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Law Office of Michael D. DellaMonaca

Have a Plan for Life

Not a Festive Thought, But A Kind One: Planning for Your Own Funeral

Leaving instructions for your funeral and burial wishes relieves loved ones of the burden of making decisions and hoping they are following your wishes. In addition, says the article “Important to provide instructions for preferred funeral, burial wishes” from The Leader, it also prevents arguments between relatives and friends who have their own opinions about what they think you may have wanted.

What often happens is that people make this information part of their estate plan. However, the will is usually not looked at until after the funeral. If your loved ones don’t know where your will is, then they certainly won’t know what your wishes were for the funeral.  Without clear written directions, spiritual practices or cultural traditions that are important to you, may not be followed.

An estate planning attorney can help you create a document that outlines your wishes and will have suggestions for how to discuss this with your family and where it should be located. The documents are different in each state, so be sure to work with a local lawyer. In New York State, there is a form that allows you to name an agent who will be in charge of your remains. You can give your instructions to that person or you can leave them in charge to make arrangements in their discretion.

In New York State, if this form is not completed, the following people, in descending order, have the right to control your remains: spouse, domestic partner, children, other family members and others.

For funeral planning, one option is to go to the funeral home and arrange to pay for the funeral and go to the cemetery and purchase a plot. A pre-paid irrevocable funeral trust purchased at a funeral home can also protects assets from nursing home costs, when applying for Medicaid.

Some people wish to donate their organs, which can be done on a driver’s license or in another statement. Donating your body for medical research or education will require researching medical schools or other institutions and may require an application and other paperwork that confirms your intent to donate your body. When you pass, your family member or whoever is in charge will need to contact the organization and arrange for transport of your remains.

A comprehensive estate plan does more than distribute assets at death. It also includes what a person’s wishes are for their funeral and burial wishes. Think of it as a gift to loved ones.

Reference: The Leader (December 7, 2019) “Important to provide instructions for preferred funeral, burial wishes”

 

How Estate Planning Keeps the Peace for Blended Families

With the IRS’s announcement that the first $11.58 million (in 2020) of a taxable estate is free from estate taxes most people won’t have to worry about paying estate taxes. Therefore, what’s the biggest reason to have an estate plan?

Earlier this year, a survey was conducted at the 53rd annual Heckerling Institute of Estate Planning, a prestigious legal and financial conference that attracts leaders in the field of estate planning. For the second year in a row, family conflict was identified as the biggest threat to estate planning, reports Investment News in the article Reducing potential family conflicts.”

Statistics show that there are more blended families in the U.S. than ever before.  The increase in blended families has led to an increase in family conflicts. While open and honest communication is the key to any kind of conflict resolution, it’s particularly sticky when it comes to blended families. For most families, it’s a good idea to talk openly about estate plans, rather than waiting until one of the spouses has passed and explaining to the biological and stepchildren how the assets are being distributed. Discussing the estate plan before anyone dies at the very least, gives everyone a chance to voice their opinions even if no changes to the spouse’s plans are made.

How do you minimize conflicts within blended families? One way is with a prenuptial agreement, which is executed before marriage and clarifies the financial rights of each spouse, in the event of divorce or death. This is especially useful, when there is a disparity in wealth or age between the couple.

However, not everyone is willing to have a prenup. And even if they do, family conflicts can still crop up. Let’s say Gary and Helen are married, each with children from a previous marriage. Gary wants to give his entire estate to Helen when he dies. If Gary dies first, there’s no legal reason for Helen to give any of Gary’s assets to his biological children.

There are any number of solutions. If Gary really wants to cut his children out of his will, he can talk with them and explain his thinking. He can also have an estate planning attorney include a “no contest” clause in his will. If any named beneficiary challenges the will, they will lose any inheritance and are treated legally, as if they have predeceased the decedent. Gary could also use a revocable living trust, which would avoid the estate being probated and deny the children an opportunity to challenge his will.

A better solution would be to craft an estate plan that benefits both Gary and Helen’s children. Harry’s children could receive a partial outright distribution when Gary dies, with the remaining estate passing to Helen. A trust could be created for Helen’s benefit, but the remaining trust assets could go to Gary’s children when Helen dies.

There are many different ways to resolve this issue with an eye to minimizing conflict among children in blended families. If the parents are truly invested in keeping their children together as a family, it is worth the effort to create an estate plan that cares for the spouses and all of the children. An experienced estate planning attorney can create a plan to accomplish your goals for the entire blended family.

Reference: Investment News (December 9, 2019) Reducing potential family conflicts

 

I’m a Fiduciary—What Does That Mean?

There are any number of pitfalls that may occur when administering an estate, a trust or another person’s finances under a Power of Attorney (POA). Fiduciary duties are the highest under the law and the fiduciary is legally required to put the interests of the person they are representing above their own. The most common problem for a fiduciary is not taking their responsibilities seriously enough, says the article “What does it mean to serve as a fiduciary? from the New Hampshire Union Leader.

You can avoid some common pitfalls, if you keep the following in mind:

Know the governing instrument. A fiduciary must abide by the terms of the governing instrument, which might be a Power of Attorney (POA), trust, or another legal document. The powers you hold are limited to those granted in the document. There are times when even though you have a power or the ability to do something, it’s not in the best interest of the grantor. Let’s say the trust gives you as a trustee the power to make distributions to a beneficiary. If the beneficiary has sufficient independent resources, doing so might be a breach of your duties. In the same way, the ability to make gifts that is given by a POA, doesn’t mean you should automatically start making gifts.

Maintain extremely detailed records. Do this for two reasons. You have a duty to do so, and you need good records in case anyone claims that you did something wrong. Make sure that your records have enough details so that any expense or expenditure can be documented and explained.

Transparency is the best approach. Every situation is different, and family dynamics differs, but if you can, speak with family members before making any transactions. If they object, you can decide whether or not to proceed, or to petition the probate court to give the court’s blessing in advance. In this case, it is better to ask permission in advance, than ask for forgiveness after the fact.

Never mix your personal or business funds with that of the estate. This is one of the biggest problems for people who have never been a fiduciary before. If you are a fiduciary for more than one estate, then you’ll need to have funds and property completely separate from each other.

Fiduciary duties need to be treated with great care to avoid any liability and litigation. If you are not prepared to be a fiduciary, you could decide to decline the role. Speak with an experienced estate planning attorney, if you have any reservations about taking on this responsibility.

Reference: New Hampshire Union Leader (December 7, 2019) “What does it mean to serve as a fiduciary?

 

How to Spot Problems at Nursing Homes

The best time to shop for a nursing home is when you do not need one. If you wait until you can no longer safely or comfortably live on your own, you probably will not be in a position to do a lot of legwork to investigate facilities. Do your research well ahead of time, so you know the nursing homes in your area that provide high-quality care and, more importantly, the ones that have significant problems.

As you evaluate and compare facilities, you need to know how to spot problems at nursing homes. The marketing brochure, website and lobby might be lovely, but you should base your decision about a long-term care facility on much more data than those things. Here are some tips on how to dig for possible problems at nursing homes:

  • Online search. Check out the nursing home’s website to get an overview of the services it offers and the industry affiliations or certifications it has. Look at the daily menus to see if the meals are nutritious and have enough variety. Most people would not enjoy eating the same main course two or three times a week. Look at the activities calendar to see if you would be happy with the planned social events. On some websites, you can view the floor plans of the resident rooms.
  • Ask your primary care doctor to name a few facilities he would recommend for his parents, and those where he would not want them to live.
  • Local Office on Aging location. Every state has an Office on Aging. Contact them to get as much information as you can about safety records, injuries, deaths, regulation violations and complaints about local nursing homes.
  • Your state’s Long-term Care Ombudsman (LCO). Every state also has an Ombudsman who investigates allegations against nursing homes and advocates for the residents. Your state LCO should have a wealth of information about the facilities in your area.
  • State Online Database or Reporting System. Some states have online databases or collect reports about nursing homes.
  • Medicare’s Nursing Home Compare website. Medicare maintains an online tool, Nursing Home Compare, that provides detailed information on nursing homes. Every nursing home that gets any funding from Medicare or Medicaid is in this database. You can enter the name of a specific nursing home or search for all the facilities in a city or zip code. The tool includes information about abuse at long-term care facilities. On the webpage, you can explore the Special Focus Facility section to find nursing homes with a history of problems.
  • Word of mouth. Ask your friends, relatives and neighbors to recommend a quality nursing home. Personal experience can be extremely valuable.
  • Make a short list of the top candidates. After you collect as much information as you reasonably can, narrow your options down to four or five facilities that best meet your needs and preferences.
  • Visit your top choices. There is no substitute for going to a nursing home and checking it out in person. Pay attention to the cleanliness of the place throughout, not just in the lobby. Give the facility the “sniff” test. Determine whether they use products to mask unpleasant odors, instead of cleaning thoroughly. See whether the residents are well-groomed and wearing fresh, clean clothes. Observe the interaction of the staff with the residents. Notice whether people who need assistance at mealtime, get the help they need without having to wait.
  • Take online reviews with a grain of salt. Fake reviews are all over the internet. If you see a nursing home with only a few reviews, and they are all five stars, be skeptical.
  • Speak with an experienced estate planning attorney who possibly may prepare Medicaid applications. The attorney is your best source as he or she deals directly with facilities.

Once you gather this information, you will be ready in the event you need to stay in a nursing home for a short recuperation from surgery or longer term.

References:

AARP. “Finding a Nursing Home: Don’t Wait Until You Need One to Do the Research.” (accessed December 5, 2019) https://www.aarp.org/caregiving/basics/info-2019/finding-a-nursing-home.html

CMS. “Find a nursing home.” (accessed December 5, 2019) https://www.medicare.gov/nursinghomecompare/search.html

 

How Can Life Insurance Help My Estate Plan?

In the 1990s, it wasn’t unusual for people to buy second-to-die life insurance policies to help pay federal estate taxes. However, in 2019, with estate tax exclusions up to $11,400,000 (and rising with the cost-of-living adjustments), fewer people would owe much for estate taxes.  However, IRAs, 401(k)s, and other accounts are still 100% taxable to the individuals, spouses and their children. The stretch IRA options still exist, but they may go away, as Congress may limit stretch IRAs to a maximum of 10 years.

Forbes’ recent article, “3 Ways Life Insurance Can Help Your Estate Plan,” explains that as the IRA is giving income from the RMDs, it may also be added, after tax, to the life insurance policy. If this occurs, it’s even possible that the death benefits could grow in the future, giving a cost-of-living benefit to children. This is one way how life insurance can be used creatively to help your estate plan.

For married couples, one strategy is to consider how life insurance on one individual could be used to pay “conversion tax” at death, using tax-free benefits. When the retiree dies, the spouse beneficiary can then convert all the IRA (taxable money) to a Roth IRA, which is tax-exempt with new, lower income tax rates (37% in 2018-2025 versus 39.6% in 2017 or earlier).

This tax-free death benefit money can be used to pay the taxes on the conversion, letting the surviving beneficiary have a lifetime of tax-exempt income without RMD issues from the Roth IRA. The Social Security income could also be tax-exempt, because Roth withdrawals don’t count as “income” in the calculation to see how much of your Social Security is taxed. However, you’d have to be within the threshold for any other combined income.

Life insurance for both individuals (if married) may also be a good idea. If the spouse of the IRA owner dies, the money from the life insurance can be used once again. If this is done in the tax year of the death for married individuals, the tax conversion could be done under “married filing status” before the next year, when the individual must use single tax filing status.

Another benefit of the IRA-to-Roth conversion is the passing of Roth IRAs to heirs, which could create a lasting legacy, if planned well. New life insurance policies that add long-term care features with chronic care and critical care benefits can also provide an extra degree of benefits, if one of the insureds has health issues prior to death.

Be sure to watch the tax rates and possible changes. With today’s lower tax rates, this could be very beneficial. Remember that there are usually individual state taxes as well. However, considering all the tax-optimized benefits to spouses and beneficiaries, the long-term tax benefits outweigh the lifetime tax liabilities, especially when you also consider SSI tax benefits for the surviving spouse and no RMD issues.

Life insurance in retirement can help protect, build and transfer wealth in one of the easiest ways possible. If you’re not certain about where to start with your life insurance needs, speak with an experienced estate planning attorney.

Reference: Forbes (November 15, 2019) “3 Ways Life Insurance Can Help Your Estate Plan”

 

Three Advanced Questions and Answers Regarding Health Care Decisions for the Elderly

In a perfect world, every adult would have a will, advance care directive and financial and healthcare powers of attorney designated and updated on an annual basis. Unfortunately, more than half of adults in America haven’t gotten around to it. This can result in considerable stress and confusion, when a loved one becomes incapacitated due to illness, accidents or old age. In this article, we answer some of the more advanced questions we’ve had when it comes to caring for elderly loved ones.

Do Adult Children Have any Right to Information About Their Parents’ Medical Condition?

Unless their parent’s physician or other healthcare provider deems it necessary, or the parents have named the adult child as their personal representative for healthcare matters, they do not have any right to their parents’ personal medical information. The same goes for financial information. Unless the parents have named the adult child their power of attorney for financial matters, banks and other financial institutions will not provide any information. If you are concerned about these matters, ensure that your parents have designated a healthcare power of attorney and a financial power of attorney.

My mother had a stroke and is unable to make decisions for herself. What are my options?

If your mother has not designated a healthcare power of attorney or created an advance directive, your next best option is to petition the courts for guardianship over your mother. You will need to prove to the court that your mother lacks the capacity to make decisions on her own and that you are qualified to do so. If guardianship is granted, you will have the same powers over your mother’s healthcare (and likely, finances) as you would over a minor child. This is also a good time to ensure that you have designated a healthcare power of attorney and created an advance directive to ensure your needs are taken care of when the time comes.

Does my father’s power of attorney have the right to keep his medical information from the rest of the family?

No family is perfect. There are always certain dynamics that contribute to strife, especially when an elderly parent is concerned. If your father’s power of attorney is keeping you out of the loop on healthcare matters, the truth is, they have every right to. They alone have the authority to determine who has access to your father’s medical records. If you believe your father’s power of attorney is not acting in your father’s best interests, you may file a petition with the court to have that power of attorney removed.

The laws regarding healthcare powers of attorney and other estate-planning matters differ from state-to-state. If you have questions about these issues, consult with an experienced estate planning attorney in your area.

Resources:

ElderLawAnswers. (Accessed November 29, 2019) https://www.elderlawanswers.com/questions-and-answers/Health%20Care%20Decisions

A Place for Mom. “10 Essential Questions to Ask Your Aging Parents” (Accessed November 29, 2019)  https://www.aplaceformom.com/blog/essential-questions-for-aging-parents/

AARP. “Haven’t Done A Will Yet?” (Accessed November 29, 2019)  https://www.aarp.org/money/investing/info-2017/half-of-adults-do-not-have-wills.html

 

Top 6 Questions (and Answers) about Conservatorships and Guardianships

What is a Guardian?

When someone becomes incapacitated due to illness, injury or disability, the court appoints a guardian to handle healthcare and certain non-financial decisions for that person. A guardian can be anyone over the age of 18, but must also be able to show that they are qualified to make these decisions for their loved one.  A guardian is not necessarily the person who is the caregiver over the incapacitated individual. Speak with an experienced estate planning attorney who can discuss this with you.

What is a Conservator?

A Conservator is appointed by the court to make financial decisions for an incapacitated person. In some states, those who are appointed “conservator of the estate” are those who make financial decisions. Those who are appointed “Conservator of the person” handle the same issues as a “guardian.” Conservators can be expensive, as is the process to obtain one. There is also the potential that the incapacitated individual may be taken advantage of. To avoid a Conservatorship, designate a power of attorney for your financial and medical care. You should always speak with an experienced estate planning attorney who can explain this process to you should you think you need one.

Does my elderly loved one need a guardian

If your family member is unable to make healthcare decisions on her own, due to an injury following an accident, an illness, or disability, and she has not designated a healthcare power of attorney, she will need a guardian.

When is a Conservator more appropriate than a Guardian?

In some cases, someone may be perfectly capable of making her own healthcare decisions, but are unable to manage her finances. In this case, a Conservator would be more appropriate. If an individual cannot make financial or healthcare decisions, both may be appropriate.

Who does the court appoint as Guardian or Conservator?

A court will appoint the person it deems most competent to fill the role of conservator or guardian. In general, the person must be over the age of 18. The court’s first choice is a spouse, or other close family member. If none of those is available or is unwilling to serve, then they may consider extended family or friends. If those are unwilling or unavailable, then the court will appoint a neutral third party, such as an attorney, to act as Conservator or Guardian.

How do I relinquish Guardianship over my wife?

To relinquish Guardianship over any loved one, you must go to court and petition to do so. It is best if you have someone else in mind to take over when you submit your petition to ensure your loved one’s needs are met.

Whether you are considering a Guardianship or Conservatorship for a loved one, it is important to speak with an experienced estate planning attorney who can discuss these important concepts and filings with you.

Resources:

ElderLawAnswers. (Accessed November 29, 2019) https://www.elderlawanswers.com/questions-and-answers/Guardianship/Conservatorship

LawHelp.org. (Accessed November 29, 2019) https://www.lawhelp.org/dc/resource/guardianship-and-conservatorship-frequently-a

 

How Do I Avoid Unintentionally Disinheriting a Family Member?

When an account owner dies, their assets go directly to beneficiaries named on the account. This bypasses and overrides the will or trust. Therefore, you should use care in coordinating your overall estate plan. You don’t want the wrong person ending up with the financial benefits.

The News-Enterprise recent article, “Don’t accidentally leave your estate to the wrong person,” tells the story of the widower who remarried after the death of his first wife. Because he didn’t change his IRA beneficiary form, at his death, his second wife was left out. She received no money from the IRA, and the retirement money went to his first wife, the named beneficiary. Many types of accounts have beneficiary forms, like U.S. savings bonds, bank accounts, certificates of deposit that can be made payable on death, investment accounts that are set-up as transfer on death, life insurance, annuities and retirement accounts.

Remember that beneficiary designations don’t carry over, when you roll your 401(k) to a new plan or IRA. You can name as your beneficiaries individuals, trusts, charities, organizations, your estate, or no one at all. You can name groups, like “all my living grandchildren who survive me.” However, be certain that the beneficiary form lets you to pass assets “per stirpes,” meaning, equally among the branches of your family. For example, say you’re leaving your life insurance to your four children. One predeceases you. Without the “per stirpes” clause, the remaining three remaining children would divide the death proceeds. With the “per stirpes” clause, the deceased child’s share would pass to the late child’s children (your grandchildren).

Don’t leave assets to minors outright, because it creates the process of having a court appointed guardian care for the assets, until the age of 18 in most states. Instead, you might create trusts for the minor heirs, have the trust as the beneficiary of the assets, and then have the trust pay the money to heirs over time, after they have reached legal age or another milestone.

You should also not name disabled individuals as beneficiaries, because it can cause them to lose their government benefits. Instead, ask your estate planning attorney about creating a special needs or supplemental needs trust. This preserves their ability to continue to receive the government benefits.

Reference: The News-Enterprise (November 30, 2019) “Don’t accidentally leave your estate to the wrong person”

 

Can I Place My IRA in a Trust?

Unfortunately, you can’t place an individual retirement account (IRA) in a trust while you’re alive. This rule applies to all types of IRAs including traditional, Roth, SEP, and SIMPLE IRAs says Investopedia’s article, “How Can I Put My IRA In a Trust?”

However, if you establish a trust as part of your estate plan and want to include your IRA assets, you need to look at the characteristics of an IRA and tax consequences concerning certain transactions.

IRA accounts were designed to achieve two goals. First, they provided tax-deferred retirement savings for individuals not covered under an employer-sponsored plan. For those who were covered, IRAs provided a spot for retirement-plan assets to continue to grow, when and if the account holder changed jobs via an IRA rollover.

IRA accounts can only be owned by an individual. They can’t be held in joint name and can’t be titled to an entity, like a trust or small business. Contributions can also only be made, if certain criteria are met, such as the owner must have taxable earned income to support the contributions. A non-working spouse can own an IRA but must receive contributions from the working spouse and the working spouse’s income must satisfy the criteria.

No matter the source of the contributions, the IRA owner must remain constant. Only certain ownership transfers are permitted to avoid being categorized as a taxable distribution. If transferred to a trust, IRA assets become taxable, because this transfer is seen as a distribution by the IRS. In addition, if the owner is under age 59½ at the time of distribution, there’s an early withdrawal penalty. The trust can accept IRA assets of a deceased owner, however, and establish an inherited IRA.

Naming a trust as the beneficiary to an IRA can be a good idea, because owners can instruct the beneficiaries on how to use their savings. A trust can be created, so that special provisions for inheritance apply to specific beneficiaries. This can be a helpful option, if the beneficiaries vary greatly in age, or if some of them have special needs to be addressed.

Planning should consider how beneficiaries will take possession of IRA assets and over what time period. Get professional advice from a trust and estate planning lawyer. Ask the attorney about getting the maximum stretch option for the distribution of the account. The trust will need to have specific terms, such as “pass-through” and “designated beneficiary.” If it doesn’t have terms for inheriting an IRA, it should be rewritten, or specific people should instead be named as beneficiaries.

While moving all assets into the name of a trust and designating it as the beneficiary on retirement accounts is common, it is not always a good decision. Trusts, like other non-individuals that inherit IRA assets, are subject to accelerated withdrawal requirements. Most of the time, these must take place within five years from the original IRA owner’s death. Without the proper “pass-through” terms, stretching the withdrawals over a lifetime isn’t an option. Depending on the size of the account, this could place a major burden on the beneficiaries. It’s especially detrimental to eliminate the spousal inheritance provisions by designating a trust, instead of a spouse as the beneficiary.

Reference: Investopedia (November 26, 2019) “How Can I Put My IRA In a Trust?”

 

What Estate Planning Documents Do You Need?

Wouldn’t your children be relieved to learn that you’ve done all the necessary advance planning so that if you should become incapacitated, someone has been properly appointed to help with health care and financial decisions? The Tennessean suggests that you “Give your loved ones peace of mind with legal documents” so that your spouse and your family will be able to take the necessary steps to give you the care and dignity you (and they) deserve.

Here’s a checklist of the documents that everyone should have in place:

Power of Attorney for Health Care. When you have mental capacity, you can make your own decisions. When you do not, you need someone to be appointed who knows your beliefs and wishes and has the ability to advocate for you. Ideally, you should name one person to be your agent to minimize arguments. Talk with your family to explain who has been named your power of attorney for health care, and if need be, explain why that person was chosen.

Power of Attorney for Finances. There are different kinds of POA for finances. The goal of the POA for finances is so they can make decisions on your behalf, when you become incapacitated. Some states use “springing” POA—but that may mean your family has to go through a process to prove you are incapacitated. Check with an estate planning elder law attorney in your state to see what the laws are.

Advance Directive. This describes what kind of life sustaining treatment you do or do not want if you are in a coma, are terminally ill or have dementia. You can direct whether you want CPR, tube feeding, and other life-sustaining procedures to be withheld, if your quality of life is diminished and there is no hope of improvement. This will help your family to know what you want in a time when emotions are running high.

Last Will and Testament. Have a will created, if you don’t already have one. This directs distribution of your assets to your wishes and does not leave them to the laws of your state. Not having a will means your family will have to go through many more court proceedings and people you may not want to receive your worldly possessions may get them.

Trusts. Talk with your estate planning attorney about placing assets in trust, so they are not subject to the public process of probate. Your wishes will be followed, and they will remain private.

Reference: Tennessean (Nov. 16, 2019) “Give your loved ones peace of mind with legal documents”