Planning for Nursing Home Expenses

The question raised in the article “Fact or Fiction: I Can Protect My Assets from a Nursing Home with a Revocable Trust” from New Hampshire Business Review is frequency asked and the reason for it is understandable. Any form of long-term home care is costly and can quickly decimate a lifetime of savings. There are ways to protect assets but a revocable trust is not one of them.

There are some reasons why a person might find a revocable trust attractive. If the grantor (the person who creates the trust and is also the trustee (i.e., the person in charge of the trust)), there is no loss of control. It is as if you still own the assets that are in the trust. However, when you die, the assets in the trust don’t go through the probate process. Instead, they go directly to the beneficiaries named in the trust documents. A revocable trust also lets you make specific provisions for beneficiaries and beneficiaries with special needs.

There is a trust that can be used to protect assets from the cost of long-term care. It is the irrevocable trust which must be properly prepared by an estate planning attorney and done in a timely fashion: five years before the person needs to go to a nursing home.

The difference is in the name: the irrevocable trust is irrevocable. Once it is created, you (the grantor) may not change it. Once an asset is placed in the trust you don’t own it. The trust is the owner. You can’t change your mind. The grantor may also not serve as the trustee of the trust.  You have to be prepared to give up complete control of the assets that go into the trust.

Some people think simply by handing over their assets in the trust to their children that they’ve solved everything. However, there are problems. If your children are sued or run into debt problems that lifetime of saving which is now in their control is also subject to creditors or claims. If you need to enter a nursing home within five years of your handing over the assets you also won’t be eligible for Medicaid.

The best course of action is to meet with an estate planning attorney and discuss your overall estate plan. You should have a frank conversation about your wishes, what kind of a legacy you want to leave behind and your bigger picture for the world after you’ve passed. The attorney will help work out a plan that will protect you, your spouse, your assets and your family.

Remember that an estate plan is not a one-and-done document. Every three or four years or as “life happens” and changes occur in your life, you should touch base with your attorney. A new family member by marriage, birth or adoption, may call for some changes to your estate plan. It might also be affected by the sadder events of life; death, divorce, or a significant health change. All require a phone call and a discussion to ensure that your estate plan still achieves your goals and protects those you love.

Reference: New Hampshire Business Review (July 30, 2020) “Fact or Fiction: I Can Protect My Assets from a Nursing Home with a Revocable Trust”

 

Do I Need More Than a Will?

If you die without a will (i.e., intestate), a court will determine who inherits your assets and who would care for any surviving children as a guardian.  CNBC’s recent article entitled “A will doesn’t cover all your bases when it comes to end-of-life decisions. Here’s what else you need” explains that some assets pass outside of the will including retirement accounts and life insurance.

Start your estate planning with a will which is just one piece of an “estate plan.” Creating a plan for your assets helps make certain that your wishes will be carried out upon your death and that family grumbling doesn’t escalate into destroyed relationships. Here are some additional things about estate planning you should know.

What passes via your will. A will is a document that allows you to say who gets what when you die. However, there are some assets that pass outside of the will, such as retirement accounts like 401(k) plans and individual retirement accounts (IRAs), and life insurance policies. As a result, the person named as a beneficiary on those accounts will get the money, no matter what your will says. Regular bank accounts also can have beneficiaries listed on a payable-on-death form, also known as a POD. If you own a home, check how it’s titled to ensure it ends up passing as you wish upon your death.

Executor. As part of the will-making process, you’ll need to name an executor of your will (sometimes called a personal representative). This entails making sure that assets are liquidated, the assets go to the proper beneficiaries, paying any debts not discharged and selling your home.

To prepare a will, you can hire an estate planning attorney in your local area, who knows state law. If use an online option, note that not all of the web-based alternatives will necessarily reflect the specifics of your state’s law. Online forms or software may not be compliant with your local law.

Living Will. An estate plan will typically include a few other legal documents, such as an advance health-care directive, also known as a living will. This document states your wishes, if you become incapacitated due to illness or injury, like whether you want to be kept on life support if there’s no hope of recovery.

Powers of Attorney. If you become incapacitated, your designated attorney-at-fact or agent will handle your medical and financial affairs. Similar to selecting an executor, be certain that he or she is trustworthy and smart, with the ability, skill set, time and desire to make such decisions and do these tasks.

Make a list of critical documents. Create an organized list of information your executor will need to settle your estate and include passwords, so your online accounts can be accessed.

Look at a trust. If you want your children or loved ones to receive money but don’t want to give a young adult or someone with poor money management free access to a lot of cash, you can create a trust for your beneficiaries. A trust holds assets on behalf of your beneficiaries, so they can only receive money according to how (or when) you’ve stated in the trust documents.

Again, it is important that you contact an experienced estate planning attorney to help you.

Reference: CNBC (July 27, 2020) “A will doesn’t cover all your bases when it comes to end-of-life decisions. Here’s what else you need”

 

What Is Involved with Serving as an Executor?

Serving as the executor of a relative’s estate may seem like an honor, but it can also be a lot of work, says The (Fostoria, OH) Review Times’ recent article entitled “An executor’s guide to settling a loved one’s estate.”

As an executor of a will, you’re tasked with settling her affairs after she dies. This may sound rather easy but you should be aware that the job can be time consuming and difficult, depending on the complexity of the decedent’s financial and family situation. Here are some of the required duties:

  • Filing court papers to initiate the probate process
  • Taking inventory of the decedent’s estate
  • Using the decedent’s estate funds to pay bills, taxes, and funeral costs
  • Taking care of canceling her credit cards and informing banks and government offices like Social Security and the post office of her death
  • Readying and filing her final income tax returns; and
  • Distributing assets to the beneficiaries named in the decedent’s will.

Every state has specific laws and deadlines for an executor’s responsibilities. To help you, work with an experienced estate planning attorney and take note of these reminders:

Get organized. Make certain that the decedent has an updated will and locate all her important documents and financial information. Quickly having access to her deeds, brokerage statements and insurance policies after she dies, will save you a lot of time and effort. With a complex estate, you may want to hire an experienced estate planning attorney to help you through the process. The estate will pay that expense.

Avoid conflicts. Investigate to see if there are any conflicts between the beneficiaries of the decedent’s estate. If there are some potential issues, you can make your job as executor much easier if everyone knows in advance who’s getting what and the decedent’s rationale for making those decisions. Ask your aunt to tell her beneficiaries what they can expect even with her personal items because last wills often leave it up to the executor to distribute heirlooms. If there’s no distribution plan for personal property, she should write one.

Executor fees. You’re entitled to an executor’s fees paid by the estate. In most states, executors are allowed to take a percentage of the estate’s value, which can be from 1-5%, depending on the size of the estate. However, if you’re a beneficiary, it may make sense for you to forgo the fee because fees are taxable and it could cause rancor among the other beneficiaries.

Reference: The (Fostoria, OH) Review Times (Aug. 19, 2020) “An executor’s guide to settling a loved one’s estate”

 

Trusts: The Swiss Army Knife of Estate Planning

Trusts serve many different purposes in estate planning. They all have the intent to protect the assets placed within the trust. The type of trust determines what the protection is, and from whom it is protected, says the article “Trusts are powerful tools which can come in many forms,” from The News Enterprise. To understand how trusts protect, start with the roles involved in a trust.

The person who creates the trust is called a “grantor” or “settlor.” The individuals or organizations receiving the benefit of the property or assets in the trust are the “beneficiaries.” There are two basic types of beneficiaries: present interest beneficiaries and “future interest” beneficiaries. The beneficiary, by the way, can be the same person as the grantor, for their lifetime, or it can be other people or entities.

The person who is responsible for the property within the trust is the “trustee.” This person is responsible for caring for the assets in the trust and following the instructions of the trust. The trustee can be the same person as the grantor, as long as a successor is in place when the grantor/initial trustee dies or becomes incapacitated. However, a grantor cannot gain asset protection through a trust, where the grantor controls the trust and is the principal recipient of the trust.

One way to establish asset protection during the lifetime of the grantor is with an irrevocable trust. Someone other than the grantor must be the trustee, and the grantor should not have any control over the trust. The less power a grantor retains, the greater the asset protection.  One additional example is if a grantor seeks lifetime asset protection but also wishes to retain the right to income from the trust property and provide a protected home for an adult child upon the grantor’s death. Very specific provisions within the trust document can be drafted to accomplish this particular task.

There are many other options that can be created to accomplish the specific goals of the grantor.

Some trusts are used to protect assets from taxes, while others ensure that an individual with special needs will be able to continue to receive needs-tested government benefits and still have access to funds for costs not covered by government benefits.

An estate planning attorney will have a thorough understanding of the many different types of trusts and which one would best suit each individual situation and goal.

Reference: The News Enterprise (July 25, 2020) “Trusts are powerful tools which can come in many forms”

 

You Need More than a Will for Estate Planning

As the coronavirus continues to sweep across through the U.S. and the death tolls continue to rise, many people are starting to put their estate plans in place, as reported by CNBC.com in the article “A will doesn’t cover all your bases when it comes to end-of-life decisions. Here’s what else you need.”

It’s true–your will, or last will and testament, is just one of several legal documents you need to help loved ones know what your wishes are. If there is no will, all kinds of problems are created. If you have minor children and no will, the court will decide who will care for them. With no will, the laws of your state determine who will receive your assets—even if it’s a relative you’ve never met—or one you’ve loathed for decades.

For those who have partners but are not married, no will means your assets won’t go to them. They also won’t have legal standing to fight back. The courts typically pass assets on to your closest blood relatives. That might not be what you want.

However, a will is only one part of your entire estate plan. You don’t need to live on “an estate” to have an estate. Actually, your estate refers to everything you own—financial accounts, possessions, real estate and digital assets. Putting a plan in place for those assets helps lessen the chances your family will fracture when you have died. Your assets will also go where you want them. It’s a kindness to your loved ones.

A will lets you convey your wishes about who gets what when you die, except for assets that pass outside of a will. These are accounts where you have named a beneficiary, like insurance policies, retirement accounts and jointly owned property. The beneficiary designations and joint ownership (with rights of survivorship) always supersede your will, which is where many people make big mistakes. If you don’t update your beneficiary designations as you move through life, the wrong person might inherit significant assets. There also won’t be anything your intended heirs can do about it. Another big part of your will involves choosing a person to be in charge of carrying out your intentions—the executor. This is a job that requires someone who is responsible, reliable and comfortable with handling financial and legal matters.

You’ll also need a health care directive, sometimes called a living will, to outline your wishes, if you become incapacitated because of illness or injury. This gives loved ones the instructions they need if, for example, you are on life support and a decision has to be made about whether to continue or to let you pass. Don’t forget a Power of Attorney. This document allows a person of your choice to carry out all of your financial and legal affairs on your behalf. You want to pick someone who is smart and trustworthy. They might need to do everything from selling your home to managing your investments.

Estate planning also includes preparing all of the important documents in your life, so that your executor can find them easily, including your will itself, other legal documents, information about bank accounts, investment accounts and even your Social Security number. The more organized you can be, the more easily your loved ones will be able to administer your estate.

If you want your children to receive money from you but are concerned about their ability to manage an inheritance, you may want to add a trust to your estate plan. Your assets go into the trust, instead of directly into their hands. You also name a trustee who will oversee the trust. The trustee will decide when your children receive the money, according to your instructions. The distribution could be tied to achieving certain goals—like graduating from college or getting their first apartment.

One last point: many people today are downloading estate planning forms from the internet. The problem is, you don’t know if they are up-to-date, or even admissible in your state. Every state has its own estate laws, and no one document works in all states. Working with an estate planning attorney who knows the laws in your state eliminates the risk that a judge will toss out your will, because it does not comply with state law.

Reference: CNBC.com (July 27, 2020) “A will doesn’t cover all your bases when it comes to end-of-life decisions. Here’s what else you need.”

 

What’s Best for You, a Will or a Trust?

That may be an idealistic portrayal, but there is some truth to it. It is no longer unusual for families to engage in estate litigation, according to The Northside Sun’s article “Do You Have a Will or a Trust? Why?” Many families who have estate plans incorporate trusts to ensure that their directions are followed.

One of the many differences between a will and a revocable living trust, is that a will operates only after your death. By contrast, a trust performs many tasks while you are still living. A last will and testament is how assets are distributed after death. A living trust takes effect as soon as it is created and funded, allowing your assets to be protected during life, disability and after death.

A will must go through a court proceeding known as probate before it becomes a legally effective means of carrying out your wishes. A living trust functions without the need for court involvement, both in cases of incapacity and at death.

While you definitely need a will as part of your estate plan, a comprehensive estate plan will also have provisions to prepare for incapacity. Many people have a durable power of attorney. However, this is just one part of the necessary documents for incapacity. In fact, if the power of attorney is too old the bank may refuse to honor it. This is an all-too frequent occurrence and happens more often than not.

In the absence of a recognized power of attorney, the family may need to apply to the court for a Conservatorship, which can be costly. A living trust on the other hand can be created to facilitate access to assets without needing court intervention.

Some families try to create an informal estate plan by putting their children’s names on assets so they can help their parents in the event of incapacity. These self-created plans don’t work. The assets are now exposed to any creditors of the child and are at great risk if there is a divorce or bankruptcy.

Similarly, making an adult child a co-owner of real property will not give the child the ability to sell the property and once again the asset is subject to the claims of creditors.

This is also the case when using lifetime gifting to avoid probate or minimize the size of a taxable estate. A trust can serve the same purposes without the risks that an outright gift presents. This is especially problematic in the event that a child goes through a divorce. The assets could actually end up being owned by the former spouse’s new spouse. Using a trust can maintain control of the assets.

Another family dynamic where trusts are valuable is when there are children from multiple marriages. When the married couple creates a will that leaves their assets to each other, one set of children is likely to be accidentally disinherited. Let’s say a father has two daughters and a mother has two sons. They marry and create wills to leave each other all of their assets. If the father dies, the mother inherits his entire estate. When the mother dies, it is more likely that she will leave her estate to her two children. A trust can be created that will facilitate the distribution of the remaining assets that had belonged to the father to his daughters.

Speak with an experienced estate planning attorney to learn how you can use trusts as part of your estate plan in planning for life, incapacity and death. Trusts don’t have to be complicated to serve your needs. Make sure you understand the trusts, how they work and that they will achieve your goals.

Reference: The Northside Sun (August 14, 2019) “Do You Have a Will or a Trust? Why?”

 

What Does Pandemic Estate Planning Look Like?

In the pandemic, it’s a good idea to know your affairs are in order. If you already have an estate plan, it may be time to review it with an experienced estate planning attorney, especially if your family’s had a marriage, divorce, remarriage, new children or grandchildren, or other changes in personal or financial circumstances. The Pointe Vedra Recorder’s article entitled “Estate planning during a pandemic: steps to take” explains some of the most commonly used documents in an estate plan:

Will. This basic estate planning document is what you use to state how you want your assets to be distributed after your death. You name an executor to coordinate the distribution and name a guardian to take care of minor children.

Financial power of attorney: This legal document allows you to name an agent with the authority to conduct your financial affairs, if you’re unable. You let them pay your bills, write checks, make deposits and sell or purchase assets.

Living trust: This lets you leave assets to your heirs, without going the probate process. A living trust also gives you considerable flexibility in dispersing your estate. You can instruct your trustee to pass your assets to your beneficiaries immediately upon your death or set up more elaborate directions to distribute the assets over time and in amounts you specify.

Health care proxy: This is also called a health care power of attorney. It is a legal document that designates an individual to act for you, if you become incapacitated. Similar to the financial power of attorney, your agent has the power to speak with your doctors, manage your medical care and make medical decisions for you, if you can’t.

Living will: This is also known as an advance health care directive. It provides information about the types of end-of-life treatment you do or don’t want, if you become terminally ill or permanently unconscious.

These are the basics. However, there may be other things to look at, based on your specific circumstances. Consult with an experienced estate planning attorney about tax issues, titling property correctly and a host of other things that may need to be addressed to take care of your family. Pandemic estate planning may sound morbid in these tough times, but it’s a good time to get this accomplished.

Reference: Pointe Vedra (Beach, FL) Recorder (July 16, 2020) “Estate planning during a pandemic: steps to take”

How to Make Beneficiary Designations Better

Beneficiary designations supersede all other estate planning documents, so getting them right makes an important difference in achieving your estate plan goals. Mistakes with beneficiary designations can undo even the best plan, says a recent article “5 Retirement Plan Beneficiary Mistakes to Avoid” from The Street. Periodically reviewing beneficiary forms, including confirming the names in writing with plan providers for workplace plans and IRA custodians, is important.

Post-death changes, if they can be made (which is rare), are expensive and generally involve litigation or private letter rulings from the IRS. Avoiding these five commonly made mistakes is a better way to go.

1—Neglecting to name a beneficiary. If no beneficiary is named for a retirement plan, the estate typically becomes the beneficiary. In the case of IRAs, language in the custodial agreement will determine who gets the assets. The distribution of the retirement plan is accelerated, which means that the assets may need to be completely withdrawn in as little as five years, if death occurs before the decedent’s required beginning date for taking required minimum distributions (RMDs).

With no beneficiary named, retirement plans become probate accounts and transferring assets to heirs becomes subject to delays and probate fees. Assets might also be distributed to people you didn’t want to be recipients.

2—Naming the estate as the beneficiary. The same issues occur here, as when no beneficiary is named. The asset’s distributions will be accelerated, and the plan will become a probate account. As a general rule, estates should never be named as a beneficiary.

3—Not naming a spouse as a primary beneficiary. The ability to stretch out the distribution of retirement plans ended when the SECURE Act was passed. It still allows for lifetime distributions, but this only applies to certain people, categorized as “Eligible Designated Beneficiaries” or “EDBs.” This includes surviving spouses, minor children, disabled or special needs individuals, chronically ill people and individuals who are not more than ten years younger than the retirement plan’s owner. If your heirs do not fall into this category, they are subject to a ten-year rule. They have only ten years to withdraw all assets from the account(s).

If your goal is to maximize the distribution period and you are married, the best beneficiary is your spouse. This is also required by law for company plans subject to ERISA, a federal law that governs employee benefits. If you want to select another beneficiary for a workplace plan, your spouse will need to sign a written spousal consent agreement. IRAs are not subject to ERISA and there is no requirement to name your spouse as a beneficiary.

4—Not naming contingent beneficiaries. Without contingency, or “backup beneficiaries,” you risk having assets being payable to your estate, if the primary beneficiaries predecease you. Those assets will become part of your probate estate and your wishes about who receives the asset may not be fulfilled.

5—Failure to revise beneficiaries when life changes occur. Beneficiary designations should be checked whenever there is a review of the estate plan and as life changes take place. This is especially true in the case of a divorce or separation.

Any account that permits a beneficiary to be named should have paperwork completed, reviewed periodically and revised. This includes life insurance and annuity beneficiary forms, trust documents and pre-or post-nuptial agreements. Your qualified estate planning attorney can assist you in completing beneficiary forms.

Reference: The Street (Aug. 11, 2020) “5 Retirement Plan Beneficiary Mistakes to Avoid”

Should I Let The State Write My Will?

It’s a common question asked of estate planning attorneys: “Do I Really Need A Will?” This article in The Sun explains that the answer is “yes.” If you die without a will or “intestate,” the probate laws of the state will determine who will receive the assets in your estate. Of course, that may not be how you wanted things to go. That’s why you need a will.

When you die, your assets (i.e., your “estate”) are distributed to family and loved ones in your estate plan, if there is no surviving joint owner or designated beneficiary (e.g., life insurance, annuities, and retirement plans). No matter the complexity, a will is a key component of the plan.

A will allows you make decisions about the distribution of your assets, such as your real estate, personal property, investments and any businesses. You can make donations to your favorite charities or a religious organization. Your will is also important, if you have minor children: it’s where you nominate a guardian to care for them if you die.

Of course, you can write your own will or pay for a program on the Internet, but it’s better to have one prepared by an experienced estate planning attorney. Prior to sitting down with an attorney, make a listing of all your assets (your home, real estate, bank accounts, retirement plans, personal property and life insurance policies). If you have prized possessions or family heirlooms, be sure to also detail these.

Make a list of all debts, such as your mortgage, auto loans and credit cards. You should also collect contact information for all immediate living family members, detailing their addresses and birth dates.

When meeting with an attorney, ask about other components of an estate plan, such as a power of attorney and medical directive.

The originals of these documents should be kept in a safe place, where they can be easily accessed by your estate administrator or executor.

You should also review your estate plan every few years and at significant points in your life, like marriage, divorce, the adoption or birth of a child, death of a beneficiary and divorce.

Do your homework, then visit an experienced estate planning attorney to receive important planning insights from their experience working with estate plans and families.

Reference: The (Jonesboro, AR) Sun (July 15, 2020) “Do I Really Need A Will?”

Daughters of Don Lewis from ‘Tiger King’ File Lawsuit

“It’s a lawsuit for equity,” said Jacksonville based lawyer John M. Phillips, who specializes in personal injury and wrongful death cases and is representing Lewis’ family in the action.

Wealth Advisor’s recent article entitled “Family of Tiger King’s Don Lewis files lawsuit against Carole Baskin and others” explains that that the attorney filed a “pure bill of discovery.” That’s a pretty obscure legal pleading. It demands that the defendants produce information they might have about the Lewis case for possible use in later lawsuits. The plaintiffs are Lewis’ adult daughters, Donna L. Pettis, Lynda L. Sanchez, Gale Rathbone and Lewis’ longtime assistant, Anne McQueen.

At a news conference, Phillips explained that his legal move could mean depositions and subpoenas to determine who exactly the family will sue in the future. The complaint demands that the defendants turn over electronic device data, diaries and investigative material related to Lewis. Phillips said Carole Baskin, one of the stars of the Netflix series is “invited to the table” to willingly come forward with information on Lewis.

“Generally you announce a $150 million lawsuit and how we’re going to get justice,” Phillips said. “And we are going to do all of that, in time. But our office wants to invite reason, to invite civil conversation where it can be had.”

Carole Baskin was married to Lewis, when he disappeared. Kenny Farr worked as a handyman for Lewis for many years and continued working for Baskin after Lewis went missing. The third defendant in the suit, Susan A. Bradshaw, is listed as a witness on Lewis’ will and durable power of attorney. Bradshaw told the Tampa Bay Times in 2005 that Baskin asked her to testify that she was there for the will signing—but she wasn’t.

Phillips said that his law firm is also conducting an independent investigation into Lewis’ disappearance.

“We may or may not have hopped a fence yesterday just to try to investigate and find out if, you know, if this was a place where Don Lewis could have been buried,” Phillips said in an interview with HLN.

A judge is tasked with deciding whether to allow the bill of pure discovery to go forward. The family’s attorney will have to convince the judge that the lawsuit isn’t filed as a “fishing expedition,” simply looking for evidence, or that it’s not being used to harass the defendants.

Lewis was never found after his wife reported him missing in August of 1997, a day before a scheduled trip to Costa Rica. Lewis was declared legally dead in 2002. The interest in Lewis’ case again came into focus, when it was part of the hit Netflix series “Tiger King”, which was the story of the feud between Baskin and Oklahoma zookeeper Joe Exotic. Lewis’ daughters suspect that Baskin was somehow involved in their father’s disappearance.

Contact an estate planning attorney if you do not have your estate plan already in place.

Reference: Wealth Advisor (Aug. 11, 2020) “Family of Tiger King’s Don Lewis files lawsuit against Carole Baskin and others”