What Is a ‘Survivorship’ Period?

A survivorship clause in a will or a trust says that beneficiaries can inherit, only if they live a certain number of days after the person who made the will or trust dies. The goal is to avoid situations where assets pass under your beneficiary’s estate plan, and not yours, if they outlive you only by a short period of time. While these situations are rare, they do occur, according to the article “How Survivorship Periods Work” from kake.com.

Many wills and trusts contain a survivorship period. Most estates won’t rise to the level of today’s very high federal estate tax exemption ($11.58 million for an individual), so a long survivorship period is not necessary. However, if the surviving spouse must wait too long to receive property under the will—six months or more—it might harm their eligibility for the marital deduction, even if they are made in a qualifying trust or an outright gift.

Even if a will does not contain a survivorship clause, many states require one. Some states require at least a five-day or 120-hour survivorship period. That law might apply to beneficiaries who inherit property under a will, trust or, if there is no will, under state law. This usually does not apply to those who are beneficiaries of an insurance policy, a POD bank account (Payable on Death), or a surviving co-owner of property held in joint tenancy. To learn what states have a set of laws, known as the Uniform Probate Code or the revised version of the Uniform Simultaneous Death Act, speak with a local estate planning lawyer.

Survivorship requirements are put into place in case of simultaneous or close to simultaneous deaths of the estate owners and the estate beneficiaries. This is to avoid having the distribution of assets from an estate owner’s estate distributed according to the beneficiary’s estate plan, and not the estate owner’s plan.

For an example, let’s say Jeff dies and leaves his estate to his sister Judy. Jeff has named his favorite charity as an alternative beneficiary. Jeff’s assets would normally go to his sister Judy. They would only go to his favorite charity, if Judy were not alive at the time of his death. However, if Jeff dies and then Judy dies 14 days later, Jeff’s assets could go to Judy’s beneficiaries under the terms of her will. The charity, Jeff’s intended beneficiary, would receive nothing.

The family would also have the burden of dealing with not one but two probate proceedings at the same time.

However, if a 30-day survivorship clause was in place, the assets would pass to his favorite charity, as originally intended. Jeff’s estate plan would be carried out, according to his wishes.

These are the types of details that make estate planning succeed as the estate owner wishes. Having a complete and secure—and properly prepared—estate plan in place is worth the effort.

Reference: kake.com (March 31, 2020) “How Survivorship Periods Work”

How to Plan for Nursing Home Care for Parents

The median annual cost of care in a skilled nursing facility in South Carolina is $42,000, according to a cost of care survey by long-term care insurance company Genworth. You can’t expect Medicare to cover it. Medicaid coverage doesn’t start in, until the value of your assets is reduced to $2,000, says The Columbia Regional Business Report’s recent article entitled “Nursing home care requires advance planning.”

Many people don’t know that to qualify for Medicaid, your assets have to be spent down to almost nothing. Planning for long-term care includes both insurance and financial planning. However, the long-term care insurance options are limited. There are only a few providers remaining in the industry, but it’s worth the effort to see what they have.

Long-term care insurance is a plan that lets you pay a premium in exchange for coverage for a stay in an assisted care facility, full-scale care facility, or even at home. Without a policy, those financial costs can be catastrophic.

Because the cost of long-term care is so high, begin planning for your later years as soon as possible. It’s likely that in the next few decades, when the baby boomer generation starts requiring long-term or assisted living care, paying for it could become a crisis.

For people who are starting to save for future care needs, financial planners earmark 10% to 15% of your income. If you’re older and see that you don’t have enough money saved, put away at least 20% of your income. IRS guidelines include catch-up provisions for people older than 50 for IRAs and 401(k)s.

Some group insurance plans offer long-term care options. There are some additions for life insurance policies that could extend living benefits for elder care. You should plan on paying for three years of long-term care.

How to pay for skilled care is just one of the issues a family may face in later years. You also should have a will, advance directives, medical or health care power of attorney and durable power of attorney in place to help your family with difficult decisions. Remember to make sure the beneficiaries on your insurance plans are up-to-date.

Talk to an attorney about late-life concerns.

It’s never too soon to develop some kind of plan that can ease the financial burden for you and your family.

Reference:  Columbia Regional Business Report (March 10, 2020) “Nursing home care requires advance planning

An Estate Plan Is Necessary for the Unthinkable

The death of basketball legend Kobe Bryant, his daughter and seven others reminded us that we never know what fate has in store for us. A recent article from The Press Enterprise titled Yes, you must go there: Think about the unthinkable, plan for the worst” explains the steps.

Put an appointment in your schedule. Make an appointment with a qualified estate planning attorney. If you make the call and have an actual appointment, you have a deadline and that’s a start. The attorney may have a planning worksheet or organizer that he or she can send to you to guide you.

Start getting organized. If this seems overwhelming, break it out into separate parts. Begin with the easy part: a list of names, addresses, phone numbers, and email addresses for family members. Include any other people who you intend to include in your estate plan.

Next, list your assets and an estimated value of each. It doesn’t have to be to the penny. Include the account numbers, name of the institution, phone number and, if you have a personal contact, a name. Include bank accounts, real estate holdings, timeshares, stocks, bonds, personal property, vehicles, RVs, any collectibles of value (attach appraisals if you have them), life insurance and retirement accounts.

List the professionals who you rely on—your estate planning lawyer, CPA, financial advisor, etc.

If you own a firearm, include your license and make sure that both your spouse and your estate planning attorney are aware of the information. In certain states, having possession of a firearm without being the licensed owner is against the law. Speak with your estate planning attorney about the law in your state and how to prepare for a situation if the firearm needs to be safely and properly dealt with.

Name an executor or personal representative. Estate planning is not just for death. It is also for incapacity. Who will act on your behalf, if you are not able to do so? Many people name their spouse, a long-time trusted friend or a family member. Be certain that person will be willing to act on your behalf. Have a second person also named, in case something occurs, and your first choice cannot serve.

If you have minor children, your estate plan will include a guardian, who will be responsible for raising them. Talk about that with your spouse and that person to make sure they are willing to serve. You can also name a second person to be in charge of finances for the children. Your estate planning lawyer will talk with you about the role of trusts to provide for the children.

Think about your overall goals. How do you see your legacy? Do you want to leave some funds for a charity that has meaning to you and your family? Do you want your children to receive equal shares of your entire estate? Does one child require special needs planning, or are you concerned that one of your children may not be able to manage an inheritance? These are all topics to discuss with your estate planning attorney. Their experience will help clarify your goals and create a plan.

Reference: The Press Enterprise (Feb. 2, 2020) Yes, you must go there: Think about the unthinkable, plan for the worst”

Estate Planning for Unmarried Couples

For some couples, getting married just doesn’t feel necessary. However, they don’t enjoy the automatic legal rights and protections that legally wed spouses do, especially when it comes to death. There are many spousal rights that come with a marriage certificate, reports CNBC in the article “Here’s what happens to your partner if you’re not married and you die.” Without the benefit of marriage, extra planning is necessary to protect each other.

Taxes are a non-starter. There’s no federal or state income tax form that will permit a non-married couple to file jointly. If one of the couple’s employers is the source of health insurance for both, the amount that the company contributes is taxable to the employee. A spouse doesn’t have to pay taxes on health insurance.

More important, however, is what happens when one of the partners dies or becomes incapacitated. A number of documents need to be created, so should one become incapacitated, the other is able to act on their behalf. Preparations also need to be made, so the surviving partner is protected and can manage the deceased’s estate.

In order to be prepared, an estate plan is necessary. Creating a plan for what happens to you and your estate is critical for unmarried couples who want their commitment to each other to be protected at death. The general default for a married couple is that everything goes to the surviving spouse. However, for unmarried couples, the default may be a sibling, children, parents or other relatives. It won’t be the unmarried partner.

This is especially true, if a person dies with no will. The courts in the state of residence will decide who gets what, depending upon the law of that state. If there are multiple heirs who have conflicting interests, it could become nasty—and expensive.

However, a will isn’t all that is needed.

Most tax-advantaged accounts—Roth IRAs, traditional IRAs, 401(k) plans, etc.—have beneficiaries named. That person receives the assets upon death of the owner. The same is true for investment accounts, annuities, life insurance and any financial product that has a beneficiary named. The beneficiary receives the asset, regardless of what is in the will. Therefore, checking beneficiaries need to be part of the estate plan.

Checking, savings and investment accounts that are in both partner’s names will become the property of the surviving person, but accounts with only one person’s name on them will not. A Transfer on Death (TOD) or Payable on Death (POD) designation should be added to any single-name accounts.

Unmarried couples who own a home together need to check how the deed is titled, regardless who is on the mortgage. The legal owner is the person whose name is on the deed. If the house is only in one person’s name, it won’t become part of the estate. Change the deed so both names are on the deed with rights of survivorship, so both are entitled to assume full ownership upon the death of the other.

To prepare for incapacity, an estate planning attorney can help create a durable power of attorney for health care, so partners will be able to make medical decisions on each other’s behalf. A living will should also be created for both people, which states wishes for end of life decisions. For financial matters, a durable power of attorney will allow each partner to have control over each other’s financial affairs.

It takes a little extra planning for unmarried couples, but the peace of mind that comes from knowing that you have prepared to care for each other, until death do you part, is priceless.

Reference: CNBC (Dec. 16, 2019) “Here’s what happens to your partner if you’re not married and you die”

When Do I Need an Elder Law Attorney?

Elder law is different from estate law, but they frequently address many of the same issues. Estate planning contemplates your finances and property to best provide for you and your family while you’re still alive but incapacitated. It also concerns itself with the estate you leave to your loved ones when you die, minimizing probate complications and potential estate tax bills. Elder law contemplates these same issues but also the scenario when you may need some form of long-term care, even your eligibility for Medicaid should you need it.

A recent article from The Balance’s asks “Do You or a Family Member Need to Hire an Elder Law Attorney?” According to the article there are a variety of options to adjust as economically and efficiently as possible to plan for all eventualities. An elder law attorney can discuss these options with you.

Medicaid is a complicated subject, and really requires the assistance of an expert. The program has rigid eligibility guidelines in the event you require long-term care. The program’s benefits are income- and asset-based. However, you can’t simply give everything away to qualify, if you think you might need this type of care in the near future. There are strategies that should be implemented because the “spend down” rules and five-year “look back” period reverts assets or money to your ownership for qualifying purposes, if you try to transfer them to others. An elder law attorney will know these rules well and can guide you.

You’ll need the help and advice of an experienced elder law attorney to assist with your future plans, if one or more of these situations apply to you:

  • You’re in a second (or later) marriage;
  • You’re recently divorced;
  • You’ve recently lost a spouse or another family member;
  • Your spouse is incapacitated and requires long-term care;
  • You own one or more businesses;
  • You have real estate in more than one state;
  • You have a disabled family member;
  • You’re disabled;
  • You have minor children or an adult “problem” child;
  • You don’t have children;
  • You’d like to give a portion of your estate to charity;
  • You have significant assets in 401(k)s and/or IRAs; or
  • You have a taxable estate for estate tax purposes.

If you have any of these situations, you should seek the help of an elder law attorney.

If you fail to do so, you’ll most likely give a sizeable percentage of your estate to the state, an ex-spouse, or the IRS.

State probate laws are very detailed as to what can and can’t be included in a will, trust, advance medical directive, or financial power of attorney. These laws control who can and can’t serve as a personal representative, trustee, health care surrogate, or attorney-in-fact under a power of attorney.

Hiring an experienced elder law attorney can help you and your family avoid simple but expensive mistakes, if you or your family attempt this on your own.

Reference: The Balance (Jan. 21, 2020) “Do You or a Family Member Need to Hire an Elder Law Attorney?”