2011 and 2012 are good years not only for heirs but also for charities; high estate- and gift-tax exemption amounts (as much as $5 million per person) have many wealthy families exploring their options for gift-giving, and record-low interest rates are prompting many financial advisors to recommend that their clients set up charitable lead trusts to leave money to both their favorite charity and their heirs with little or no tax hit.

When setting up a charitable lead trust the grantor puts the desired assets into a trust for a specified number of years, naming a charitable foundation as the first beneficiary, and a non-charity (children or grandchildren) as the remainder beneficiary. Each year during the specified time period payments are made from the trust to the grantor’s designated charity, once the trust’s term expires, what is left goes to the grantor’s heirs.

Charitable lead trusts have fallen in and out of favor with financial advisors over the years, and were most recently popular after Ms. Jacqueline Kennedy Onassis used one to great effect. This recent article in the New York Times describes the pros and cons of the charitable lead trust:

“Over the years, charitable lead trusts have been a way to give money to charity with the possible benefit of passing what was left to children without paying estate taxes.” Although the payout (to both beneficiaries) of a charitable lead trust is highly dependent on the starting interest rate, “the likelihood today that one of these trusts would have money left for heirs [is] 95 percent. The trusts are written so that the assets appreciate substantially over time, but even if they do not, the designated charity — often a family foundation — will still get the money.”

One of the downfalls of a charitable lead trust is that rules and regulations can be confusing, “they are hard for someone who is not a tax lawyer to understand.” Furthermore, some families have “used these trusts to give money to their family foundation. This runs the risk of being deemed self-dealing if the person who set up the trust names his foundation as the recipient and then parcels out the money himself.”

The bottom line is that while a charitable lead trust can be an incredible useful tool benefitting both your heirs and your favorite charity (especially if set up during the next year and a half), it is not something to be done lightly, without the advice and help of an experienced attorney or financial planner.

It is common knowledge in our society of aging Baby Boomers that many adult children end up taking months or even years off from their lives and careers to provide care for their elderly parents. Most children do this out of love and a sense of duty, but even in the closest of parent-child relationships there may be an unspoken expectation that appreciation for the caregiving child’s time and effort may be reflected in the parent’s will or trust. After all, professional caregivers demand a salary, is it too much to expect that a relative serving as caregiver should be compensated as well?

Take as an example the case of Anthony Olivo, who this article in Forbes describes as “a tax lawyer who ended up providing nearly full-time care for his mother and father.” Anthony “worked in law firms from 1976 to 1988 and then opened his own practice. Yet by 1994, given all the time he was devoting to his parents and their health problems, he found it hard to maintain his practice. He lived with his parents and gave them round-the-clock care from 1994 through 2003, during which he earned no significant income from his law practice.”

Now Mr. Olivo is asking that the U.S. Tax Court deduct $1.24 million from the estate of his parents for fees it paid to Anthony while he was serving as caregiver. Mr. Olivo is not challenging his parents’ wishes, he is not asking for more of the estate than his parents bequeathed to him; rather, he is asking that a “salary” for caregiving be deducted from the taxable portion of his inheritance.

Unfortunately, in the absence of a legal agreement, the tax court is unable to rule in Mr. Olivo’s favor: “The court was careful to note that Anthony rendered extraordinary care and that his efforts were commendable. However, the court ruled that his mother’s estate did not establish that Anthony was entitled to that pay. There were no written agreements and scant evidence the family agreed to pay him.” Furthermore, “There was no contract and no firm evidence of how much Anthony’s services were worth.”

We sympathize with Mr. Olivo, and hope that our firm can help save our clients from ending up in a similar situation. Simply leaving the caregiving relative “a little extra” in a will or trust is not enough, we cannot stress enough the importance of a legal caregiver agreement if a family member is providing caregiver services—especially if that family member is giving up time from his or her own career to do so.

Trudy Lieberman has had plenty of experience with Medicare—of course up until now most of it was from the outside looking in. As a journalist for more than 40 years specializing in insurance, health care, health care financing and long-term care, one would think that when the time came this year for her to enter the Medicare system herself she’d be an old pro. Unfortunately, as Ms. Lieberman discovered—and shared with the readers of her exceptional five part article series in Time Magazine’s Moneyland—entering the Medicare system as a patient can be confusing for even the most knowledgeable of inside reporters.

While her experience as a reporter may not have made signing up for Medicare any easier for Ms. Lieberman, her willingness to share her entrance into Medicare with readers may make the process easier for the rest of us. Here are just a few of the issues Lieberman has written about thus far:

Sorting through Medicare information and choosing a plan: “Brochures and ‘lead cards’ for Medicare Advantage plans and Medigap policies began flooding my mailbox in January. This stuff can be a real burden, but some of it’s worthwhile – some even important – so you can’t just throw it all away…Hopefully, my sorting system (partly informed by decades of reporting on Medicare, partly by common sense) will make the task easier for you.

Choosing a Medigap Plan to fill in the gaps of Medicare coverage: “It quickly became clear that the push to give consumers more choices and more information has actually made the job of picking a Medigap plan much harder. I ended up having to check out multiple websites, brochures, handouts and make several toll-free calls for assistance.”

Finding a plan to cover the cost of prescription drugs: “I decided to ask my pharmacy about the retail cost of the drugs I currently take. I’ve always had great drug coverage, so it was shocking to learn that my prescriptions would cost $3,131 a year if I had to pay out-of-pocket. (Of course, from interviewing seniors over the years, I know some folks actually pay four or five times that amount.)”

We know how confusing and time consuming dealing with Medicare can be, so it’s helpful to know that many elder law attorneys specialize in helping seniors with this very process—we can help you too.