental acuity. They don’t seem to enjoy life as much anymore. They haven’t found a new purpose that engages them. I believe that if you take a look at four freedoms that everyone wants to achieve, no matter the age, it becomes easier to never run out of future.

These are the freedoms of time, money, relationship and purpose.

The first is freedom of time. There are two aspects to each freedom. Freedom from and freedom to. Retirees are free from the day to day grind that consumed their lives for many decades. Now they are free to engage in those activities that they enjoy doing. Those retirees fortunate enough to maintain good health don’t spend a great deal of time in doctors’ offices, instead they are able to choose to take the time in those activities that they find motivating.

The next freedom is that of money. Most of the retirees that I encounter have done a good job of saving, and therefore have the freedom from obligations such as mortgages or those found when raising a family. I have three daughters, one who just graduated from her Master’s degree, another who is going to enter professional/graduate school in the coming year, and a third beginning her college career this fall. I’m looking forward one day to being free from college tuition expenses! Most of those a couple of decades older than I are free of those types of expenses. The retirees I work with also have a freedom to spend their money on those things that provide fulfillment and energize them. Some choose to go back to school simply for education’s sake. Others like to travel, become philanthropic or enjoy helping their children and grandchildren with life’s expenses.

Once you gain freedoms of time and money, that opens the possibility of freedom of relationship. Again, we can be from those relationships that we find toxic or exhausting and can enter relationships that we find satisfying, loving and supportive. Finally, there is the freedom of purpose. This is the highest freedom that can only be obtained once we’ve achieved the other three freedoms. Here we find our meaning. Our why. It can mean many different things to many different people.

When we consider our freedoms in this fashion, it’s impossible to run out of future no matter our age. If you find yourself stuck in a routine that you can’t seem to break out of, I suggest that you consider these four freedoms, and what you want to be free from and free to do. That might just be the thought process that begins an entirely new and exciting chapter in your life.

The Vultures

Those ugly turkey vultures are quite ubiquitous throughout Southwest Florida. You see packs of them on the side of the roads picking at road kill. I suppose that they serve a useful purpose, disposing of the carcasses of various dead creatures big and small.

But family vultures are quite different. They’re not present in all families, obviously. Vultures can be found in just a few I would say. But when they’re present, someone has to stand guard.

While both Dad and Mom are alive and well, they circle patiently overhead, not making a sound. But then Dad dies, and when Mom’s vulnerable, you see them become more aggressive.

“My car won’t start anymore and I can’t afford a new one.”

“The kids’ private schools are so expensive, and I just don’t know how we’re going to pay the tuition bills.”

“I haven’t been on vacation in years and I’m burning out at the office.”

“Now that I’m middle aged no one will hire me.”

And so on. The vultures prey on Mom’s maternal instincts to take care of her children, even though those children are now adults and are quite capable of taking care of themselves. They knew that they couldn’t ask for money while Dad was alive, because he would say “No” and might even disinherit them for even asking.

But now that Dad’s gone, they look at Mom’s retirement account as a lump sum that can and should be shared by all. The vultures don’t realize that the corpus of the retirement account is necessary to generate annual income for Mom. Since yields are so low these days it takes a lot of money to generate even modest income.

I’ve seen the vultures swarm several times throughout my career. Mom’s financial advisor warns her that she really can’t afford to make such large gifts to her children without compromising her standard of living. Yet she does so anyway.

And I don’t mean to be sexist. Sometimes the surviving Dad is the one being preyed upon. More often than not it’s Mom, only because women tend to have longer life expectancies than do men, and as I said before, the instinct to assist even capable adults seems stronger with the parent who actually carried and gave birth to that person, even though it was several decades ago.

And sometimes the vultures sweep in while both parents are alive. Not too long ago I represented a long time married couple who were bled completely dry by one of their adult children. Even though Son had a job and apparently did reasonably well (or overspent) as he took vacations to Europe with his family. But Son also demanded that his parents pay for the plane tickets to bring his family of four down to visit, and expected Mom and Dad to pick up the tabs when they went out to eat, and for the family’s activities. This was on top of the annual assistance he said he needed to make ends meet.

Despite the pleadings of their professionals, including the CPA and the couple’s financial advisor, Mom and Dad couldn’t stop themselves from making large gifts to Son. When Daughter found out about it, she became terribly upset and frustrated, but there was little that she could do by that time. The damage had been done.

So what’s the answer? How do you protect yourself from a circling vulture?

That’s a complicated answer, since every family’s situation is unique. But there are some common threads. When your advisors are telling you that you really can’t afford to make gifts that your adult children request, the first line of defense is to say “No.”

But this is hard to do for many.

If you find yourself unable to say “No” when you know that you should, that’s the time to name a co-trustee in your revocable living trust who does have the ability to help you say “No” and will monitor your financial situation. That co-trustee might be a trusted son or daughter who won’t try to take advantage and will act as a gatekeeper to their vulture-like sibling. It could also be a trust company that can serve the same role in a less emotional and more impartial way.

When I mention professional management, oftentimes my client will bemoan the fees that they would have to pay. I remind them that they are likely already paying management fees of one sort or another, but even if they aren’t, paying 1% for someone to stand guard is better than losing large amounts to vultures whose appetite never seems to diminish.

If you suspect that you have vultures circling, please do yourself a favor and ask your team of advisors what steps you should take before you jeopardize your own financial stability.

An Apprenticeship in Reality

The Canadian psychologist Jordan Peterson has become one of the most prominent intellectuals of our time. His recent book, Twelve Rules for Life, is a massive best-seller. He courageously challenges the fashionable fallacies of the contemporary west. Particularly striking in his book is Rule 5: don’t let your children do anything that makes you dislike them.

That point is more subtle than it sounds. According to Peterson, a significant number of parents today fail to socialize their children. They indulge them. They don’t teach them rules. He states that there are many complex reasons for this. Some of it has to do with lack of attention; parents are busy and don’t have the time for the demanding task of teaching their children discipline. Some of it has to do with Jean Jacques Rousseau’s influential, yet misleading, idea that children are naturally good and only become bad through society’s rules. The best way, that idea states, is to let children choose for themselves.

Peterson believes that modern parents are paralyzed by the fear that they will no longer be liked or even loved by their children if they chastise them for any reason. They are afraid to damage their relationship with their children by saying “No” for fear that the children won’t love them anymore. The result is that they leave their children dangerously unprepared for a world that will not indulge their wishes, desire for attention. A world that can be tough, demanding and sometimes even cruel.

Without rules, social skills, self restraints or a capacity to defer gratification, children grow up without an apprenticeship in reality.

So how does this correspond to estate planning? I commonly hear my clients voice a concern that leaving their children a significant inheritance will only serve to create ne’er-do-wells. There’s a fear that inheritance will eviscerate any drive or ambition that a child might have. Life will be too easy.

Since most of my clients are self-made, they remember a time when they didn’t have much. They struggled. They saved. They denied themselves things that others considered necessities until they were on sound financial footing.

But when they had kids, they didn’t want their children to suffer in the same way that they did. So the children were provided the very things that my clients couldn’t afford or denied themselves at similar ages. As the children grew, many clients described a feeling – a sort of regret – that perhaps they indulged too much. While shielding them from the very scars that defined the parent, the child wasn’t forged into the same tough alloy. The children were happier, yes, but softer as well, and sometimes had less perseverance in difficult situations.

Now fast forward to the time when a client sits in my office discussing their estate plan. While they love their children and believe them to be good, solid citizens, my clients aren’t sure how the transfer of wealth will affect the family. Will it be good or bad? They consider leaving amounts to the grandchildren, but often conclude that might end up cascading the same issues to the next generation.

One answer commonly discussed is to make the trust only available for limited yet specific needs. Education. Health. Supplementing retirement. To do this requires not an outright distribution at the client’s death but a continuing testamentary trust. Not only that, but it also wouldn’t make sense for the trustee of the trust to be the beneficiary/child. In that case, the trustee/beneficiary could simply disregard the terms of the trust and distribute for whatever reason he or she desired. When imposing use restrictions on the inheritance it would make sense to name an independent corporate trustee, from which many clients shy away.

Further, the tax law dissuades us from accumulating income inside of a trust, as compressed federal income tax tables result in much higher bounties paid to Uncle Sam. Here professional money management is often necessary to balance growth and income to save taxes.

The issues and concerns surrounding these issues are unique to each family. I sympathize with having to make these tough decisions, as I grew up in a family that struggled financially. I tossed pizzas, waited tables, mopped floors and bagged groceries in high school through college and law school. My children didn’t have to earn the stripes I acquired in my youth. Yet, our kids did everything my wife and I asked of them, excelling in school and in college.

So what’s the answer? It will be the best one possible assuming that you’ve taken the time to engage in these thought processes. It’s also going to matter what types of assets you bring into the estate plan. Inherited IRAs, which distribute annual taxable income in the form of required minimum distributions beginning in the year following your passing, will have different planning challenges than other assets will, for example.

It all starts with the process of considering what you believe to be in the best interests of your loved ones. As Jordan Peterson would counsel, do what’s right for your family, even if it means that they might not love you for it.

Is It Possible Anymore?

I recently sat down with “Mike,” aged in his mid 80s who owned and operated more than a dozen car dealerships in the Northeast before selling those dealerships to his son.

“How did you get started in the car business?” I asked.

“I was about 27 years old selling used cars after my stint in the Navy,” Mike said. “Someone who knew someone got a representative from Volkswagen to meet with me about opening a dealership in my community. They painted this picture where I would build a $300,000 building – a lot of money back in the early 1960s. I would build the building, purchase inventory and hire mechanics, sales staff and support personnel.”

“That sounds like a lot of money, even now. In today’s dollars it was probably a couple million dollars or more,” I noted. “Did you have a stash of cash? Inheritance?”

“I didn’t have two nickels in my pocket,” Mike chuckled. “I had another friend from the Navy whose father was the bank President. He loaned me the money. At first, I was nervous because they wanted me to personally sign for all this money. But then I visited a friend who had a thriving business. He asked me what I had to lose! I was judgment proof, really. If I defaulted there wasn’t anything for the bank to get other than the business. So I did it.”

The rest was history. Mike went on to build several dealerships that sold cars, employed hundreds of people and served communities.

Later that evening I thought a lot about Mike and how he made himself such a success. I also thought about how impossible building that business would be today for someone in a similar circumstance.

Bank regulators would never allow a bank to loan significant amounts even to an ambitious twenty-something without collateral or a co-signor. Purchasing property and obtaining all of the necessary permits to build a car dealership complete with environmentally hazardous materials such as used oil would likely cost multiples of what was necessary back in 1960. Hiring workers entails not only salary costs, but also the remittance of state and federal taxes and compliance costs associated with laws and regulations governing employers, including employer social security matching, Medicare matching, health insurance, disability insurance and others.

So is replicating Mike’s success even possible today?

I don’t know the answer. It is evident that while government plays an important role in regulating business such that the consumer, environment and employees are all treated properly, I question whether we’ve also choked off the American dream in many ways. Has government taken too large of a role in our lives? Where should we draw that line as a society?

Government regulation isn’t the only constraint today. Most businesses compete not only with those down the highway or across the street, but from across the globe. Going back to the car example, how much money would a new dealership have to invest in a web presence and Internet capabilities in order to attract customers, quote prices and close deals?

Obviously the car business isn’t the only one affected by these factors. All of those in business share these obstacles. Are they the right obstacles? Are they too many? Have we over-regulated to the determent of young, ambitious people who don’t have access to capital?

Somehow making money and even our economic system called capitalism have become taboo in our society. That’s too bad because capitalism was named by its enemies, including Karl Marx. The true definition of capitalism according to Austrian economist Friedrich Hayek (1899-1992) “is an ever increasing system of cooperation among strangers.” No other economy in the world works as well as capitalism in creating value and wealth for its citizens.

Less advanced economic systems fail because they require a centralized system of management consisting of individuals who are part of a family, clan, tribe or party. Those outside don’t benefit. Those inside benefit greatly. It’s only when you have a society that is governed by the rule of law rather than the whims of a man or a group can it engage in an economic system capable of producing remarkable results.

When you withdraw money from an ATM machine that is not your banking institution, think about how successful cooperation amongst strangers must be in order for that transaction to occur. In Europe I used ATM machines to withdraw local currency from my checking account here in Fort Myers. Without the reliance among strangers in the economic system, that wouldn’t be possible.

We may all want to take time to consider how today’s young generation is going to make a go of it so that we all continue to prosper.

The Hunt for Scholarships

According to the College Board, the average cost of tuition and fees for the 2017-2018 school year was $34,740 at private colleges, $9,970 for state residents at public colleges, and $25,620 for out-of-state residents attending public universities. Add another $15,000-$30,000 annually for books, supplies, room, board and living expenses depending upon the location of the institution. Consequently, you’ll find that attaining a bachelor’s degree can range between $125,000-$300,000 or more.

Backbreaking expense even for the affluent among us.

In last week’s column I reviewed my perspective on my three daughters’ college admissions processes, as my youngest will be leaving the nest this next academic school year. I promised in this week’s column to address accessing scholarships to help pay for these monstrous expenses.

It’s important to keep in mind that financial aid and scholarships are two different things. Financial aid is usually awarded by means of completing a FAFSA (Free Application for Federal Student Aid) form www.fafsa.ed.gov, which is part of a federal program. Most colleges and universities use the FAFSA process to determine financial need and award federal grants and loans based upon that need.

Generally speaking, the income and financial resources of parents are used to determine the need of undergraduate students. It doesn’t take a great amount of income and/or assets on the part of an undergraduate’s family to decrease the amount of eligible aid and grants offered. Retirement savings, for example, are included in the calculation as an available resource that a parent might use to educate his or her child. With the cost of education high and continuing to rise, it’s conceivable that a parent or grandparent burns through retirement accounts by allocating retirement resources to children’s college educations.

A student might qualify for more aid or grants if his or her siblings are also in college concurrently, but not enough to make up the significant difference in the associated costs. It should be noted that gifts from parents and grandparents in the form of 529 Plans, UTMA accounts and trusts for college education are counted towards available resources, also limiting the amount of federal aid the student will qualify for.

Since student loan debt might crush a freshly minted graduate, caution should be heeded before funding the majority of a college education with government and private loans. Most student loans can’t be discharged in bankruptcy. This might be why so many thirty-somethings reside with their parents rather than renting apartments or purchasing first homes.

Which brings us to scholarships.

Many colleges and universities automatically consider applicants for academic scholarships based upon high school grade point average, standardized test scores and extracurricular achievements. When applying to a college or university, don’t leave the process entirely up to the student. My kids, bleary-eyed from their high school’s rigorous International Baccalaureate studies, often didn’t thoroughly scour colleges’ websites for available scholarships, which sometimes required the submission of a separate application or essay.

Moreover, there are a variety of public foundation and private scholarships available. Numerous websites offer insight, simply Google “college scholarship opportunities.”

Once awarded an academic scholarship, don’t give up! There may be even more money available. When my eldest daughter Gabrielle was accepted to Brandeis University, the scholarship offer wasn’t as meaty as others offered from other universities. I telephoned the Dean of Admissions asking if the scholarship offer could be increased. He explained that Bernie Madoff stole a significant portion of Brandeis’ endowment, so they didn’t have the resources to match competing schools. He did, however, eventually offer additional scholarship money which we accepted, as Brandeis was my daughter’s first choice. Gabi has since graduated Magna Cum Laude with her Bachelor’s degree, and next month will also graduate Brandeis with her Master’s degree.

My middle daughter Courtney is a junior at The University of Florida, a public institution. While negotiating academic scholarships with large institutions isn’t usually possible, there are programs like Florida Bright Futures earned through high school achievement, which provide a healthy scholarship as well. So long as your student maintains a 3.0 average (not a problem for Courtney!) Bright Futures continues for her four year degree.

My youngest daughter, Madison, was invited to compete for Elon University’s Honors Fellowship. Elon invited 350 of the more than 2,000 applicants to visit campus last month to be interviewed by faculty, attend a lecture and write an essay from a prompt related to the class. Madi was recently awarded one of the 43 honors fellowships, along with a Presidential scholarship she received when first admitted.

Elon’s scholarship offers will cover approximately two-thirds of her four-year tuition expense. Madison noticed that she could have competed for a variety of different honors, but chose to compete solely for the one that paid the most – an “all or nothing” approach on her part, which I encouraged. If the Elon’s admission office really wanted her for the Class of 2022 (as I felt they did based on her exceptional high school academic performance), I figured they’d offer the honors fellowship rather than lose her to another school.

A final thought goes to whether to apply for early decision. Many of the more competitive schools encourage applicants to apply early decision which means that if accepted, the applicant is bound to attend, regardless of scholarship offers or lack thereof.

If there is an institution that your student is dead-set on, then applying early decision may increase his or her chances of admission. I don’t favor this course, as I believe it removes all negotiating power over scholarship awards. If you have the resources and don’t care, then by all means it might help your student get into a “reach” school. Two sons of a close family friend were admitted into their preferred schools of Duke and Vanderbilt through early decision. But neither received scholarship awards.

If you’re concerned about academic scholarships, then I would suggest a more flexible approach. It’s similar to buying a car. If you limit yourself to a certain model, you are less likely to get the best deal than if you are open to a number of different models that have similar preferred features. Ultimately, even going through this process, each of my daughters enrolled in the university they felt was the right fit for them.

Please understand that I’m simply stating my opinion formed from my experiences over the past six years. Others may find success on a different path. I wish the best of luck for those currently engaged in the process.

Courtney, by the way, is beginning her search to attend graduate school. If any reader knows of private scholarships for those pursuing a doctorate in physical therapy or hospital sponsorships that may be available please email me at my address below!

Empty Nester: View of the College Admissions Process

Regular readers know that my wife and I raised three daughters, all of whom we are extremely proud. All three graduated (or will graduate) Summa Cum Laude from Fort Myers High’s International Baccalaureate program. Our eldest daughter graduates with a Masters Degree from Brandeis University next month. Our middle daughter is a junior at the University of Florida, aiming to become a physical therapist. Our third recently accepted an Honors Fellowship at Elon University, enrolling this coming fall semester.

Soon Patti and I will be empty nesters. Hard to believe.

We’ve been through the college admissions process on three separate occasions, so I feel that I’ve earned some wisdom to share. Many of my clients believe as I do that helping your child (or grandchild) achieve a higher education is one of the best ways to launch them into the adult world, so it’s common for my clients to establish Section 529 Educational Savings Plans (named for the Internal Revenue Code Section creating them) for their children and grandchildren, and invest in state Prepaid Programs like the Florida Prepaid College Plan.

Are they worth it?

As my children were born, we invested in two Florida prepaid programs understanding that at least one of them would choose to attend a private institution rather than a Florida public state college or university that those plans are best suited for. As it turns out, two chose to enroll in universities outside of the Florida public state system.

Was the prepaid program a bad investment? No, not really. As it turns out, while Florida Prepaid Plans are designed to be used at a Florida College or State University, the plans can also be applied to other schools nationwide. Plans can be used at in-state, out-of-state, public or private schools around the country – or even the world. The Florida Prepaid Plan pays to the other schools the same amount for tuition that it would have paid to a Florida public school.

Because the cost of attending a public university has outpaced inflation, it didn’t turn out to be a bad investment. The annual cost of attendance for an in-state resident at the University of Florida today is estimated to approximate $22,000, with $6,300 of that amount constituting in-state tuition. The rest is room, board, books and other expenses. The cost of attending a private institution like Brandeis University however, hovers around $65,000 annually. So if your student attends a private college then the Florida prepaid plan would pay that private college $6,300 annually for the tuition assuming you purchased a four year plan.

How about 529 plans? While the prepaid plans pay for tuition (and dormitory if you purchase a dorm contract rider) the 529 Plans can be used for nearly any educational-related expense. A 529 Plan usually consists of investments in mutual funds or cash equivalents, and therefore rises and falls with the market. Like all investment plans, some perform better than others.

So long as the 529 plan withdrawals are made for college related expenses, any realized capital gain or other income recognized inside of the plan is not taxed to the account holder or recipient.

I’ve found marginal success with 529 plans. Because of the stock market crash ten years ago, many of my plan assets decreased in value. Low yields didn’t help with those parts of the plans invested in bonds and other income producing funds. But the same probably would have held true with investments outside of a 529 plan for the same time period. The tax-free character did help overall.

What about the admissions process? My observation is that the competition to get into the best colleges and universities is fiercer than ever. It appears that our children compete for admission spots not only against other students from across the United States, but also from those around the globe. It’s common on many campuses to find that international students make up an ever-growing proportion of the student body.

While grades and SAT/ACT test scores remain vitally important, there are other actions you can take to help your student gain admission, especially among private universities. The most significant point I can convey is to take an official campus tour. Most private colleges and universities offer tour dates where you register to attend a presentation, tour the campus, and learn about financial aid and scholarships.

During an Emory University tour, an admissions officer honestly revealed that those who don’t take the time to visit the campus often don’t make the first cut when the admissions office selects who will be admitted and who won’t. The admissions officers have a difficult job in that their goal is to admit those students who are likely to enroll. Since the best students commonly have multiple offers, the school never knows who has that institution at the top of a particular student’s list. When you and your student tour the campus, it demonstrates a certain eagerness to attend that university.

Next week I’ll review what I’ve learned about gaining scholarships while navigating this process with each of my three daughters.

Immigrant Success Juxtaposes News Reports

For the past 13 years, I’ve participated in Strategic Coach, an international entrepreneurial coaching program. I fly to Chicago or Toronto quarterly to meet with my coach, Dan Sullivan, in a class consisting of about fifty other business leaders, professionals and entrepreneurs mostly from the United States, but also from around the world. Most of the participants in my group established and built multi-million dollar businesses employing anywhere from a few dozen to several thousand employees.

My estate planning legal practice is a spit in the ocean compared to what many of my classmates run. I find it invaluable to be in a room of wise, sound businessmen and women, most of whom also support a variety of philanthropic causes. They give me fantastic ideas how to streamline work, upgrade client service and market my law practice through valuable client education using today’s technology.

But here’s my anecdotal observation: roughly one-third of the participants are either immigrants themselves or first generation children of immigrants to the United States.

One out of every three!

These are individuals who left their homeland, some not knowing how to speak English, having little or no financial resources to make a go of it in our country. Many attained college degrees at our fine colleges and universities while some did not, but all of them built something quite substantial. The program’s annual tuition is $25,000.00, so we don’t have charlatans among us. These people are the real deal.

Before joining Strategic Coach, I would never have guessed that so many created so much in such a short period of time. They are men and women, white, black, brown and every shade in between. I’ve met a Muslim from Asia looking for a bigger future in America, despite knowing he would likely face discrimination here. Another in my class fled Macedonia with his family when war broke out in the 1990s. A Christian Iranian fled as a child with his family when the Ayatollah came into power in 1979. Several Indian nationals have established technology centers here and in their homeland.

They are all multi-millionaires who run successful organizations.

It’s truly amazing what these individuals have accomplished in such a short period of time. And besides, they are nice, quality people that are interesting to talk to. They love our country and the opportunity it provides.

And they give back.

They’ve established centers to help refugees stricken by war around the world. They’ve created foundations to fight dreaded diseases and to feed the homeless. One I know has a program to hire wounded American veterans suffering from PTSD.

I therefore don’t understand the news reports that would have one believe our country has become a conglomeration of xenophobes. Certainly not every immigrant constructs million dollar enterprises, but you also notice hard-working immigrants in restaurant kitchens, hotels, landscaping companies, manufacturing firms and a host of other jobs that require back-breaking hours.

Just about every one of us traces our ancestry back to an immigrant. My great-grandparents landed on Ellis Island in the early 1900s to escape European pogroms. They worked in sweat shops in the lower East side of Manhattan, which at the time was the most densely populated place on earth. Later, they built clothing manufacturing firms and later general retail stores.

My ancestors would beam with pride if they could witness what their progeny have achieved these many years later.

I don’t know why our country can’t readily admit, as a full-fledged citizen, anyone who earns a college level diploma here. Instead, these individuals must endure a grueling application process. Do we really want the brainpower that our colleges and universities train creating businesses, hiring workers and paying taxes somewhere else – especially when they would prefer to reside here?

Yes, we certainly have to be concerned about and screen for those who have destructive intent. Many of our nation’s recent terrorist incidents were home-grown, however. Almost all of those entering our country work an honest job to make it here like the rest of us.

The “brand” of our country, if you will, is built on immigration. I’ve been fortunate to witness first-hand the significant contributions recent immigrants have made. I hope as a country we promote a liberal immigration policy to attract the best, brightest and most ambitious.

Our future depends on it.

Island Residence Dreams Shattered

Many of my clients who live on the islands dream of leaving their beloved residence to loved ones. They imagine that, long after they are gone, their children and grandchildren will frolic on the beach at the family beach house, remembering the good times that they all had together while building more good times for the future.

This dream is often shattered when the children actually inherit the island residence. Upon the death of their parent, the residence loses its “Save Our Homes” property tax assessment cap that the parents enjoyed when the residence was homesteaded. This often results in a significant increase in property taxes, sometimes to the point that the family can no longer afford to retain the residence. When you add on the increases we have all experienced in homeowner’s insurance rates in Florida, it is not uncommon for even a modest town-home on the island to require tens of thousands of dollars to maintain on an annual basis.

There are additional issues as well. Who should inherit the residence? Should the residence be treated as satisfying a share of one of the children beneficiaries? What if he or she doesn’t want the residence? If you instead leave the residence to all of the children, who decides when each family can use the residence during the most popular vacation periods such as Christmas or spring break?

What happens if you leave the residence to a child who then gets divorced? Might a former daughter-in-law or son-in-law own a stake? What if one of the children isn’t financially capable of contributing his or her fair share of the annual expenses?

I am aware of at least one situation where the residence was left to all of the children, some of whom wanted to retain the residence as a vacation home and the others wanted to sell the residence. The children who wanted to sell the residence disagreed how much they should get paid from the other children who wanted to keep the residence for each of their shares. Something ugly like a partition action which results in a forced sale could erupt.

These are all serious issues that merit attention. I happen to be giving a free lecture open to the community sponsored by the Sanibel-Captiva Trust Company on Wednesday, April 11th from 9:30am to 11:30am at the Sanibel Community House. I’ll be able to delve into the details at that talk, but there are some general guidelines that you might want to consider before telling your estate planning attorney how you would like your island residence bequeathed.

First, you want to consider whether your children really do want the residence. Is leaving them your Sanibel or Captiva property important to them? Or is it just important to you?

If your children are busy raising families and working in a career, a Sanibel residence might be viewed more as a burden than as a gift.

How should the residence be bequeathed? Rather than outright bequests to one or more children, consider creating a testamentary trust inside of your estate plan, or perhaps form a family partnership. This could serve to both protect the residence from a beneficiary’s divorce or other creditor problem, as well as centralize its management and control. It’s usually better to put the responsibility of collecting the money for annual expenses on one or two of the children rather than all who own it.

You may also want to consider providing a source of liquidity to pay for the expenses associated with the residence. It’s not right to put a specific monthly or annual dollar amount in the trust. Instead, it’s important to allocate a sum of money to be held in the continuing trust to generate income (or invade the corpus itself) to pay for the expenses associated with the residence.

There certainly are many issues to consider. But doing this thinking up-front will help you and your family to better realize your dreams of continued enjoyment for generations to come. If you’d like to hear more, contact Frances Steger at the Sanibel Captiva Trust Company at 239.472.8300 or email at fsteger@sancaptrustco.com.

Delayed Decisions

I’m usually not a big proponent of procrastination. The longer one takes to act, the more difficult the decision usually becomes.

Unless you’ve just lost a spouse or significant other.

When that happens, there are many fears and concerns. Will there be enough income to pay all the bills? Should I put the house on the market? What about our health insurance or supplemental Medicare plan? Do I change financial advisors?

After the death of a loved one, it seems that the world becomes unhinged. Normal routines are no more. After the flurry of the funeral with family and friends surrounding you is over, meals are often spent alone, meaning that there is too much time to dwell on all of the fears and insecurities that arise. On top of that, it’s difficult if not impossible to think clearly through the mourning and grief.

So what I’m advising is to not make major decisions during this emotional and difficult period – unless you absolutely have to.

Don’t put the home on the market.

Don’t change financial, legal and tax advisors.

Don’t sell all the investments and go to cash.

Don’t buy that new car that you’ve been eyeing.

This is not to say that you should put everything on hold. There will be tasks that you have to complete within a time frame. If your spouse’s will or trust has to be probated or administered, visit with your attorney and get that going. Waiting too long could result in adverse legal or tax consequences, for example. Provided that you have confidence in your attorney, let him or her guide you through the process.

Let your attorney help you make death claims such as life insurance, annuities, VA or other government benefits. Make sure that the checks are deposited in the correct accounts if you or your spouse created a revocable trust. If a federal estate tax return is going to be due, make sure that you ask for a Form 712 from the insurance company when they pay the claim, as your CPA will need that.

Don’t rush to transfer joint accounts into individual name, either. Sometimes checks will arrive made out to the deceased. If a joint account isn’t still open, the only way to deposit that check may be to open a probate, which is time consuming and expensive. If a probate is not otherwise necessary, (the usual case when the deceased owns a fully funded revocable trust, for example) then it is important to have a place to deposit the rogue checks made payable to the deceased that may come in over the next few months.

Provided that you are over 59½ let your financial advisor help rollover any 401(k) or IRA accounts. If you are under 59½ and if you were relying on IRA distributions that your spouse was taking prior to his or her death, don’t roll over the account right away. If someone under 59½ rolls over the IRA account into his or her own name, then he or she generally can’t take distributions before that age without incurring an excise tax penalty.

Certainly if financial realities require a change in spending habits or force the sale of certain assets, you can’t wait too long to make certain financial decisions. Here you may lean on your CPA and financial advisor to create budgets and to lay out a prudent plan to keep you living in reasonable comfort.

Aside from those situations, nearly everything else can wait. The advice of most mental health professionals is to wait a year before making any major decisions. That amount of time allows one to process the grief and loss of a loved one, and return to a state where logic and careful thought are more likely to govern your actions.

While family and friends may have the best of intentions, try to take their advice with a grain of salt. Even if something works for them, it may not work for you as everyone’s individual circumstances is different. Surround yourself with an excellent team of professionals and rely on them.

It’s always tragic when we lose a loved one. Try not to compound the tragedy by making difficult decisions on your own and too early.

More Than Pushing a Button

We can accomplish so much these days simply by pushing a button. I just returned from a conference in Washington, DC, where I pushed many buttons using apps on my iPhone. It was simply amazing when you think about it.

I pushed buttons to check into my flight and to display my boarding pass. Another button informed me if my flight was on time, while yet another button tracked my bags onto the plane. Upon arrival at Dulles International, I pushed a button to summon an Über to take us to our hotel.

Rather than wait in a long line to check into our room, I pushed a button to check in, reading the assigned room number on my screen. We ascended in the elevator, and, after finding our room, I proceeded to punch another button to unlock our door. Once in our room we used buttons to read restaurant reviews and make a reservation.

We even pushed buttons to enroll in the conference break-out sessions, find the location of those sessions around the conference center, and communicate with the conference organizers.

There was virtually no interaction with a human being to accomplish all of these tasks. It seems that we can do a lot pushing buttons.

Even construct an estate plan.

But not a good one.

You see, unlike many transactions, a good estate plan is only developed through a meaningful interaction with a knowledgeable professional. Sure, you can access web-based estate planning programs, but those can only perform one minor function in an estate plan—that is preparing a legal document that would say who gets what in the event of your death. Even then it probably doesn’t do a thorough enough job.

Why is that? Because there is so much more thought that should go into constructing an estate plan. Consider, for example, that you have several different baskets of assets. Some carry taxable income with them (such as annuities, IRA and 401(k) accounts), while in others you might achieve a step up in tax-cost basis that eliminates capital gains to your beneficiaries. Without a thorough understanding of the complexities surrounding these issues, it’s likely that you don’t maximize your plan, and that Uncle Sam becomes a larger beneficiary than he should.

How about those in blended families? A computer program won’t provide any insight into the problems associated with economically tying your spouse who is not the parent of your children to those children through marital trust planning. Sure, the program will describe the benefits of providing income to your spouse for the rest of her life, and then how the trust will distribute principal to the children upon her death. Seems pretty straightforward.

Except it’s not.

Will that computer program reveal how to maximize family harmony when every dollar your spouse spends following your passing will result in one less dollar that the children inherit? There are strategies to consider beyond what the cold calculations that artificial intelligence can master.

How about protecting your children’s inheritance from divorce or other economic maladies? Will those computer buttons know how to give your children the greatest amount of freedom in choosing their investments, distributing the trust income and principal, and ultimately deciding who should benefit from the inheritance following their deaths? I usually have lengthy conversations with my clients about the hopes and wishes that they harbor for their loved ones. Can you do that with Siri?

No. You can’t.

Selecting your trustee in the event of your disability is usually another in-depth conversation that I engage in with my clients. There’s so much to it, in fact, that I wrote a book exclusively on that subject. If you’d like a copy of that book please email me at info@sbshlaw.com. Once you receive it please read the preface where I described how shocking I found the crushing responsibility to be when my mother contracted leukemia and I became the trustee of my parents’ trusts. Reflect on the fact that I’m a board certified wills, trusts and estates attorney and a licensed CPA, and I found the responsibilities overwhelming. This is my career. Think about that for a moment.

There are so many variables to a good estate plan that every person’s plan will be unique to that individual. Sure, if you have less than $100,000 in assets and a house you probably don’t need the best estate planning attorney out there, and perhaps a computer program will suffice.

If you’ve taken the time to read this column, chances are you’ve accumulated somewhat more than that.

Yes, it’s great that we can do so much by pushing a button on our Smartphones. But do you really want to put that small amount of thought into constructing a plan to protect you and your loved ones with what took you a lifetime to accumulate?

The Sheppard Law Firm is located in Fort Myers and Naples by appointment.

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