Dad’s Will and Trust at Odds?

A revocable trust, commonly called a living trust, is created during the lifetime of the grantor. This type of trust can be changed at any time, while the grantor is still alive. Because revocable trusts become operative before the will takes effect at death, the trust takes priority over the will, if there is any discrepancy between the two when it comes to assets titled in the name of the trust or that designate the trust as the beneficiary (e.g., life insurance).

A recent Investopedia article asks “What Happens When a Will and a Revocable Trust Conflict?” The article explains that a trust is a separate entity from an individual. When the grantor or creator of a revocable trust dies, the assets in the trust are not part of the decedent grantor’s probate process.

Probate is designed to distribute the deceased individual’s property pursuant to the instructions in his will. However, probate doesn’t apply to property held in a living trust, because those assets are not legally owned by the deceased person. They’re owned by the trust. As a result, the will has no authority over a trust’s assets.

Let’s say that Bernie (who is the grandfather) has two children named Pat and Junior.  Bernie places the old family home into a living trust that says Pat and Junior are to inherit that house. Twelve years later, Bernie remarries. Right before his death, he executes a new will that says is the house is to go to his new wife, Andrea.

In this case, for the home to go to his new wife, Bernie would’ve had to amend the trust to make the house transfer to his wife effective. Thus, the home goes to the two children, Pat and Junior.

Sound confusing? It can be. Work with an experienced estate planning attorney, so that your intentions can be carried out without any issues. As mentioned, a revocable trust is a separate entity and doesn’t follow the terms of a person’s will when they die.

Make sure everything is legally binding and the way you intend it with the advice of a trust and estate planning attorney.

It’s important to note that while a revocable trust supersedes a will, the trust only controls those assets that have been placed into it. Therefore, if a revocable trust is formed, but assets aren’t moved into it, the trust provisions have no effect on those assets at the time of the grantor’s death.

Reference: Investopedia (Aug. 5, 2019) “What Happens When a Will and a Revocable Trust Conflict?”

 

Seriously, Why Do I Need a Will?

The Times Herald-Record’s article “55 Plus: Four Reasons to Create a Will” provides some tips and important reasons for why you should make a will.

When you create a will with the help of an estate planning attorney, you are able to decide who will execute your estate.

Creating a will and appointing a trusted executor will help make certain that your estate is managed in accordance with your wishes and instructions. If you have a will, you help the people you leave behind. A legally valid will can avoid added costs of legal dealings. If you pass away without a will, the state will decide how your estate is divided.

Creating a will allows you to determine who inherits your estate. Your estate will include your home, motor vehicles, financial accounts and any other personal property you want to pass on to your loved ones. The great thing about a will is that it clearly states the persons or organizations that will receive all or part of your estate after your death.

Consulting with an experienced estate planning attorney to help understand your state laws and probate procedures is a wise move.

In your will, you can also decide and designate the person(s) who will care for your minor children. Creating a will gives you the opportunity to appoint a guardian for your minor children, in the event of your death. If you don’t have a will stating a guardianship, a court can make the issue its own and appoint a guardian in your absence. It could be someone you don’t like or someone you hardly know.

By creating a will, you provide several benefits for yourself and your family. A will offers peace of mind that your loved ones will be cared for as you intend, after you’re no longer around.

Finally, a reminder for those with wills and estate plans: review these documents every year or three to be certain that everything is up to date. You want to be sure that your estate plan includes any new spouse, birth or adoption of a child or grandchild, death of a relative and change in your financial situation.

Reference: Times Herald-Record (Jan. 6, 2020) “55 Plus: Four Reasons to Create a Will”

 

A 2020 Checklist for an Estate Plan

The beginning of a new year is a perfect time for those who haven’t started the process of getting an estate plan started. For those who already have a plan in place, now is a great time to review these documents to make changes that will reflect the changes in one’s life or family dynamics, as well as changes to state and federal law.

Houston Business Journal’s recent article entitled “An estate planning checklist should be a top New Year’s resolution” says that by partnering with a trusted estate planning attorney, you can check off these four boxes on your list to be certain your current estate plan is optimized for the future.

  1. Compute your financial situation. No matter what your net worth is, nearly everyone has an estate that’s worth protecting. An estate plan formalizes an individual’s wishes and decreases the chances of family fighting and stress.
  2. Get your affairs in order. A will is the heart of the estate plan, and the document that designates beneficiaries beyond the property and accounts that already name them, like life insurance. A will details who gets what and can help simplify the probate process, when the will is administered after your death. Medical questions, provisions for incapacity and end-of-life decisions can also be memorialized in a living will and a medical power of attorney. A financial power of attorney also gives a trusted person the legal authority to act on your behalf, if you become incapacitated.
  3. Know the 2020 estate and gift tax exemptions. The exemption for 2020 is $11.58 million, an increase from $11.4 million in 2019. The exemption eliminates federal estate taxes on amounts under that limit gifted to family members during a person’s lifetime or left to them upon a person’s passing.
  4. Understand when the exemption may decrease. The exemption amount will go up each year until 2025. There was a bit of uncertainty about what would happen to someone who uses the $11.58 million exemption in 2020 and then dies in 2026—when the exemption reverts to the $5 million range. However, the IRS has issued final regulations that will protect individuals who take advantage of the exemption limits through 2025. Gifts will be sheltered by the increased exemption limits, when the gifts are actually made.

It’s a great idea to have a resolution every January to check in with your estate planning attorney to be certain that your plan is set for the year ahead.

Reference: Houston Business Journal (Jan. 1, 2020) “An estate planning checklist should be a top New Year’s resolution”

 

Am I Too Young to Remain in House Inherited from Mom?

Can the house be listed to the deceased on a deed forever? What if the deceased was 70 years old and living in a 55-and-over community with his 40-year-old son?

Her will left everything, including the house, to her adult son. The son is now wondering if and for how long he can stay in his home in the senior community. Can he stay put, or will he have to sell the house and move?

lehighvalleyhigh.com recently published an article entitled “Can son remain in 55-and-over community after parent dies?” The article explains that the deceased individual’s name can stay on the deed indefinitely. However, when the mother dies, the property passes “by operation of law,” regardless of what the deed says.

For example, if the deed was titled as husband and wife, the surviving spouse would become the sole owner by operation of law at the death of the first spouse, no matter if there was a new deed filed.

Another important issue with this scenario involves the details in the by-laws of the 55-and over community.

It would be rare that the 40-year-old son could stay in the home in the 55-and-over senior community.

It is doubtful that the decedent owned the right to convey his/her property interest to a non-senior.

In addition, the mother’s will also should be reviewed thoroughly to determine whether the will leaves the residuary estate to the son, or if it specifically leaves the home to the son.

If the son inherits the residuary estate, then the home will be liquidated, and the proceeds are inherited by the son. If the mom’s will specifically leaves the home to the son, the bequest will most likely fail. In that case, the home would be liquidated, and the proceeds would pass as part of the residuary estate.

Finally, there’s also a good chance that the son may not have been living there with the approval of the by-laws, but there could be an exception to the by-laws for someone who is disabled. Speak with your estate planning attorney if you have questions or concerns.

Reference: lehighvalleyhigh.com (Jan. 13, 2020) “Can son remain in 55-and-over community after parent dies?”

How Will Clinic Closings Worsen Minnesota’s Shortage of Geriatric Specialists?

Hennepin Healthcare has informed roughly 700 patients in Minneapolis receiving care at its Augustana and Parkside senior care clinics that it will be closing at the end of February.

The Minneapolis Star Tribune’s recent article entitled “Clinic closings will worsen Minnesota’s shortage of geriatric specialists” reports that patients who want to stay with Hennepin Healthcare, which operates HCMC (the big public hospital in downtown Minneapolis) can transition to one of its eight neighborhood clinics or to its large, new clinic and specialty care center in downtown.

The U.S. has fewer than 7,000 geriatricians (of whom about half are full time), and we’ll need 33,200 of these specialists by 2025 to keep pace with rising demand, according to a 2017 federal study. More than half of Minnesota’s counties don’t have any certified geriatricians, according to the state association of geriatricians.

Geriatric clinics play an important part in treating the many complex ailments and disabilities associated with aging. Elderly patients often have multiple chronic conditions, such as memory loss, macular degeneration and heart disease. This means that physicians working with the elderly must understand and monitor how various medications interact. Research shows that geriatricians generate savings over time, by reducing costly hospitalizations and stays in skilled nursing facilities.

Geriatricians “are trained to be attuned to elders’ wishes and preferences, and to see care from more of a holistic perspective,” said Eilon Caspi, a gerontologist and adjunct faculty member at the University of Minnesota’s School of Nursing. “These closings will almost certainly create instability for hundreds of people with complex health conditions.”

Dr. John Cumming, interim CEO at Hennepin Healthcare, commented that the clinic closings are part of a broader restructuring designed to achieve cost savings. However, he noted that they don’t reflect a pullback from overall senior medical care. The geriatricians and interdisciplinary teams that worked in the clinics will have the opportunity to work in other locations in the county-run system and their services will continue in more modern facilities.

The system will also continue to provide geriatric care to patients living in about 20 nursing homes in the Twin Cities through its extended care program. The hospital system also will maintain home nursing services for seniors through its provider, MVNA, and hospice care for people diagnosed with terminal illnesses.

“We are absolutely 100% committed to continuing to provide services to the seniors in our community,” Cumming said. “I completely understand that this is a vulnerable and a fragile patient population and we do need to do this very, very carefully.”

Minnesota has 146 certified geriatricians, but they’re spread across a variety of settings, like nursing homes. This means there are many parts of the state, where geriatric services aren’t available to seniors who live at home.

Reference: Star Tribune (Jan. 12, 2020) “Clinic closings will worsen Minnesota’s shortage of geriatric specialists”

Planning Retirement with a Cognitive Decline

The Director of Volunteer Programs at the Alzheimer’s Association, Stephanie Rohlfs-Young, explains that families shouldn’t let a diagnosis disrupt proper financial, estate and retirement planning. She recommends several proactive and tactical steps that individuals and families can undertake to address issues related to cognitive decline.

Barron’s recent article entitled “Cognitive Decline Shouldn’t Derail Retirement Planning. Here Are Some Tips to Prepare Your Finances” provides some tips on navigating the financial aspects of cognitive decline. Let’s look at some of them:

Inventory. For budgeting and estate planning purposes, families should conduct a thorough inventory of the individual’s property and debts to create a list of those who have access to each account. Ask about and include online checking, savings, credit-card and investment accounts. These can be neglected, if they aren’t in paper form. Try to work with the individual in cognitive decline to ascertain this information, when they can still be helpful. You don’t want to lose all those assets. This task can be challenging, when children aren’t aware of their parents’ financial dealings. This can include savings, insurance, retirement benefits, government assistance, veterans’ benefits and more. Families should also pick a lead person to be in charge of financial or legal matters.

Calculating future costs. A diagnosis of this nature is the time to figure out and plan for care costs that may include adult day care, in-home care and full-time medical care. These can costs vary widely, and many times families underestimate the amount they’ll spend on care. Families often fail to factor in out-of-pocket expenses that can add up, like prescriptions not covered by insurance. When budgeting, families should see what insurance may be available and if they might add or amend coverage.

Leverage the skills of an elder-law attorney. Partner with an experienced elder law attorney to help get the family’s financial and legal affairs together. Issues can include the titling of assets, trusts, powers of attorney, advance health care directive and more. For some, there’s also Medicaid planning.

Automate finances. Families should devise a plan for routine financial tasks, like bill paying. These are things that will eventually become too difficult for the loved one experiencing cognitive decline. Consider signing up for online banking. That way, an adult child can have easy access to monitor the parent’s account. Monthly bills, including insurance premiums, can be set up for automatic payment to help minimize the possibility of errors.

Organize your important documents. It’s critical after a diagnosis of cognitive decline to name a health-care representative to allow healthcare decisions to be made by someone of the person’s choosing. You should also have a general durable power of attorney for finances in place. This allows the appointed agent to make financial and legal decisions in the individuals’ stead.

Reference: Barron’s (Jan. 11, 2020) “Cognitive Decline Shouldn’t Derail Retirement Planning. Here Are Some Tips to Prepare Your Finances.”

Elder Financial Abuse Is Increasing

A September 2018 Forbes report said that elder financial abuse would only get worse as we age. With 10,000 people turning age 65 every day for the decade, the demographics include a growing pool of potentially fragile retirees and the elderly, many of whom are susceptible to financial exploitation.

alphabetastock.coms recent article entitled “Elder Financial Abuse Is Rising” says that, although the criminals are out there, a lot of elder financial abuse actually begins in the retirement system, because individuals must accumulate and handle a large amount of money designed to last an entire lifetime. With $14.5 trillion in self-directed retirement accounts in the U.S., it’s a big, enticing target for financial predators.

Elder financial abuse includes all of the frauds and scams targeting seniors and because it’s a hidden crime, many victims opt not to report it. Those that do report the crimes, frequently don’t prosecute.

However, when it comes to trying to promote real changes that will provide some material protections, the investment, insurance, and financial services industries directly or indirectly have been showing some reticence about the potential compliance expense. Some of these companies are lobbying to maintain a status quo—one that’s on a course to see a steady rise in elder financial exploitation.

Many retirement investors think their professional financial advisors are fiduciaries who are legally bound to act in their best interests. However, that’s not always so. Many professional financial advisors need only adhere to a lower legal standard of behavior. They can’t outright tell you a lie—but they can make recommendations that don’t put the customer’s best interests as a top priority.

A GAO study found elder financial abuse to be a growing epidemic. Rather than being able to live out their golden years in safety and financial security, the lack of financial safeguards are leaving an entire (and growing) group of older Americans at risk. These seniors are often left on their own and confused as to how the advisors they entrusted with their financial security are permitted to make moves that are motivated by high commissions and self-interest. These so-called professionals aren’t required by the law to place interests of their clients ahead of their own.

Theft and illegal behavior is one small component of the elder financial exploitation. A bigger part comes from abusive financial practices, such as higher fees and complex and unsuitable advice and recommendations from professional financial advisors who aren’t fiduciaries.

Be sure that you are working with a financial professional who is a fiduciary. Ask your elder law attorney for recommendations.

Reference: alphabetastock.com (January 11, 2020) “Elder Financial Abuse Is Rising”