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?”

Business Owners Should Start End-Game Planning Now
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Business Owners Should Start End-Game Planning Now

Most parents understand that the ultimate goal of child-rearing is to help a child become an independent adult. For the business owner, this means building a business that would continue after they have retired or passed away. However, when it comes to estate planning, says the article “Why Business Owners Should Think About Estate Planning Sooner Than Later,” from Forbes, many business owners think only about their personal assets and their children.

For a successful business owner who wants to see their business continue long after they have moved on to the next chapter in their lives, the best time to start succession planning is now.

Succession and estate planning should not be something you wait to do until the end of your life. Most people make this mistake. They don’t want to think about their own mortality or what will happen after they’ve died. Very rarely do people realize the value of estate planning and succession planning when they are engaged in a start-up or when their companies are just getting solid footing. They are too busy with the day-to-day concerns of running a business than they are with developing a succession plan.

However, any estate planning attorney who has been practicing for more than a few years knows that this is a big mistake. Securing assets and business planning sooner, not later, is a far better way to go.

Business continuity is the first concern for entrepreneurs. It’s not an easy topic. It’s far better to have this addressed when the owner is well and the business is flourishing. Therefore, the business owner is making decisions and not others, who may be emotionally invested but not knowledgeable about the business.

A living trust and will can put in place certain parameters that a trustee can carry out. This should include naming the individuals who are trusted to make decisions. Having those names and decisions made will minimize the amount of arguing between recipients of assets. Let them be mad at you for your choices, rather than squabbling between each other.

Create a business succession plan that designates successor trustees who will be in charge of managing the business, in the event of the owner’s incapacity or death. A power of attorney document is used to nominate a fiduciary agent to act on your behalf if you should become incapacitated, but a trust should be considered to provide for a smoother transition of the business to successor trustees.

By transferring a business to a trust, the inconvenience and costs of probate may be avoided and assets will be passed along to chosen beneficiaries. Timely planning also preserves business assets, since they can take advantage of advanced tax planning strategies.

Estate and succession planning is usually not top-of-mind for young business owners, but it is essential planning. Talk with an experienced estate planning attorney to get yourself and your business ahead of the game.

Reference: Forbes (Dec. 30, 2019) “Why Business Owners Should Think About Estate Planning Sooner Than Later”

Retirement and Estate Planning Work Better Together

So, you’ve been married for a while, and you’re both comfortable with which bank accounts, credit cards and investment accounts are shared and which other accounts are kept separate. However, where the big picture is concerned—like coordinating retirement plans, health coverage and tax planning—you both need to take an active role in planning and making good decisions. In fact, says the article “Couples and Money: When Together is Better” from Kiplinger, the decisions that work well for you as individuals may not be so hot, when they are looked at from a couple’s perspective.

Here’s an example. A man is working at a firm that doesn’t offer a match for his 401(k) contributions, but his wife’s employer does. Instead of contributing to his 401(k) plan, he uses the money to pay off a HELOC (Home Equity Line of Credit) that the couple had taken together to do some upgrades on their home. She contributes enough to her own 401(k) to get her company’s match every year. The goal is to cut their debt and save as much as possible. This worked at that time in the couple’s life.

Ten years later, they are both maxing out their 401(k) savings and working to build short-term savings to send kids to college through the use of 529 College Savings Accounts.

Retirement accounts can never be jointly owned. However, some couples fall into a trap of saving for themselves without considering the overall household. Dual earning couples often run into trouble, when one has a workplace plan and the other does not. The spouse with the workplace plan isn’t thinking that he or she needs to save enough for two people to retire. With two incomes, you might think that both are making retirement a savings priority, but without a 401(k) plan, it’s possible that only one person is saving and only saving enough for themselves.

A general recommendation is that both members of a couple save between 10-15% of their household earnings, rather than their personal earnings, in retirement accounts. Couples should review their respective retirement plans together and plan together. If one has a more generous match, access to a Roth option, or better investment opportunities, they should consider how much the person with the better plan should save.

Couples also need to examine other financial aspects of their lives. Coordinating retirement benefits, reviewing life insurance policies, planning a coordinated strategy for taking Social Security and making informed choices about health care coverage can make a big difference in the family’s financial well-being.

Equally important: making sure that an estate plan is in place. That includes a will that names a guardian for any minor children, a health care proxy and a financial power of attorney. Depending upon the family’s circumstances, that may include trusts or other wealth transfer strategies.

Reference: Kiplinger (Dec. 23, 2019) “Couples and Money: When Together is Better”

Sometimes, Estate Tax Planning Can be a Challenge, Even for a Judge

Five and a half years into the case, the question of whether six life insurance policies at their cash surrender value should be included in the deceased woman’s taxable estate is one question, and the second is whether the estate is liable for the tax underpayment penalties. The policies were purchased for $30 million, reports Bloomberg Tax in the article “$30 Million Estate Tax Going To Be ‘Hard,’ Judge Says.”

The final ruling may also have an impact on the overall attractiveness of using this type of arrangement in estate planning. Known as a ‘split-dollar’ arrangement, this is an agreement between parties to split the cost and benefits of a life insurance policy, where a party paying premiums gets an interest in the payout.

The estate in this case is connected to a set of family businesses, described as the “Interstate Group,” accumulated over the decades after Arthur Morrissette began a moving company in 1943. Arthur’s surviving spouse Clara used her revocable trust to transfer $29.9 million to three trusts for the benefit of each of her three sons. That happened in 2006. The trusts then used the funds to make lump-sum payments for six permanent life insurance policies. Each son’s trust held a policy that insured the lives of the two other brothers.

The transactions were governed by split-dollar arrangements between Clara’s revocable trust and her son’s trusts. When an insured son died or an arrangement was terminated, Clara’s trust received either a policy’s cash surrender value or all of the premium payments on it, whichever was greater. If the policy remained in place until an insured son died, Clara’s payout would be taken out of the death benefit, and the son’s trusts would receive any remaining death benefit.

The first issue at trial was the motivation for setting up this type of split-dollar arrangement in the first place. In order to exclude the cash-surrender value of the life insurance policies from the taxable estate, tax rules require demonstration of a bona fide sale or business transactions. In other words, there needs to have been a significant non-tax reason for the arrangement to be put into place.

Attorneys representing the IRS said that the primary reason for the arrangements was to lower estate taxes, where having to wait to be repaid until the sons passed, lowered the present value of the rights Clara’s trust received in exchange for the $30 million.

One of the sons said that the family entered into the arrangement, so that money from a policy’s death benefit would help the surviving son buy each other’s shares at the time of their deaths, while also repaying their mother. He said that the policies paid a better return than the family was getting by putting the $40 million in investment accounts.

If the Morrissette’s argument about motivation prevails, the tax code also requires proof that Clara’s trust received something that was worth the $30 million that she put in. Experts debate what was the best real-world exchange with which to compare the split trust arrangements.

At the end of the trial, U.S. Tax Court Senior Judge Joseph Goeke said, “I look forward to your briefs, because for me this is going to be a hard case.”

This is a complex case, and estate planning attorneys will be watching it to learn if the split-dollar arrangement has a future.

Reference: Bloomberg Tax (October 14, 2019) “$30 Million Estate Tax Going To Be ‘Hard,’ Judge Says”

How a Charitable Remainder Trust Works
Charity Savings Jar

How a Charitable Remainder Trust Works

A couple lives well on their incomes, but the biggest asset they own is a tract of unimproved real estate that the wife received from her parents many years ago. The land was part of the family’s farm and is located in prime area that is growing in value. The couple is looking for ways to supplement their retirement income, which is based solely on their retirement accounts.

What can they do to generate retirement income and not have to pay a significant proportion of their profit in capital gains? The solution is presented in the article “Using Charitable Trusts in Your Retirement Planning” from Richardland Source.

One strategy would be to establish a Charitable Remainder Trust or CRT. The wife would transfer the land to an irrevocable trust created to provide lifetime payments to her and her husband. At the death of the surviving spouse, the trust property would be transferred to a charitable organization named in the wife’s trust agreement.

Using the CRT, the trustee can sell the trust property and reinvest the proceeds, without have to pay any immediate tax on the gain. The couple would have more money for retirement, than if they simply sold the land and invested the proceeds. They also have the option of investing their tax savings outside of the trust to produce additional income.

The CRT can be either an annuity trust or a unitrust. The type of CRT used will determine how payments from the trust are calculated. If a Charitable Remainder Annuity Trust (CRAT) is chosen, the couple will receive annual payments of a set percentage of the trust’s initial fair market value. The percentage will need to be at least 5% and may not be more than 50%.

If they choose a Charitable Remainder Unitrust (CRUT), they would receive an annual income based on the fair market value of the trust property, which is revalued each year. That percentage must be at least 5% and not more than 50%.

These are complex legal strategies that need to be considered in tandem with an overall estate and tax plan. Speak with an experienced estate planning attorney to learn if using CRTs would be a good strategy for you and your family.

Reference: Richardland Source (October 28, 2019) “Using Charitable Trusts in Your Retirement Planning”

 

Blended Families Need More Thoughtful Estate Plans

Estate planning for blended families is like playing chess in three dimensions: even those who are very good at chess can struggle with so many moving parts in so many dimensions. Preparing an estate plan requires careful consideration of family dynamics, and those are multiplied in blended families. This is another reason why estate plans need to be tailored for each family’s circumstances, as described in the article “Blended families have unique considerations in estate planning” from The News Enterprise.

The last will and testament is often considered the key document in an estate plan. But while the will is very important, it has certain limitations and a few commonly used estate planning strategies can result in unpleasant endings, if this is the only document used.

Spouses often leave everything to each other as the primary beneficiary on death, with all of their children as contingent beneficiaries. This is based on the assumption that the second spouse will remain in the family home, then will distribute any proceeds equally between the children, if and when they move or die. However, the will can be changed at any time before death, as long as the person making the will has mental capacity. If when the first spouse dies, the relationship with the surviving children is not strong, it is possible that the surviving spouse may have their will changed.

If stepchildren don’t have a strong connection with the surviving spouse, which occurs frequently when the second marriage occurs after the children are adults, things can go wrong. Their mutual grief at the passing of the first spouse does not always draw stepchildren and stepparents together. Often, it divides them.

The couple may also select different successor beneficiaries. The husband may name his wife first, then only his children in his will, while the wife may name her husband and then her children in her will. This creates a “survival race.” The surviving spouse receives the property and the children of the spouse who passed won’t know when or if they will receive any assets.

Some couples plan on using trusts for property distribution upon death. This can be more successful, if planned properly. It can also be just as bad as a will.

Trust provisions can be categorized according to the level of control the surviving spouse has after the death of the first spouse. A trust can be structured to lock down half of the trust assets on the death of the first spouse. The surviving spouse remains as a beneficiary but does not have the ability to change the ultimate distribution of the decedent’s portion. This allows the survivor the financial support they need, giving flexibility for the survivor to change their beneficiaries for their remaining share.

Not all blended families actually “blend,” but for those who do, a candid discussion with all, possibly in the office of the estate planning attorney, to plan for the future, is one way to ensure that the family remains a family, when both parents are gone.

Reference: The News Enterprise (November 4, 2019) “Blended families have unique considerations in estate planning”

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A Good Estate Plan Equals Peace of Mind and Peace in the Family

The problems aren’t always evident when the first parent passes. Often, it’s when the second parent becomes gravely ill, that lapses in estate planning become evident. For one family, everyone thought estate plans were all in place after their father died. When their mother suffered a stroke, the adult children learned that they had no access to her financial accounts or her health care directives. No one had thought to update the estate plan.

However, when one parent passes, the family needs to take action. That’s the lesson from the article “Avoid heartache and anxiety with estate planning” from Post Independent. In this case, the family never thought to modify or add anyone’s name to the financial accounts, power of attorney documents, medical power of attorney documents, or HIPAA consent forms. What often happens in these cases, is that family members start bickering about who was supposed to do what.

For those who have not taken the time to learn about estate planning, planning for end-of-life legal, financial and medical matters, the quarrels may be inevitable.

Estate planning is not just for wealthy families. If your aging loved one own property, stocks, bonds or any other assets, they need to have a will, advance directives, powers of attorney and possibly some trusts. Take the time to understand these documents now, before an urgent crisis occurs.

There are few formal courses that teach people about these matters, unless they go to law school. Nearly half of Americans age 55 and over don’t have a will, according to an article appearing in Forbes. Fewer than 20% of these people have health care directives and the proper types of powers of attorney in place.

When it comes to preparing for these matters, the laws are very specific about who can participate in health care and financial conversations and decisions.

Here are some of the documents needed for an estate plan:

  • Last Will and Testament
  • General, Limited and/or Durable Power of Attorney
  • Health Care Power of Attorney
  • Living Will
  • Advance Care Directive
  • HIPAA Consent Form

Preplanning will greatly assist family members and loved ones, so they know what medical and financial efforts you or your parents would want. Having the documents in order will also provide the family with the legal means of carrying out these wishes.

The legal documents won’t solve all problems. Your brother-in-law will still be a pain in the neck and your oldest sister may still make unrealistic demands. However, having these documents in place, will make the best of a bad situation.

Speak with an estate planning attorney to ensure that your estate plan, or your parent’s estate plan, is properly prepared. If someone has moved to another state, their estate plan needs to be updated to align with their new state’s laws.

Reference: Post Independent (November 3, 2019) “Avoid heartache and anxiety with estate planning”

Everyone Should Have a Power of Attorney and Healthcare Power of Attorney

Before snowbirds begin their seasonal journey to warmer climates, it’s time to be sure that they have the important legal documents in place, advises LimaOhio.com in a recent article “Different seasons and documents, same peace of mind.” The two documents are a healthcare power of attorney and a financial power of attorney, and they should be prepared and be ready to be used at any time.

These documents name another person to make healthcare and financial decisions, in case you are not able to make those decisions for yourself. We never think that anything will really happen to us, until it does. Having these documents properly prepared and easily accessible helps our loved ones. They are the ones who will need the powers given by the documents. Without them, they cannot act in a timely manner.

If traveling between a home state and a winter home, it is wise to have a set of documents that align with the laws of both states. It may be necessary to have a separate set of documents for each state, if the laws differ.

Financial powers of attorney typically need updating more often than healthcare powers of attorney. The law has changed in recent years, and there are a number of specific powers that need to be stated precisely, so that the document can grant those powers. This includes the power to gift assets and make a person eligible for nursing home and other healthcare assistance, like Medicaid.

If these documents are not in place and are needed, the only way that someone else can make decisions for the person, is to become a guardian of that person. That includes spouses. Many people think that the fact that two people are married gives them every right, but that is not the case. Guardianship takes considerably more time and costs more than these two documents. It should be noted that once guardianship is established, the person who is the guardian will need to report to the court on a regular basis.

Another document that needs to be in place is a living will or advance directive. This is a document prepared to instruct others as to your wishes for end-of-life care. The document is created when a person is mentally competent and expresses their wishes for what they want to happen, if they are being kept alive by artificial means. For loved ones, this document is a blessing, as it lets them know very clearly what their family members wishes are.

Peace of mind is a wonderful thing to take with you as you prepare for a warm winter in a different climate. Talk with an estate planning attorney to be sure that your estate planning documents will be acceptable in your winter home.

Reference: LimaOhio.com (Oct. 26, 2019) “Different seasons and documents, same peace of mind”

What’s Happens to Digital Assets, When You’re Gone?

We all have many more digital assets than we realize. What happens to those assets when we die?, asks Investment News in the article “4 ways to help clients control their digital afterlife.” The answer is not that simple. There are a large number of rules that survivors must untangle, and many family members are stunned, when they find that not only don’t they have access to these accounts, but the data in the accounts may be deleted permanently, when they try to log in too many times.

Almost all states have passed the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA), and experts are gaining a better understanding of how this law works and what happens to digital assets when owners die.

Start by naming a digital assets fiduciary in your last will and testament. This person will be able to gain access to digital assets, as directed in the will. If they list their wishes for specific disposition of the assets, their wishes supersede the terms of service provision of each individual site.

Note that these provisions apply ONLY if clients take specific action. Education of family members is important here. This should be part of the overall estate plan.

Start by creating a complete inventory of all digital assets. Try using these categories:

  • Communication: email, contacts, login for phone
  • Rewards programs: hotels, airlines, restaurants
  • Shopping: eBay, Craig’s List, Amazon, department stores
  • Online storage sites: iCloud, data backup sites
  • Finances: online payments, banking, investment accounts, cryptocurrency
  • Social media: Twitter, Instagram, LinkedIn, Facebook, Snap Chat, WhatsApp
  • Gaming sites and fantasy leagues—especially if there is real money involved.

Make sure your will has a provision that names a digital assets fiduciary, as well as an alternate, if that person cannot serve.

In a separate document or in the will itself, list your wishes for each and every digital asset. Do you want your social media sites memorialized or do you want them shut down? Who gets your airline frequent flier miles? Who should have access to emails, taxes and social media sites? Where should pictures go?

It may be easier to use one of several available services that generate secure passwords for each site and store the passwords and usernames. Using provisions for denial of access until death, the named digital fiduciary should have the master password to that service, plus instructions for any two-factor authentication. Remember that your will becomes a public document upon your death, so don’t put any passwords in that document.

Reference: Investment News (Oct. 22, 2019) “4 ways to help clients control their digital afterlife”

Do Name Changes Need to Be Reflected in Estate Planning Documents?

When names change, executing documents with the person’s prior name can become problematic. For example, what about a daughter who was named as a health care representative by her parents several years ago, who marries and changes her name? Then, to make matters more complicated, add the fact that the couple’s daughter-in-law has the same first name, but a different middle name. That’s the situation presented in the article “Estate Planning: Name changes and the estate plan” from nwi.com.

When a person’s name changes, many documents need to be changed, including items like driver’s licenses, passports, insurance policies, etc. The change of a name isn’t just about the person who created the estate plan but also to their executors, heirs, beneficiaries and those who have been named with certain legal powers through power of attorney (POA) and health care power of attorney.

It’s not an unusual situation, but it does have to be addressed. It’s pretty common to include additional identifiers in the documents. For example, let’s say the will says I leave my house to my daughter Samantha Roberts. If Samantha gets married and changes her last name, it can be reasonably assumed that she can be identified. In some cases, the document may be able to stay the same.

In other instances, the difference will be incorporated through the use of the acronym AKA—Also Known As. That is used when a person’s name is different for some reason. If the deed to a home says Mary Green, but the person’s real name is Mary G. Jones, the term used will be Mary Green A/K/A Mary G. Jones.

Sometimes when a person’s name has changed completely, another acronym is use: N/K/A, or Now Known As. For example, if Jessica A. Gordon marries or divorces and changes her name to Jessica A. Jones, the phrase Jessica A. Gordon N/K/A Jessica A. Jones would be used.

However, in the situation noted above, most attorneys to want to have the documents changed to reflect the name change. First, there are two people in the family with similar names. It is possible that someone could claim that the person wished to name the other person. It may not be a strong case, but challenges have been made over smaller matters.

Second is that the document being discussed is a healthcare designation. Usually when a health care power of attorney form is being used, it’s in an emergency. Would a doctor make a daughter prove that she is who she says she is? It seems unlikely, but the risk of something like that happening is too great. It is much easier to simply have the document updated.

In most matters, when there is a name change, it’s not a big deal. However, in estate planning documents, where there are risks about being able to make decisions in a timely manner or to mitigate the possibility of an estate challenge, a name change to update documents is an ounce of prevention worth a pound of trouble in the future.

Reference: nwi.com (October 20, 2019) “Estate Planning: Name changes and the estate plan”

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