The Wiewel Law Firm

Going Off to College? Documents are Helpful

There are tools in an estate plan that a college student may need and are also beneficial to you.

If your child is heading off to college you have prepared them already with background education and the ability to live away from home. However, are they prepared with the documents that an adult needs? They should be, according to the Monterey Herald in “Liza Horvath, Senior Advocate: Off to College.”

When college students go to off to a world of dorm living, classes and increased independence, many are on their own for the first time. If they are 18 or older, they are legally considered adults. If they become sick or injured while away, the rules of HIPAA, the Health Insurance Portability and Accountability Act, prohibit anyone from speaking with a doctor, gaining access to medical records or being informed of their status–even their own parents!

If your college admissions package did not include an Advance Health Care Directive and a HIPAA release form giving you permission to speak on behalf of your student, speak to doctors and to be part of any medical decisions. Your estate planning attorney will be able to draft those documents for you.

Make sure that your college-bound student also has a list of who they should contact in an emergency, including cell, home and work numbers and email addresses. This list should include their primary treating physician and a history of their immunizations, chronic conditions, medications and  other relevant medical issues.

This information can be stored in the cloud or on their phones.  However, if the phone is stolen or lost, so is a lot of sensitive data. Write it down on an old-fashioned piece of paper and keep a hard copy at home and one on your own computer, so it can be easily sent if necessary.

You should also consider having a power of attorney for finances and a directive to the college, so information on your student can be released to you. This will allow you to see the academic records and act on your child’s behalf on any legal matters.

If you have adult children, even those who graduated long ago, you may also to wish to have some of these documents prepared.  

Resource: Monterey Herald (July 28, 2018) “Liza Horvath, Senior Advocate: Off to College”

Giving Your Money Away? What Does the Family Think?

There are ways to give away money that help people and create some tax breaks.

If you’ve reached a point in life where you feel you have enough and want to give your money away, it would be wise to consider what your family thinks about sharing your resources, according to the AARP in “How to Give Your Money Away.”

The following are some good points from AARP on giving your money away:

A grandchild needs a college education. Use a 529 college tuition plan to help your grandchild, by contributing to a plan created by the child’s parent. Financial aid formulas look at contributions from a grandparent’s plan but not a parent’s plan as student income. To allow your grandchild to be eligible for student aid or grants, make sure that the funds you contribute go to his or her parent’s 529.

You want to be philanthropic, even if you’re not Warren Buffet. You can use what’s called a DAF—donor advised fund. They are like charitable savings accounts. The tax deduction for any cash or investments placed in the fund is immediate, so you can front-load two or three years’ worth of giving into one year. You can also claim a charitable deduction for a year, when you intend to itemize instead of taking the new standard deduction.

One child is a smashing success, the other is a starving artist. Sometimes the disparity of incomes between children can be a result of choice or abilities. Nevertheless, you may not wish to leave the exact same amount to both kids. One of your children might have a disability and needs special planning. It’s your call and it’s also your call whether to share all the details with your kids. Logic prevails in some families and there’s no drama over these kinds of decisions. Less information about their inheritance is better for others. You could insert a no-contest clause in the will to forestall any litigation.

You have visions of generations enjoying your summer cottage. Sometimes this works out.  However, sometimes the kids have no interest in the property and just want to sell it. Have that conversation first. If no one wants it, sell it when the timing works for you. If one kid loves the house and the others don’t care, work out the numbers so the house stays in the family, but the child receives a smaller percentage of assets. If the family wants to keep the house, work with an estate planning attorney to create an LLC (Limited Liability Company) and give shares to the kids. You’ll need an operating agreement, including how the cost of maintaining the property will be handled and what happens, if someone wants to sell their share. Define the universe of eligible owners as lineal descendants and not spouses, to forestall an ownership battle in the case of a divorce.

An estate planning attorney can advise you on creating an estate plan that fits your unique circumstances and may include giving some money away.

Reference: AARP (May 1, 2018) “How to Give Your Money Away”

Prepare Legal Documents as College Approaches

Your child is getting ready to leave the nest and head off to college. Now would be a good time to make sure proper legal documents are ready, before the student departs.

There are several standard preparations required, as your child gets ready to head off to college life. In addition to the usual preparations, it would also be wise to have certain legal documents prepared before they go, according to getintocollege.com in “Legal Documents Your Child Needs to Sign Before Heading to College.”

Once your child turns 18, your access to their medical records ends unless they complete a form called a HIPAA Authorization. Your child must sign the form to give you access to their records, appointments, test results, etc. If your child is going to a school out of state, you may need a state-specific form. Keep these documents in a safe place, where you can access them quickly, in case of an emergency.

Chances are your student is heading off to college with a debit card and a credit card.  However, do you have access to those accounts? Talk with your estate planning attorney about creating a Financial Power of Attorney form, so you don’t run into any roadblocks, if your child needs help handling their finances. Opening a bank account or having a credit card attached to your account makes it easier for you to transfer money to your student. It also makes it easier for you to keep a watchful eye on their spending. Make a copy of the front and back of all cards so you can easily report them if lost or stolen.

Colleges have a form known as FERPA (Family Educational Rights and Privacy Act), which you usually can obtain at some point during orientation. This is a document that gives you the legal right to your child’s academic and financial information through the college. Think of this as the college’s HIPAA law. It’s not the same, but it can create the same level of obstruction, if you do not address it in advance. With it in place, you’ll be able to discuss their finances with the bursar’s office, their grades with their academic advisor and many other offices in the college that will otherwise refuse to speak with you.

An estate planning attorney can advise you in preparing the proper legal documents.

What Your College Freshman Needs

Before sending your recent high school graduate off to college, there are a few things that you need to make sure that they have that go beyond spending money and a new wardrobe.

Your child might have graduated as the valedictorian of his or her high school class and might be going off to a well-regarded university in the fall, but you still know that your child has a lot of things that he or she needs to learn before he or she will be successful in life.

As a parent who wants what is best for your child, there are a few things you can do before your child goes off to college.

This was the topic of a recent post by the Wills, Trusts & Estates Prof Blog in "Five Essentials for College Freshman."

Things that you can do include:

• Get your child a health care power of attorney. If your child has a medical emergency, you will want to make sure you or someone else has the legal authority to make important health care decisions.
• Get your child a general durable power of attorney. This will make it so you or someone else can handle your child's finances in an emergency.
• Get your child a will. While hopefully not necessary, should the worst happen it would be good for your child to have a will. If nothing else, getting a will should help your child understand why having a will is important.
• Make sure that your child knows about cyber security and how to protect their identity. The Internet is still a dangerous place in many ways. Future employers also know all about social media.
• Have your child get a credit card. It is possible your child might abuse it, but establishing credit early is important enough to take that risk.

Reference: Wills, Trusts & Estates Prof Blog (July 12, 2017) "Five Essentials for College Freshman."

529 Accounts Can Create Many Benefits

Many parents and grandparents with 529 savings plans aimed at helping with college expenses may not be getting the full benefit from them.

As college tuition continues its steady rise the issue of growing college tuition and student loan debt has become a key issue at home and in politics as well as the 2016 Presidential election approaches.

The rising costs are also having an impact in estate planning. Instead of waiting to give grandchildren an inheritance, many grandparents are investing the money in 529 savings accounts to pay for college tuition.

Recently, the Wall Street Journal offered some tips on how to use these plans most effectively in “How to Be Smarter With a ‘529’ Account.”

The tips include:

• Fund Fully – To get the most that you can out of the plans, you should fund them as much as you can as soon as you can after a child is born. However, the plans can be funded at any time if that is not possible.
• Use Online Withdrawals – Many 529 accounts allow you to make withdrawals online directly to colleges. This avoids any potential IRS questions about whether or not the funds were used for qualified expenses.
• Caution for Grandparents – Grandparents may want to avoid paying out from 529 accounts until a student’s junior year to avoid potential issues with student loan qualifications.
• Not Always the Best Option – As good as 529 savings accounts are they are not always the best option for all families. In some cases it may be wiser to just pay for a student’s tuition, which can possibly be done as a tax-free gift.

The issue of 529 account options and the potentially unnecessary gift taxes can be discussed with an estate planning attorney.

Reference: Wall Street Journal (Nov. 8, 2015) “How to Be Smarter With a ‘529’ Account.”

Estate Plans For College Students

When most people first go off to college the last thing they think they need is an estate plan. However, there are two very important estate planning documents that every college student should have before they leave home.

Recently, Forbespublished an article titled "Two Documents Every 18-Year-Old Should Sign." As is clear from the title, before parents send their children off to college for the first time, they need to make sure their college students have certain legal plans in place in case of an emergency. The article provides some thought-provoking examples of what can happen if these documents are not signed.

So, what are these two key legal documents? The General Durable Power of Attorney and the Health Care Power of Attorney.

Typically, these two documents come as standard issue with any comprehensive estate plan. College students need them because, if an accident should occur, then parents are not automatically given the ability to handle their child's finances or make their medical decisions. Even if the student is still entirely dependent on the parent, once the student turns 18 the parents cannot legally deal with the child's needs in an emergency … without the child having signed the necessary paperwork ahead of time.

A General Durable Power of Attorney gives someone the ability to handle financial matters for a person who is incapacitated. Thus, if your child has an accident, you can still make sure rent and other bills are paid. A Health Care Power of Attorney gives you the ability to make medical decisions for your child if he or she is currently unable to do so. In the event of an emergency, parents can tell doctors how to treat their injured children.

Getting these two documents is easy. Likely, a quick visit to an estate planning attorney will do the trick. In all probability, these documents will not be necessary while your children are away at college. However, if your child is in an accident or gets ill, then you will be very glad these two estate planning documents were executed beforehand.

Reference: Forbes (August 15, 2014) "Two Documents Every 18-Year-Old Should Sign"

Wealth Transfer Tips For Parents (And Grandparents)

People who take good care of their children take good care of their money, and people who take good care of their money take good care of their children.

It has been said that money is at once the root of all potential and also the root of all evil. What is a concerned parent or grandparent to do for their young heirs when so much is at stake, especially when it comes to gifts and inheritances? For some timely insights, a recent Forbes article titled “What Can We Do With Money For Our Kids?” may be a good place to start.

As an alternative to gifting money outright to your children or grandchildren, the article explores Roth IRAs, 529 plans, annuitized gifts, and even UTMA/UGMA accounts. While there are many wealth transfer tools and methods, the key is asking yourself a few important questions upfront.

For starters, what is the purpose of your wealth transfer? Is it education? How involved do you want to be? Do you have specific educational purposes in mind and, perhaps, even limitations? After all, who wants to facilitate a perpetual student?

On the other hand, would you prefer flexibility beyond education alone? What about providing some assistance should your younger loved one ever need a home loan, capital to start a business, or other opportunity to get a leg up? However, could “bailing” a younger loved one out of a bad situation deprive him or her of some valuable life lessons? There is something to be said about the school of hard knocks.

Oftentimes a trust arrangement is an excellent solution for wealth transfers to a younger generation, whether funded now with gifting or later on through inheritance. With a trust you can, with far more particularity and power, articulate both your concrete hopes and goals as well as spell out the specific limitations behind the gift or inheritance. In addition, you may appoint a trustee to stand by and oversee the whole process in your stead.

If you want to ensure that your transfers are a blessing and not a curse, then it will take some legal work to get it right. You will need competent counsel to help you sort through the many legal options available and to chart a course to get there. Ultimately, however, before engaging such counsel, take time to consider your heirs, review your assets and consider your wealth transfer goals for both.

Reference: Forbes (December 23, 2013) “What Can We Do With Money For Our Kids?”

“Super-Funding” College Savings

With college costs already astronomical and rising, saving for them isn't just a year-end thing. But if those prices - … - have got you down, there are some ways to max out your savings before 2013 ends. You can stuff a lot of money into a 529 college savings plan now and then do the same thing at the beginning of 2014 - a strategy that advisers say they are seeing many wealthy clients adopt this year.

The year is almost up. Nevertheless, there is still one gifting strategy to consider. In fact, this strategy alone could give your college-bound grandkids an extra leg up on their advanced education. The timing and confluence of a number of gift tax and contribution rules may allow you to more than “fund” a 529 College Savings Plan. Did you know you can actually super-fund it?

As though just funding a 529 were not good enough, Reuters provided the skinny on super-funding recently in an article titled “Should you super-fund your 529 college savings plan?”

The short answer is “yes,” if you have the means. Under the right circumstances, it may be more than worthwhile to superfund a 529 for your loved ones. By maximizing the rules in 2013, and then doing so again right after the ball drops in Times Square in 2014, some grandparents can earmark a cool $84,000 per grandchild for college savings in the coming weeks.

So, how does this work exactly?

Every year you can transfer $14,000 to anyone free of gift taxes through the annual gift tax exclusion. However, a special twist on this rule for 529 plans permits you to make five years of annual gift exclusion transfers in a single year. Accordingly, you could contribute $14,000 in the last days of 2013, then turn around in January and contribute another $70,000 (5 x $14,000).

Remember, 529 plans vary a bit from state to state. Some states are better than others. Regardless, this super-funding strategy is not just about college planning anymore. It is a powerful wealth transfer strategy at the same time. Think of it this way: you are moving great wealth to your loved ones while you can enjoy watching them make a life from it.

Even if this super-funding strategy is too late for you to implement in 2013, the idea remains. The question then becomes whether you want to give the inheritance now or leave it after you are gone? Perhaps the answer is a little of both.

In the right financial and family circumstances, a 529 plan will make perfect sense, super-funding or otherwise.

Reference: Reuters (December 16, 2013) “Should you super-fund your 529 college savings plan?”

Careless Inheritance Planning May Bolo Financial Aid

So often with estate planning, the legal issue is less complicated than the family dynamics at play.

We all intend for the inheritance we leave behind to be for good, not to cause problems. When planning for the good of loved ones who are minors, you may be focused on protecting and preserving their inheritance from squandering, divorces, lawsuits and bankruptcies. While you are at it, however, be sure you do not jeopardize their eligibility for college financial assistance in the process.

Sometimes too much inheritance all at once is a threat to moral development, it’s true, but sometimes a gift can threaten a college education by complicating financial aid.

As parents of the college-bound understand to a dizzying degree, financial aid is a difficult calculus of have and have not. It is often an entirely necessary salvation. Unfortunately, the types of income a parent or a student of a parent receive will have dramatic influences both on the availability of financial aid and the ease with which it is attained.

In other words, sometimes an inheritance can be a threat to financial aid and the college degree of a young person, especially if there are family issues at play.

Enter the story of “Robin” as relayed in a recent Forbes article titled “An Inheritance That Could Foul Financial Aid.” Truth be told, the story of Robin and the potential difficulties of her children with financial aid is as much a story of family disagreement as it is of grumpy institutional curmudgeonry. Nevertheless, it is worth considering Robin’s story of family disagreement and the details a FAFSA will sniff out, even if they are not available and true.

What is even more important is to understand that different assets, inheritances and gifts will have a serious effect on financial aid, taxation and/or financial viability for higher education. If your goal is to financially assist your loved ones through college, then there are some very specific types of gifts to consider without jeopardizing financial aid in the process.

Reference: Forbes (November 18, 2013) “An Inheritance That Could Foul Financial Aid”