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Have a Plan for Life

Can a Trust Be Amended?

A son has contacted an elder law attorney  now that mom is in a nursing home and he’s unsure about many of the planning issues, as reported by the Daily Republic. The article, “Amending trust easier if parents can make informed decision,” describes the family’s situation.

There is one point to consider from the start. If the son been involved in the planning from the start by meeting with the attorney and discussions, he might have less uncertainty about the plan and the details.

As for the details: mom is in her 90s with some savings, a few annuities, a CD and a checking account. She was left with five acres of land which is her home and a duplex on it and 12 additional acres with a rental property on it. Everything she owns has been placed in a trust. The son wants to be able to pay her bills and was told that he needs to have a Durable Power of Attorney with the correct powers and to be named trustee in her trust.

He reports that his mom is good with this idea but he has a number of concerns. If mom is sued, will he be personally liable? Would the Durable Power of Attorney give him the ability to handle her finances and the real estate in the trust?

If his mom has a revocable or living trust, there are provisions that allow one or more persons to become the successor trustee in the event that the parent becomes incapacitated or dies.  If she has appointed him as trustee in the trust he would become the trustee (or alternate trustee if her spouse, had passed).

Usually the Durable Power of Attorney is created when the trust is created so that someone has the ability to take control of finances for the person.

The trust should also show whether the successor trustee would be empowered to sell the real estate. Trusts can be drafted in a way that the client wants it written and the successor trustee receives only the trustee powers that are given in the document. As for the liability, the trustee is not liable to a buyer during the sale of a property. There are exceptions, so he would need to speak with an experienced estate planning attorney to help with the sale.

More specifically, assuming the trust does not name the son as a successor trustee and also does not give the son a power of attorney, the bigger question is are the parents mentally competent to make important decisions about these documents?

Given the age of these parents, an experienced estate planning attorney will be concerned and rightfully so, about their competency and if they can freely make an informed decision, or if the son might be exercising improper influence on them to turn over their assets to him.

There are a few different steps that can be taken. One is for the son, if he believes that his parents are mentally competent, to make an appointment for them with an estate planning attorney, without the son being present in the meeting, in order to determine their capacity and wishes. If the attorney is not sure about the influence of the son, he or she may want to refer the parents for a second opinion with another attorney.  If the parents are found not competent, then the son may need to become their conservator, which requires a court proceeding.

Planning in advance and discussing these issues are best done with an experienced estate planning attorney, long before the issues become more complicated and expensive to deal with.

Reference: Daily Republic (Aug. 10, 2019) “Amending trust easier if parents can make informed decision”

 

What Happens when Both Spouses Die at the Same Time?

There are any number of ways a person can inherit assets from another person. They may inherit assets from a trust, through a will or as a designated beneficiary of an insurance policy or retirement account. However, in each case, says Lake Country News in the article “Simultaneous and close together deaths,” the person inheriting the asset is living while the person they inherited from has died.

What happens if spouses die either at the same exact time or at a time that is very close to each other? The answer, as with so many estate planning questions, is that it depends.

The first question is did both decedents have estate planning documents in place? If so, what directions do the wills give? Are there trusts, and if so, who are the trustees? If they served as trustees for each other’s trusts, did they name a secondary trustee?

If real estate was owned as joint tenants with rights of survivorship, the estate of each deceased tenant receives an equal share of the asset unless it can be proven that a joint tenant survived the other.

Here’s an example: if a parent dies without a will and is survived by two children, but one of the two children dies only four days after the parent’s death, (i.e., fewer than 120 hours in California, the law presumes that the deceased child did not survive the mother). The sole surviving child’s estate receives the entire parent’s intestate estate.  A beneficiary who survives long enough to inherit, however, might die before receiving complete distribution of his or her inheritance.

A trust may provide for distributions to alternative beneficiaries. This is another reason why it is wise to have primary and secondary beneficiaries on all accounts that permit secondary beneficiaries. Not all accounts permit this. Similarly, a trust may provide for distribution to alternative beneficiaries. Otherwise, unless there has been advance planning, the undistributed inheritance becomes part of the deceased beneficiary’s estate where it will be distributed either according to the beneficiary’s will or according to the laws of intestacy of the decedent’s state of residence.

All of these instances are further reasons why it is so important for everyone to have a will and other estate planning documents prepared.

The legal and factual analysis associated with the distribution of a couple who die at the same time or in close proximity to each other varies from case to case. Speak with an experienced estate planning attorney to have an estate plan prepared to avoid your family having to unravel the knotty mess that is created when there is no will and no estate planning has been done.

Reference: Lake Country News (Aug. 10, 2019) “Simultaneous and close together deaths”

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What Goes into an Estate Plan?

The very idea of creating an estate plan can be intimidating, but this article from Brainerd Dispatch, “Navigating your estate plan,” wisely advises breaking down the process into smaller pieces making it more manageable. By taking it step by step, it’s more likely that you’ll be comfortable getting started with the process.

Start with Beneficiaries. This may be the easiest way to start. If you have retirement accounts, like IRAs, 401(k)s, 403(b)s or other retirement accounts, chances are you have already written down the name of the person who you want to receive your assets if you die. The same goes for life insurance policies. The beneficiary designation tells who receives the assets on your death. You should also note that there are tax ramifications if you do not have a beneficiary. Your assets could become taxable five years after you die without a named beneficiary.

Be aware that no matter what your will says, the name on your beneficiary designations on these accounts determines who gets the assets. You need to check on these to be sure the people you have named are still the people who you want to receive your accounts. You should review the designations every time you review your estate plan with your estate planning attorney which should be every three or four years.

Where There’s a Will, There’s a Way Forward. The will is a key document in your estate plan. It can be used to minimize taxes on your estate, ensure that your family has the management assistance they need, and if you have minor children, establish who their guardians should be. Don’t neglect updating your will whenever there is a big change to the law or changes in your life. Not having a will leaves your family in a terrible position where they will have to endure unnecessary expenses and added stress. Your assets will be distributed according to the laws of the Commonwealth of Massachusetts, and not according to your own wishes.

Directives for Difficult Times Health care proxies give your loved ones direction when a terrible situation occurs. If you become incapacitated, through an accident or serious illness, the health care proxy tells your family members what kind of care you want—or do not want. That  person can make medical decisions on your behalf. An estate planning attorney who is licensed will know what forms are accepted.

In addition, you’ll need a Durable Power of Attorney. This allows you to designate someone to step in and manage your finances in the case of incapacity. This is especially important if you are single because otherwise a court may name someone to be your financial guardian.

What About Trusts? If you own a lot of assets, own several piece of real estate or business entities or if your estate is complicated, a trust may be helpful. Trusts are legal entities that hold assets on behalf of a beneficiary or beneficiaries. There are many different types of trusts that are used to serve different purposes, from Special Needs Trusts that are designed to help families plan for an individual with special needs; revocable trusts are used to avoid probate and testamentary trusts are created only when you die. An experienced estate planning attorney will know which trusts are appropriate for your individual situation.

Reference: Brainerd Dispatch (Aug. 11, 2019) “Navigating your estate plan”

 

What to Look for When Comparing Assisted Living Centers

Whether you are evaluating assisted living centers for yourself or your loved one, it can help to know what questions to ask. After you look at the websites and visit several facilities, the details can get overwhelming. If you prepare a checklist, you can organize your thoughts and have more confidence in your decision.

The issues you need to address will depend on the needs of the person who will receive the services at the facility. To get you started, here are some suggestions of what to look for when comparing assisted living centers.

  1. The floor plan options of the apartments. Some people will be happier in a smaller space, like a studio apartment that requires little upkeep. Another person might want a big kitchen because he loves to cook or an extra bedroom for friends and relatives to come to visit. Make sure that the floor plan you select has enough space for the furniture, clothes and other items your loved one wants to have. Think about hobbies, socializing and other activities and be sure there will be adequate space for these things.
  2. The costs. You should receive a written statement of how much each type of apartment costs per month, as well as exactly what services the facility includes in that price. Get details about the cost of included meals, housekeeping services, electricity and other utilities, cable television, internet, phone and activity fees. You should also get a list of everything the facility does not provide for the base price and the additional costs of those items and services. You need to know the expense of the different levels of care available, if the resident’s needs change.
  3. Medical issues. Find out if the facility has other residents with similar medical needs. Ask about the medical services and treatment the facility provides and the hours of availability. Some facilities only offer certain medical services during the week and not during evenings or weekends. Ask whether the staff administers medications and if there is a nurse onsite 24/7.
  4. Get information about the staff-to-resident ratio and exactly what that means. This includes the people who mow the grass or do other non-patient care duties and is a way some facilities inflate their staff to resident ratios. Get hard data on the experience, training and credentials of the people who provide the hands-on resident care.
  5. Common areas. Go look at the facility and explore the common areas. Some facilities only have one big room as the common area. The residents take all their meals in that room, engage in activities there and spend time watching television or socializing with other residents. Find out whether there are attractive and comfortable outdoor spaces. You should also see if there are smaller rooms available to the residents to visit with guests or have some quiet time by themselves. The resident should have more options than only his room and a crowded multi-purpose dining room.

Be sure to tour at least three or four facilities with the person who will be moving into assisted living. Trust your instincts and listen to your loved one’s first impressions of the centers. Talk with people who live at the facilities and find out what they like and do not like about the places. Finally, find out about the policy for return of the deposit, in the event that your loved one moves in and hates the facility.

You also may want to reach out to your estate planning attorney to make sure that your loved ones affairs are in order. The attorney may also be able to assist you in your decision as attorneys work with a lot of other clients who have faced these difficult decisions.

References:

A Place for Mom. “Assisted Living Residence Checklist.” (accessed August 7, 2019) https://www.aplaceformom.com/planning-and-advice/articles/assisted-living-resident-checklist

 

When Does a No Contest Clause Make Sense?

It’s an emotionally charged decision. Parents who sit down with an estate planning attorney would much rather talk about their grandchildren and how much they are looking forward to retirement.

However, then the discussion turns to how they want to distribute their assets, as reported in the article “Why is it called a ‘No Contest’ clause?” from The Daily Sentinel, and a problem is revealed.

The parents share that there is a family member, an adult child, who has never been part of the family. Usually they have had a troubled past, pushed others in the family out of their lives and it’s heartbreaking for all concerned.

The discussion then moves to determining how to handle that individual with respect to their estate plan. “Do you want her to be part of your estate plan?” is the least judgmental question the estate planning attorney can ask. In many cases, the parents say “yes” and say they will keep trying to foster some kind of relationship no matter how limited. In other cases, the answer is “no”.

In both cases, however, the concern is that the difficult child will fight with their siblings and take the battle to court. That’s one of the reasons to include a no contest clause.

As long as estate planning documents are prepared correctly and signed, they will survive a legal contest. However, putting in a “no contest” clause creates another barrier to an estate battle. The “no contest clause” is intended to act as a strong deterrent for those individuals who believe they are entitled to more of the estate. It makes it clear that any challenges will result in a smaller portion of the estate and possibly no inheritance at all, depending upon how it is written. Both parents need to have a no contest provision included in their wills. The message is clear and consistent: these are the estate plans that we decided to create. Don’t try to change them.

For families with litigious family members or spouses who married into the family and feel that they are not being treated fairly, a no contest clause makes sense to protect the wishes of the parents.

Speak with an experienced estate planning attorney about how a no contest provision might work in your situation. If your family doesn’t need such a clause count your blessings!

Reference: The Daily Sentinel (Aug. 10, 2019) “Why is it called a ‘No Contest’ clause?”

 

How Does an Irrevocable Trust Work?

There are pros and cons to using a revocable trust, which allows the grantor to make changes or even shut down the trust if they want to, and an irrevocable trust, which doesn’t allow any changes to be made from the creator of the trust once it’s set up, says kake.com in the article “How an Irrevocable Life Insurance Trust (ILIT) Works.”

Revocable trusts tend to be used more often, since they allow for flexibility as life brings changes to the person who created the trust. However, an irrevocable life insurance trust may be a good idea in certain situations. Your estate planning attorney will help you determine which one is best suited for you.

This is how an irrevocable trust works. A grantor sets up and funds the trust, while they are living. If there are any gifts or transfers made to the trust, they are permanent and cannot be changed. The trustee—not the grantor—manages the trust and handles how distributions are made to the beneficiaries.

Despite their inflexibilities, there are some good reasons to use an irrevocable trust.

With an ILIT, the death benefits of life insurance may not be part of the gross estate, so they are not subject to state or federal estate taxes. They can be used to cover estate tax costs and other debts, as long as the estate is the purchaser and not the grantor. Just bear in mind that the beneficiaries’ estate may be impacted by the inheritance.

Minors may not be prepared to receive large assets. If there is an irrevocable trust, the death proceeds may be placed directly into a trust, so that beneficiaries must reach a certain age or other milestone, before they have access to the assets.

If there are concerns about legal proceedings where assets may be claimed by a creditor, for example, an irrevocable trust may work to protect the family. A high-liability business that faces claims whether you are living or have passed, can add considerable stress to the family. Place assets in the irrevocable trust to protect them from creditors.

The IRS notes that life insurance payouts are typically not included among your gross assets, and in most instances, they do not have to be reported. However, there are exceptions. If interest has been earned, that is taxable. And if a life insurance policy was transferred to you by another person in exchange for a sum of money, only the sum of money is excluded from taxes.

An ILIT should shield a life insurance payout and beneficiaries from any legal action against the grantor. The ILIT is not owned by the beneficiary, nor is it owned by the grantor. It makes it tough for courts to label them as assets, and next to impossible for creditors to access the funds.

However, there are some quirks about ILITs that may make them unsuitable. For one thing, some of the tax benefits only kick in, if you live three or more years after transferring your life insurance policy to the trust. Otherwise, the proceeds will be included in your estate for tax purposes.

Giving the trust money for the policy may make you subject to gift taxes. However, if you send beneficiaries a letter after each transfer notifying them of their right to claim the gifted funds for a certain period of time (e.g., 30 days), there won’t be gift taxes.

The most glaring irritant about an ILIT is that it is truly irrevocable, so the person who creates the trust must give up control of assets and can’t dissolve the trust.

Speak with your estate planning attorney to learn if an ILIT is suitable for you. It may not be—but your estate planning attorney will know what tools are available to reach your goals and to protect your family.

Reference: kake.com (July 19, 2019) “How an Irrevocable Life Insurance Trust (ILIT) Works”

Your Estate Plan Decides or the State Decides

It’s something that everyone needs, but often gets overlooked. Estate planning makes some people downright uncomfortable. There’s no law that says you must have an estate plan—just laws that will impact how your property is distributed and who will raise your children, if you don’t have a will. Planning is important, says WMUR 9 in a recent article “Money Matters: Estate planning,” if you want to be the one making those decisions.

An estate plan can be simple if you only own a few assets, or complicated if you have significant assets, more than one home and multiple investments. Some strategies are easier to implement like a last will and testament. Others can be simple or complex like trusts. Whatever your needs, an estate planning attorney will be able to give you the guidance that your unique situation requires. Your estate planning attorney may work with your financial advisor and accountant to be sure that your financial and legal plans work together to benefit you and your family.

There are circumstances that require special estate planning:

  • If your estate is valued at more than the federal gift and/or estate tax exclusion, which is $11.4 million per person in 2019
  • You have minor children
  • There are family members with special needs who rely on your support
  • You own a business
  • You own property in more than one state
  • You want to leave a charitable legacy
  • Your property includes artwork or other valuable collectables
  • You have opinions about end-of-life healthcare
  • You want privacy for your family

The first step for any estate plan is a thorough review of the family finances, dynamics and assets. Who are your family members? How do you want to help them? What do they need? What is your tax picture like? How old are you, and how good is your health? These are just a few of the things an estate planning attorney will discuss with you. Once you are clear on your situation, you’ll discuss overall goals and objectives. The attorney will be able to outline your options, whether you are concerned with passing wealth to the next generation, avoiding family disputes, preparing for a disability or transferring ownership of a business.

A last will and testament will provide clear, legal direction as to how your assets should be distributed and who will care for any minor children.

A trust is used to address more complex planning concerns. A trust is a legal entity that holds assets to be used for the benefit of one or more individuals. It is overseen by a trustee or trustees, who can be individuals you name or professionals.

If you create trusts, it is important that assets be retitled so the trust owns the assets and not you personally. If the assets are not retitled the trust will not achieve your goals.

Some property typically has its own beneficiary designations, like IRAs, retirement accounts and life insurance. These assets pass directly to heirs according to the designation, but only if you make the designations on the appropriate forms.

Once you’re done with your estate plan, make a note on your calendar. Estate plans and beneficiary designations need to be reviewed every three or four years. Lives change, laws change and your estate plan needs to keep pace.

Reference: WMUR 9 (Aug. 1, 2019) “Money Matters: Estate planning”

 

Planning for the Unexpected

Sadly, this is not an unusual situation. The daughter spoke with her mother once or twice a week, and the fall happened just after their last conversation. She dropped what she was doing and drove to the hospital, according to the article “Parents” in BusinessWest.com. At the hospital, she was worried that her mother was suffering from more than fractures, as her mother was disoriented because of the pain medications.

The conversation with her brother and mother about why she wasn’t notified immediately was frustrating. They “didn’t want to worry her.” She was worried, and not just about her mother’s well-being, but about her finances, and whether any plans were in place for this situation.

Her brother was a retired comptroller and she thought that as a former financial professional, he would have taken care of everything. That was not the case.

Despite his professional career, the brother had never had “the talk” with his mother about money. No one knew if she had an estate plan, and if she did, where the documents were located.

All too often, families discover that no planning has taken place during an emergency.

The conversation took place in the hospital, when the siblings learned that documents had never been updated after their father had passed—more than 20 years earlier! The attorney who prepared the documents had retired long ago. The originals? Mom had no idea. The names of her banks and financial institutions had changed so many times over the years, that she wasn’t even sure where her money was.

For this family, the story had a happy ending. Once the mother got out of the hospital, the family made an appointment to meet with an estate planning attorney to get all of her estate planning and elder law planning completed. In addition, the family updated beneficiaries on life insurance and retirement accounts, which are now set to avoid probate.

Both siblings have a list of their mother’s assets, account numbers, credit card information and what’s more, they are tracking the accounts to ensure that any sort of questionable transactions are reviewed quickly. They finally have a clear picture of their mother’s expenses, assets and income.

If your family’s situation is closer to the start of the story than the end, it’s time to contact a qualified estate planning attorney who is licensed to practice in your state and have all the necessary preparation done. Don’t wait until you’re uncovering family mysteries in the hospital.

Reference: BusinessWest.com (Aug. 1, 2019) “Parents”

 

Why an Attorney Should Help with a Medicaid Application

Elder law attorneys can be very helpful when planning for Medicaid coverage, and they can save money in the long run, ensuring that you (or a loved one) get the best care. Instead of waiting to see how wrong the process can get, says The Middletown Press, it’s best to “Use a lawyer for Medicaid planning” right from the start. Here’s why.

Everyone wants the Medicaid application to be successful, but let’s be realistic. It’s in the nursing home’s best interest that the resident pays privately for as long as possible, before going on Medicaid. It’s in the resident or family member’s best interest to protect the family’s assets for care for the resident’s spouse or family.

An attorney has a duty of loyalty only to their client. The attorney also has an ethical and professional responsibility to put their client’s needs ahead of their own.

Saving money is possible. Nursing homes in some areas cost as much as $15,000 a month. While every market and every law practice is different, it would be unusual for legal fees to cost more than a month in the facility. With an experienced medicaid attorney’s help, you might save more than her fee in long-term care and probate cost. Most attorneys will consult with new clients at little or no cost to determine what they need and what they want to achieve before paying a larger fee.

The benefit of experience. It’s all well and good to read through pages of online information, but nothing beats the years of experience that an attorney who practices in this area can bring to the table. Any professional in any field develops knowledge of the ins and outs of an area and applying for Medicaid is no different. Without experience, it’s hard to know how it all works.

Peace of mind from a reliable, reputable source. Today we hear a lot about “FOMO,” or fear of missing out. Consulting with an experienced attorney about a Medicaid application will help you avoid years of wondering, if there was more you could have done to help yourself or your loved one.

There are multiple opportunities for nursing home residents to preserve assets for themselves and spouses, children and grandchildren, particularly when a family member has special needs. However, here’s a key fact: if you wait for the last minute, there will be far less options than if you begin planning long before there’s a need to apply for Medicaid.

Reference: The Middletown Press (July 29, 2019) “Use a lawyer for Medicaid planning”

 

How Do I Title My Property Correctly for My Estate Plan?

The way by which you title your real and personal property and who you name as your beneficiaries is just as important in your estate planning as your will or trust, says The Black Hills Pioneer’s recent article, “Titling of property is just as important as your Will or Trust.”

There are some kinds of property that, depending on how they are titled or who’s the named beneficiary, will flow outside your will or trust.

For instance, if you designate a beneficiary to your life insurance policy or on your retirement account, that money goes directly to the named beneficiary at your death—not in accordance with your will or trust (provided you haven’t named your estate or trust as the beneficiary).

In addition, you could designate another person on your investment account or your bank account. These types of accounts also transfer automatically to the named designee and not with any regard to your will or trust (unless you named your estate or trust as the beneficiary).

Any jointly owned real estate will typically flow to the surviving joint owner, not pursuant to your will or trust. However, the fact that two people own one piece of real estate doesn’t mean the property will flow automatically to the survivor. It depends on how the property is titled. For example, in South Dakota, language needs to be included in the deed conveying that real estate to both individuals as “joint tenants with rights of survivorship.”

You can, therefore, see how critical it is that you discuss these issues with your estate planning attorney. In addition to questions about wills and trusts, you should also be discussing the titling of your property and the beneficiaries you’ve named on your life insurance and retirement accounts, along with named designees on your investment accounts or bank accounts.

If you don’t, you create problems for you family and loved ones. It is important that you contact an experienced estate planning attorney.

Reference: Black Hills Pioneer (August 5, 2019) “Titling of property is just as important as your Will or Trust”