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Elder Law Estate Planning

Why Should I Create a Trust If I’m Not Rich?

“Your true assets are the collections of your quality moments on the earth.”
― Amit Ray, Mindfulness Living in the Moment – Living in the Breath

Carve your name on hearts, not tombstones. A legacy is etched into the minds of others and the stories they share about you. —Shannon Adler

It’s probably not high on your list of fun things to do, considering the way in which your assets will be distributed, when you pass away. However, consider the alternative, which could be family battles, unnecessary taxes and an extended probate process. These issues and others can be avoided by creating a trust.

Barron’s recent article, “Why a Trust Is a Great Estate-Planning Tool — Even if You’re Not Rich,” explains that there are many types of trusts, but the most frequently used for these purposes is a revocable living trust. This trust allows you—the grantor—to specify exactly how your estate will be distributed to your beneficiaries when you die, and at the same time avoiding probate and stress for your loved ones.

When you speak with an estate planning attorney about setting up a trust, also ask about your will, healthcare directives, a living will and powers of attorney.

Your attorney will have retitle your probatable assets to the trust. This includes brokerage accounts, real estate, jewelry, artwork, and other valuables. Your attorney can add a pour-over will to include any additional assets in the trust. Retirement accounts and insurance policies aren’t involved with probate, because a beneficiary is named.

While you’re still alive, you have control over the trust and can alter it any way you want. You can even revoke it altogether.
A revocable trust doesn’t require an additional tax return or other processing, except for updating it for a major life event or change in your circumstances. The downside is because the trust is part of your estate, it doesn’t give much in terms of tax benefits or asset protection. If that was your focus, you’d use an irrevocable trust. However, once you set up such a trust it can be difficult to change or cancel. The other benefits of a revocable trust are clarity and control— you get to detail exactly how your assets should be distributed. This can help protect the long-term financial interests of your family and avoid unnecessary conflict.

If you have younger children, a trust can also instruct the trustee on the ages and conditions under which they receive all or part of their inheritance. In second marriages and blended families, a trust removes some of the confusion about which assets should go to a surviving spouse versus the children or grandchildren from a previous marriage.

Trusts can have long-term legal, tax and financial implications, so it’s a good idea to work with an experienced estate planning attorney.

Reference: Barron’s (February 23, 2019) “Why a Trust Is a Great Estate-Planning Tool — Even if You’re Not Rich

If you ask yourself “should Create a Trust If I’m not Rich?” then these are the answers for you.

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Elder Law Estate Planning Guardianship

What a Durable Power of Attorney Can Do?

“Make sure you visualize what you really want, not what someone else wants for you.” Jerry Gillies

“No one is useless in this world who lightens the burdens of another.” Charles Dickens

Helping aging parents with daily tasks can become a challenge, if the parent has limited mobility. A trip to the bank, for example, will require coordinating the adult child’s responsibilities with the aging parent’s limitations. If the parent has more energy in the morning, for instance, but the adult child is working, this can become a bigger challenge than if the adult child can go to the bank on behalf of the parent, when it’s convenient for them — at a lunch break, for instance.

In this situation, as noted in The Daily Sentinel’s article “Tools to help your aging parent,” having a durable power of attorney will help. This type of power of attorney is a legal document that permits a child or other named individual to handle certain responsibilities, like banking. Granting a power of attorney to a child doesn’t mean giving up total control, which is often a concern of aging parents. It simply means that the child is now legally allowed to handle these tasks.

What a Durable Power of Attorney Can Do? A durable power of attorney is different than the “general medical power of attorney.” As implied by its name, this is limited to making decisions about the parent’s health care and is usually used only when the parent is not able to make these decisions on their own.

There are more serious situations, where neither of these types of power of attorney is enough, such as when the parent lacks capacity because of dementia or a medical decision. It is necessary to protect the parent from themselves or anyone who might try to take advantage of their lack of clear mental capacity. This may require that an adult child needs to be appointed as a guardian for their parent.

Being appointed a guardian can be a very emotional event, since the parent and child are not just switching emotional roles, but legal roles. The parent no longer has the capacity to make significant decisions, because a court has found that they no longer have that ability.

You may have heard the term “conservatorship” used. It is similar to guardianship, except that the conservatorship only allows for control over the parent’s financial affairs.

Guardianship is taken very seriously, as it should be. This removes an adult’s right to make any kind of decision on their own. In some states, including Colorado, the court must first be convinced that the parent is unable to effectively receive or evaluate information or to make or communicate decisions. They must be deemed incapacitated, before guardianship can be established. Once that standard has been met, then guardianship is established. If there is a doubt about incapacity, then no guardianship will be established, and the family is faced with finding other ways to help the aging parent.

What a Durable Power of Attorney Can Do is allow parents and their children to face many issues that are best addressed before incapacity becomes an issue. If the family does not have a plan for the aging parent’s care, it is recommended that the family make an appointment with an estate planning attorney to discuss the various options.

Reference: The Daily Sentinel (March 24, 2019) “Tools to help your aging parent”

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Elder Law Estate Planning

Is a Revocable Trust Valuable in Estate Planning?

“Most of the important things in the world have been accomplished by people who have kept on trying when there seemed to be no hope at all.” Dale Carnegie.

“In three words I can sum up everything I’ve learned about life: it goes on.” Robert Frost.

Yes a revocable trust is valuable in estate planning. There’s quite a bit that a trust can do to solve big estate planning and tax problems for many families.

As Forbes explains in its recent article, “Revocable Trusts: The Swiss Army Knife Of Financial Planning,” trusts are a critical component of a proper estate plan. There are three parties to a trust: the owner of some property (settler or grantor) turns it over to a trusted person or organization (trustee) under a trust arrangement to hold and manage for the benefit of someone (the beneficiary). A written trust document will spell out the terms of the arrangement.

One of the most useful trusts is a revocable trust (inter vivos) where the grantor creates a trust, funds it, manages it by herself, and has unrestricted rights to the trust assets (corpus). The grantor has the right at any point to revoke the trust, by simply tearing up the document and reclaiming the assets, or perhaps modifying the trust to accomplish other estate planning goals.

After discussing trusts with your attorney, he or she will draft the trust document and re-title property to the trust. The assets transferred to a revocable trust can be reclaimed at any time. The grantor has unrestricted rights to the property. During the life of the grantor, the trust provides protection and management, if and when it’s needed.

Let’s examine the potential lifetime and estate planning benefits that can be incorporated into the trust:

  • Lifetime Benefits. If the grantor is unable or uninterested in managing the trust, the grantor can hire an investment advisor to manage the account in one of the major discount brokerages, or he can appoint a trust company to act for him.
  • Incapacity. A trusted spouse, child, or friend can be named to care for and represent the needs of the grantor/beneficiary. She will manage the assets during incapacity, without having to declare the grantor incompetent and petitioning for a guardianship. After the grantor has recovered, she can resume the duties as trustee.
  • This can be a stressful legal proceeding that makes the grantor a ward of the state. This proceeding can be expensive, public, humiliating, restrictive and burdensome. However, a well-drafted trust (along with powers of attorney) avoids this.

The revocable trust is a great tool for estate planning because it bypasses probate, which can mean considerably less expense, stress and time.

In addition to a trust, ask your attorney about the rest of your estate plan: a will, powers of attorney, medical directives and other considerations.

Is a Revocable Trust Valuable in Estate Planning? Ask any estate planning attorney or any person that had to face the mistake of not creating one. Any trust should be created by a very competent trust attorney, after a discussion about what you want to accomplish.

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Elder Law Estate Planning

How Do I Get My Mom’s Affairs in Order?

“It is a curious thing, the death of a loved one. We all know that our time in this world is limited, and that eventually all of us will end up underneath some sheet, never to wake up. And yet it is always a surprise when it happens to someone we know. It is like walking up the stairs to your bedroom in the dark, and thinking there is one more stair than there is. Your foot falls down, through the air, and there is a sickly moment of dark surprise as you try and readjust the way you thought of things.” Lemony Snicket, Horseradish

“Life is for the living.
Death is for the dead.
Let life be like music.
And death a note unsaid.”

Langston Hughes, The Collected Poems
What can you do to make sure your mother’s financial affairs are in proper order?

The Monterey Herald’s recent article, “Financial planning: Making sure Mom is taken care of,” says to first make sure that she has her basic estate planning documents in place. She should have a will and an Advance Health Care Directive. Talk to an experienced estate planning attorney to make sure these documents fully reflect your mother’s desires. An Advance Health Care Directive lets her name a person to make health care decisions on her behalf, if she becomes incapacitated. This decision-making authority is called a Power of Attorney for Health Care, and the person receiving the authority is known as the agent.

Based on the way in which the form is written, the agent can have broad authority, including the ability to consent to or refuse medical treatment, surgical procedures and artificial nutrition or hydration. The form also allows a person to leave instructions for health care, such as whether or not to be resuscitated, have life prolonged artificially, or to receive treatment to alleviate pain, even if it hastens death. To limit these instructions in any specific way, talk to an attorney.

Another option is to create a living trust, if the value of her estate is significant. In some states, estates worth more than a certain amount are subject to probate—a costly, lengthy and public process. Smaller value estates usually can avoid probate. When calculating the value of an estate, you can exclude several types of assets, including joint tenancy property, property that passes outright to a surviving spouse, assets that pass outside of probate to named beneficiaries (such as pensions, IRAs, and life insurance), multiple party accounts or pay on death (POD) accounts and assets owned in trust, including a revocable trust. You should also conduct a full inventory of your parent’s accounts, including where they’re held and how they’re titled. Update the named beneficiaries on IRAs, retirement plans and life insurance policies.

Some adult children will have their parent name them as a joint owner on their checking account. This allows you greater flexibility to settle outstanding obligations, when she passes away. Remember that a financial power of attorney won’t work here, because it will lapse upon your mother’s death. However, note that any asset held by joint owners are subject to the creditors of each joint owner. Do not add your daughter as a joint owner, if she has marital, financial, or legal problems!

How Do I Get My Mom’s Affairs in Order? You also shouldn’t put your name as a joint owner of a brokerage account—especially one with low-cost basis investments. One of the benefits of transferring wealth, is the step-up in cost basis assets receive at time of death. Being named as the joint owner of an account will give you control over the assets in the account—but you won’t get the step up in basis, when your mother passes.

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Elder Law Estate Planning Guardianship

Dementia and Advanced Directive

The Roanoke Times advises in the recent article “What to do in absence of advance directive” to talk to an experienced elder care attorney to coordinate the necessary legal issues, when dementia may be at issue with a parent or other loved one. Next, ask your physician for a geriatric evaluation consultation for your loved one with a board-certified geriatrician and a referral to a social worker to assist in navigating the medical system.

It’s wise for anyone older than 55 to have advance directives in place, should they become incapacitated, so a trusted agent can fulfill the patient’s wishes in a dignified manner. Think ahead and plan ahead.

As a family’s planning starts, the issue of competence must be defined. A diagnosis of Alzheimer’s disease doesn’t necessarily indicate incompetence or a lack of capacity. At this point, a patient still has the right to make a decision—despite family members disagreeing with it. A patient’s competency should be evaluated after a number of poor choices or an especially serious choice that puts a patient or others at risk.

An evaluation will determine the patient’s factual understanding of concepts, decision-making and cogent expression of choices, the possible consequences of their choices and reasoning of the decision’s pros and cons. Healthcare professionals make the final determination, and these results are provided to the court.

If a patient passes the evaluation, she is deemed to have the mental capacity to make choices on her own. If she cannot demonstrate competency, an attorney can petition the court for a competency hearing, after which a trustee may be appointed to oversee her affairs.

The time to address these types of issues is before the patient becomes incapacitated. The family should clearly define and explore the topics of living wills, health care proxies, estate planning and powers of attorney now with an experienced elder law attorney.

Taking these proactive actions can be one of the greatest gifts a person can bestow upon herself and her loved ones. It can give a family peace of mind. If you put an advance directive in place, it can provide that gift when it’s needed the most.

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Elder Law Estate Planning

Are You Forgetting this Estate Planning Document?

Forbes’ recent article, “Two-Thirds Of All Americans Are Missing This Estate Planning Document,” explains that a health care directive is a legal document in which an individual writes down his decisions for caregivers in the event of illness or dementia and makes instructions about end of life decisions. It can also provide guidance on how caregivers should handle the body after death.

Health care directives are also called living wills, durable health care powers of attorney, or medical directives, but they all serve the same function, which is to provide guidance and direction on how a person’s medical and death decisions should be made.

Despite the importance of a health care directive, a 2017 study found that only 33% of all Americans have one.

A critical decision in a health care directive is selecting an agent. This is a proxy who acts on your behalf to make decisions that are consistent with your wishes. It’s important to pick an individual whose values are aligned with yours. This is your advocate on decisions, like if you want to have treatment continued or just be kept comfortable in palliative care.

Once you choose an agent, review your directive with her. This will give her guidance if and when the need for her to step in arises.

The agent’s role in the health care directive doesn’t end at death but continues to ensure that your post-mortem wishes are carried out. When the person dies, the agent takes control of the body. Prior to funeral plans, the agent must make certain that any organ donation wishes are carried out. This decision is usually shown on a person’s driver’s license, but it’s also re-stated in the health care directive.

After the donation wishes are carried out, the agent helps to make sure funeral wishes are handled properly. These instructions can be detailed in the health care directive.
Are You Forgetting this Estate Planning Document? With a health care directive put in place, you make things easier for your family and loved ones.

Reference: Forbes (December 13, 2019) “Two-Thirds Of All Americans Are Missing This Estate Planning Document”

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Elder Law Estate Planning Guardianship

You Need a Power of Attorney in Your Estate Plan

A power of attorney is an important legal document that allows a person, known as the principal, to designate a person of their choice to become their agent, acting on their behalf. This is usually done when the principal is unable to manage their financial affairs due to disability, illness or incapacity. It must be done while the principal is still competent, notes Delco Times in the article “What’s the difference between guardianship and power of attorney?” There are also instances when power of attorney is used when the principal is unable to conduct their own affairs, because they are traveling or are deployed overseas.

Related documents are the health care power of attorney and the durable power of attorney. A durable financial power of attorney is a document where the principal designates the powers that the agent may exercise over their finances. The powers granted by this document can be used by the agent, regardless of the principal’s capacity or disability.

The principal has the option to grant very broad authority to their agent. For instance, the principal could give their agent the authority to gift all their assets, while they are still living. That’s why it is very important for the specific provisions in the power of attorney to be carefully reviewed and tailored to the principal’s wishes. There are risks in naming an agent, since they are able to exercise complete control over the principal’s assets. The agent must be 100% trustworthy.

A health care power of attorney allows an agent to make decisions about the principal’s health. Note that this document is operative only when a copy is provided to the attending physician, and the physician determines that the principal is incompetent.

Both health care power of attorney and financial power of attorney may be revoked by the principal at any time and for any reason.

If the principal has not had these documents prepared in advance and then becomes incompetent by reason of injury, illness, or mental health issues, they may not have the legal right to sign the power of attorney. When this happens, it is necessary for a guardianship proceeding to occur, so that other people may be named to take charge of the person’s financial and health affairs. Advance planning is always preferred.

If an individual is born with a disability that impacts their capacity and upon attaining legal age, does not have the capacity to sign a power of attorney, then a guardianship proceeding will be necessary. The court must determine if the person is truly incapacitated and if there might be an alternative to appointing a guardian. Once the guardian is appointed, the principal no longer has the legal right to make decisions on their own behalf.

A guardianship is a much more restrictive tool than a power of attorney. For one thing, the power of attorney generally does not need the involvement of the court. There is always the possibility that a guardian is appointed who does not know the family or the individual. A durable power of attorney allows a person to appoint someone they know and trust to help them and their family, if and when they become incapacitated.

Speak with your estate planning attorney about how power of attorney works, and when guardianship issues might arise. Being prepared in advance by having the right documents in place, is always better than having the family going to court and hoping that the right decisions are made.
Reference: Delco Times (May 8, 2019) “What’s the difference between guardianship and power of attorney?”

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Here’s How You Know You’re an Adult: 10 Documents

Fifty is a little on the late side to start taking care of these important life matters. However, it is better late than never. It’s easy to put these tasks off, since the busyness of our day-to-day lives gives us a good reason to procrastinate on the larger issues, like death and our own mortality. However, according to Charlotte Five’s article “For ultimate adulting status, have these 10 documents by the time you’re 35,” the time to act is now.

Here are the ten documents you need to get locked down.

Here’s How You Know You’re an Adult: 10 Documents

A Will. The last will and testament does not have to be complicated. However, it does need to be prepared properly, so that it will be valid. If your family includes minor children, you need to name a guardian. Pick an executor who will be in charge when you pass. If you don’t have a will, the law of your state will determine how your assets are distributed, and a court will name a guardian for your children. It is better to have a will and put your wishes down in writing.

Life insurance. There are two basic kinds: term insurance, which covers about twenty years, and universal or whole, which covers you for your lifetime. You need enough to cover your liabilities: your home mortgage, college funding for your kids and any outstanding debts, like credit cards or a car loan. This way, you aren’t saddling heirs with your debt.

Durable power of attorney. This document lets you designate someone to pay your bills, manage your money and make financial decisions for you, if you become incapacitated. Without it, your relatives will need to go to court to be appointed power of attorney. Pick a trusted person and have the form done, when you meet with your estate planning attorney.

Twice your annual income in savings. Most Americans don’t do this. However, if you start saving, no matter how small an amount, you’ll be glad you did. You need savings to avoid creating debt, if an emergency occurs. A cash cushion of six months’ worth of monthly expenses in a savings account will give you peace of mind.

Insurance coverage. Make sure that you have the right insurance in place, in addition to life insurance. That means health insurance, auto insurance and disability insurance.

Credit report. People with better credit reports get better rates on home and auto loans. You can get them free from the big credit reporting services. Make sure everything is correct, from your address to your account history.

A letter of instruction. Where do you keep your estate planning documents? What about your bank statements, taxes and insurance documents? What about your digital assets? Keep a list for easy access for those who might have to figure out your affairs.

Retirement plan. Most people only know they don’t have enough saved for retirement. That’s not good enough. If you aren’t enrolled in your company’s 401(k) or other retirement savings plan, get on that right away. If your company matches contributions, make sure you are saving enough to get every bit of those matching dollars. If your company doesn’t have a retirement plan, then open an IRA or a Roth IRA on your own. You should try to contribute as much as you possibly can.

Updated resume. It also helps to do the same thing with your LinkedIn profile. No matter how long you’ve been in your field, everyone looks at your LinkedIn profile to see who you are and what and who you know. Make sure you have an updated resume, so you can easily send it out, whether it’s a casual conversation about a speaking opportunity or if you’re starting to look for a new position.

A budget. Here’s how you know you’re really an adult. Budgets went out of fashion for a while, but now they are bigger than avocado toast. If you don’t know what’s coming in and what’s going out, you can’t possibly have any kind of control or direction over your financial life. Start tracking your expenses, matching with your income and making any necessary changes.

One last thing—do you have a bucket list? Don’t wait until you’re 70 to consider all the places you’d like to go or the people you’d like to meet. It’s true–you only live once, and we should enjoy the ride.

Reference: Charlotte Five (April 23, 2019) “For ultimate adulting status, have these 10 documents by the time you’re 35”

3. does not need the involvement of the court

Here’s Why a Basic Form Doesn’t Work for Estate Planning:

It’s true that an effective estate plan should be simple and straightforward, if your life is simple and straightforward. However, few of us have those kinds of lives. For many families, the discovery that a will that was created using a basic form is invalid leads to all kinds of expenses and problems, says The Daily Sentinel in an article that asks “What is wrong with using a form for my will or trust?”

If the cost of an estate plan is measured only by the cost of a document, a basic form will, of course, be the least expensive option — on the front end. On the surface, it seems simple enough. What would be wrong with using a form?

Actually, a lot is wrong. The same things that make a do-it-yourself, basic form will seems to be attractive, are also the things that make it very dangerous for your family. A form does not take into account the special circumstances of your life. If your estate is worth several hundreds of thousands of dollars, that form could end up putting your estate in the wrong hands. That’s not what you had intended.

Another issue: any basic form will that is valid in all 50 states is probably not going to serve your purposes. If it works in all 50 states (and that’s highly unlikely), then it is extremely general, so much so that it won’t reflect your personal situation. It’s a great sales strategy, but it’s not good for an estate plan.

If you take into consideration the amount of money to be spent on the back end after you’ve passed, that $100 will becomes a lot more expensive than what you would have invested in having a proper estate plan created by an estate planning attorney.

What you can’t put into dollars and cents, is the peace of mind that comes with knowing that your estate plan, including a will, power of attorney, and health care power of attorney, has been properly prepared, that your assets will go to the individuals or charities that you want them to go to, and that your family is protected from the stress, cost and struggle that can result when wills are deemed invalid.

Here’s one of many examples of how the basic, inexpensive form created chaos for one family. After the father died, the will was unclear, because it was not prepared by a professional. The father had properly filled in the blanks but used language that one of his sons felt left him the right to significant assets. The family became embroiled in expensive litigation, and became divided. The litigation has ended, but the family is still fractured. This was not what their father had intended.

Other issues that are created when forms are used: naming the proper executor, guardians and conservators, caring for companion animals, dealing with blended families, addressing Payable-on-Death (POD) accounts and end-of-life instructions, to name just a few.

Avoid the “repair” costs and meet with an experienced estate planning attorney in your state to create an estate plan that will suit your needs.

Reference: The Daily Sentinel (May 25, 2019) “What is wrong with using a form for my will or trust?”

I hope this blog post answers Here’s Why a Basic Form Doesn’t Work for Estate Planning.

4. and when guardianship issues might arise

COMPASSIONATE & PERSONALIZED LEGAL ASSISTANCE

When an individual is mentally or physically disabled or impaired, the court may appoint a legal guardian for that individual. It is the guardian’s responsibility to carry out decisions for the disabled or impaired individual (known as the “ward”), both financial and non-financial. Typically, guardians are established for those who have longstanding mental or physical disabilities, or those who do not have a power of attorney and become impaired due to unforeseen accidents, such as a car crash, truck collision, or other personal injury.

If you are seeking adult guardianship for a loved one, it’s important that you have the assistance of an experienced Queens County guardianship attorney on your side. At the Law Office of Frank Bruno, Jr., our guardianship attorney in Queens County has more than two decades of legal experience, giving him the skills, resources, and knowledge of the legal system he needs to aggressively advocate for you. We also assist clients who wish to establish a guardian in the event that they themselves become unable to make financial and non-financial decisions in the future.

WHAT ARE THE RESPONSIBILITIES OF A LEGAL GUARDIAN?

While a legal guardian is not a caretaker and therefore is not expected to manage every detail of the ward’s day-to-day life, certain responsibilities fall to the guardian.

These responsibilities include:

⦁ Handling financial and medical decisions for the ward

⦁ Ensuring all proper care is available and maintained

⦁ Overseeing the availability of educational and medical services
⦁ Sending court updates on the condition of the ward

The main responsibility of a legal adult guardian is to make any and all decisions on behalf of the ward that they are not capable of making on their own.

WHO CAN BE SELECTED AS A GUARDIAN?

While various factors are always considered, guardians are typically chosen based on specific qualifications. The guardian must be over the age of 18, free of any felony of gross misdemeanor charges (including implications of dishonesty such as bribery or forgery), and the guardian must be found capable of making the necessary decisions on behalf of the ward.
Typically, the court will take the wishes of the ward, if any, into account when appointing a guardian. If the ward is unable to make their wishes known or has no preference, the court will determine if the ward has a power of attorney. If no power of attorney has been named, guardianship usually falls to a family member, including a spouse, parent, sibling, adult child, grandparent, or another member of the ward’s family.

HOW OUR FIRM CAN HELP

Whether you are seeking guardianship of a family member or loved one, or you wish to prepare a power of attorney for yourself in the event of an unexpected accident, the Law Office of Frank Bruno, Jr. can help. Our Queens County guardianship attorneys have helped thousands of clients navigate the legal process, and can provide you with sound, objective advice and skilled representation. No matter your family law concern, we offer personalized services tailored to your unique situation, along with free initial consultations to assess every detail of your specific circumstances.

5. the right documents in place

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Elder Law Estate Planning

What’s the Difference Between a Life Estate and an Irrevocable Trust?

What’s the Difference Between a Life Estate and an Irrevocable Trust? Investopedia’s recent article asks “Life Estate vs. Irrevocable Trust: What’s the Difference?” The article explains that a life estate and an irrevocable trust are two different ways to make certain that assets are transferred to the right party. Each of these has advantages and disadvantages.

A life estate that’s used to gift property will divide the ownership between the giver and receiver. Some parents create a life estate to reduce their assets to qualify for Medicaid. While the parent still has some interest in the property, Medicaid doesn’t count it as an asset. A life estate lasts for the lifetime of its creator and it prohibits the selling of the asset, without the permission of its beneficiaries. Therefore, a parent can’t sell a home without the permission of his children, if they are beneficiaries of the life estate.

If you’re attempting to be eligible for Medicaid and are concerned that your home will disqualify you, ask your estate planning or Medicaid planning attorney about an irrevocable trust. With this trust, if a husband and wife both own a home, the husband can transfer his portion to his wife, and his Medicaid eligibility won’t include the home.

There must be a five-year gap between the creation of the trust and the application for Medicaid. If there isn’t, those funds will be counted as part of existing assets when determining Medicaid eligibility. Therefore, you can’t start an irrevocable trust right before you apply for Medicaid if you want to receive those benefits.

One negative of an irrevocable trust is that the founder of the trust relinquishes any rights he has to the home. However, the beneficiary of the trust can’t sell the home, unless he or she is also named as a trustee. Once an irrevocable trust has been created, the trustee can’t take back control of the trust.

Remember that a life estate and an irrevocable trust aren’t always mutually exclusive. It’s possible to place an asset (like a home) in an irrevocable trust and keep a life estate. In that case, you’re irrevocably transferring ownership of your house to the trust. However, you still keep control. In this case, you are permitted to sell the home, remodel, or rent out a room, but the house itself—or the sales proceeds from it—would remain in the irrevocable trust.

In this situation, a parent would also not risk giving their children part of the tax liability that is associated with owning a home. The parent would keep more personal control over the house and wouldn’t need their child’s permission to sell the home. This may be the best option because it would still allow the parents to apply for Medicaid and not have the property count in their assets, but he or she would remain the sole decision-maker for the house.

What’s the Difference Between a Life Estate and an Irrevocable Trust? Both have their pros and cons, but a combination of the two can often be the best answer. Make no moves either way, without the advice of an experienced elder law attorney.

Reference: Investopedia (June 16, 2019) “Life Estate vs. Irrevocable Trust: What’s the Difference?”

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“Life Estate vs. Irrevocable Trust: What’s the Difference?”

Do I Need a Living Trust or a Will? Or Both?

“Tax planning is one element of estate planning, and in many estates is the least important factor. The larger issue is: Who will inherit and what will they inherit?” First National Trust Update April 2015

“A man of 70 need not be always feeling, much less talking, about his approaching death, but a wise man of 70 should always take it into account. …He would be criminally foolish not to make, indeed not to have made long since, his will.” C. S. Lewis (1898-1963)

Do I need a living trust or a will? Or both? This is just one of the reasons people think they want a trust: to ensure that the value of their overall estate will not decrease, because of the cost of probate. The most common way to do that is with a trust, says The Houston Chronicle in the article “Elder Law: Which should I have—A Living trust or a will?”

In some states, probate is not an expensive or overly time-consuming issue. Texas, for example, has what is called an independent administration. Executors handle the tasks involved in settling an estate and distributing assets to beneficiaries. As a result, there’s very little court involvement. However, New York does not have that process and as a result probate has extensive court involvement. An estate planning attorney in your area will be able to explain the details of your state’s procedures and discuss whether a trust is right for your estate. They’ll also explain the difference between different types of trusts.

The trust most frequently used to avoid probate, is known as a revocable trust, living trust or an “inter vivos” trust.

Selecting the best type of trust for each situation is different. Here are some advantages of living trusts:

Avoiding probate. The cost of probate alone is not reason enough to use a trust. However, if your assets are in trusts, you may not need to file an inventory listing your assets with the court. That’s not always required in every jurisdiction, but if it is required where you live, a trust can help keep your asset list private, by ensuring that it is only seen by beneficiaries.

Asset management for incapacity. A living trust goes into effect, while you are alive. If you become incapacitated, an alternate trustee can step in to manage assets, pay bills and ensure that finances are taken care of.

Avoiding probate in another state. If you own out-of-state property, your estate may need to be probated in your home state and in the other state. If you have a living trust, out-of-state parcels of land can be deeded into the trust during your lifetime, thus avoiding the need for probate in another state. After your passing, your trustee can handle the out-of-state property in the living trust.

Administrative ease. There are, unfortunately, instances when Power of Attorney can be challenged by financial institutions. The authority of a trustee is more likely to be recognized, by banks, investment companies, etc.

There are some questions about whether it’s better to have a living trust or a will. The most complex part of having a living trust, is the process of funding the trust. It is imperative for the trust to work, that every asset you own is either transferred into the trust or retitled into the name of the trust. If assets are left out or incorrectly funded, then probate will probably be necessary. This can occur, even if only one single asset is left out.

If an asset is controlled by beneficiary designation, then the trust may not need to be named a beneficiary, should you want it to pass directly to one or more beneficiaries.

Funding the trust becomes complicated, when retirement accounts are involved. Consult with an experienced estate planning attorney, if you want to make the trust a designated beneficiary of a retirement account. This is because very specific and complex rules may limit the ability to “stretch” the distributions from the account.

Using a trust instead of a will-based plan is growing in popularity, but it should never be an automatic decision. An estate planning attorney will be able to explain the pros and cons of each strategy and help you and your family decide which is better for you and what advanced directives are required.

Reference: The Houston Chronicle (Feb. 15, 2019) “Elder Law: Which should I have—A Living trust or a will?”

3. owning a home – https://www.frankbrunolaw.com/property-transfers-and-gift-taxes-basics/

Property Transfers and Gift Taxes: Basics.

As we age, our needs change. That includes our needs for the property that we own. For one person, the family home was rented to the daughter and her spouse as a “rent-to-own” property. This is generous, since it gives the daughter an opportunity to build equity in a home. The parent had questions about what kind of a deed would be needed for this transaction, and if any gift taxes need to be paid on the gift of the house and a separate parcel of land. The answers are presented in the article “Dealing with property transfers and gift taxes” from Chicago Tribune.

For starters, there are tax advantages while the person is living, since the home is an investment for the owner, as described above. On the day that the home is deeded over to the daughter, she will own the home at the cost basis of the parent. Here is why. The IRS defines the “cost basis” of a real estate property as the price that the owner paid for it, plus the cost of purchase and any fees associated with the sale plus the cost of any new materials or structural improvements.

When you give someone a home, they receive it at the price that was paid for it plus these costs.

Let’s say this person paid $50,000 for the family home, and it’s now worth $700,000. If you give the home to a family member, it’s as if she paid $50,000 for it, not $700,000. There may be tax consequences when she goes to sell it, but that’s in the distant future.

It’s different if the home is inherited. In that case, if the house was valued at $700,000 on the date that the owner died, the heir’s cost basis would be $700,000. However, if the heir sold the property on the exact same day (this is an unlikely scenario), there would be no tax owed on the sale for the heir.

This is a very simplified explanation of how a home can be passed from one generation to the next. It would be best to speak with a good estate attorney, who can evaluate all the factors, since every situation is different. One suggestion might be to put the property into a living trust, in which case the daughter will still pay rent to the parent, but then would inherit the property when the parent died.

The estate planning attorney could use the same living trust for the separate parcel of land. Once the home and the land are deeded into the living trust, the owner can state her wishes for how the properties are to be used.

As for the question of gift taxes, anyone can give anyone else $15,000 per year, with no need to file any forms with the IRS or pay any taxes. If you give someone more than $15,000 in one year, the IRS requires a gift tax form with the federal income tax return.

A meeting with an estate planning attorney to discuss Property Transfers and Gift Taxes: Basics is the best way to ensure that the transfer of a family home to a family member is handled correctly and that there are no surprises.

Reference: Chicago Tribune (April 23, 2019) “Dealing with property transfers and gift taxes”

Categories
Elder Law Estate Planning

Someday’ Is Sooner than You Think

If you and your siblings have been worrying about older parents please understand that ‘someday’ is sooner than you think.

The cause for sleepless nights for many, now comes from worrying about older parents. As parents age, it becomes more important to talk with them about a number of “someday” issues, advises Kanawha Metro in the article Preparing for someday.” As their lives move into the elder years, your discussions will need to address housing, finances and end-of-life wishes.

Where do your parents want to spend their later years? It may be that they want to move to an active retirement community not far from where they live now, or they may want a complete change of scenery, perhaps in a warmer climate.

One family made arrangements for their mother to take a tour of a nearby senior-living community, after their father passed. By showing their mother the senior-living community, they made an unknown, slightly intimidating thing into a familiar and attractive possibility. Because she saw the facility with no pressure, just a tour and lunch, she knew what kind of options it presented. The building was clean and pretty, and the staff was friendly. Therefore, it was a positive experience. She was able to picture herself living there.

Money becomes an issue, as parents age. If the person who always handled the family finances passes away, often the surviving spouse is left trying to figure out what has been done for the last five decades. A professional can help, especially if they have had a long-standing relationship.

However, when illness or an injury takes the surviving spouse out of the picture, even for a little while, things can get out of control fast. It only takes a few weeks of not being able to write checks or manage finances, to demonstrate the wisdom of having children or a trusted person named with a power of attorney to be able to pay bills and manage the household.

As parents age and their health becomes fragile, they need help with doctor appointments. Having a child or trusted adult go with them to speak up on their behalf, or explain any confusing matters, is very important.

Having an estate plan in place is another part of the business of aging that needs to be accomplished. It may be helpful to go with your parents to meet with an estate planning attorney to create documents that include a last will and testament, durable power of attorney and advanced health care directive. Without these documents, executing their estate or helping them if they become incapacitated will be more complex, and more costly.

Eliminate a scavenger hunt by making sure that at least two siblings know where the originals of these documents are.

One of the more difficult conversations has to do with end-of-life and funeral arrangements. Where do your parents want to be buried, or do they want to be cremated? What should be done with their remains?

What do they want to be done with their personal belongings? Are there certain items that they want to be given to certain members of the family, or other people they care for? One family used masking tape and a marker to write the names of the people they wanted to receive certain items.

Finally, what do they want to happen to their pets? If there is a family member who says they will take their parent’s pet, can that person be trusted to follow through? There needs to be a Plan A, Plan B and Plan C so that the beloved pet can be assured a long and comfortable life after their owner has passed.

Yes, these are difficult conversations. However, not having them can lead to far more difficult issues. Knowing what your loved ones wish to happen, and making it enforceable with an estate plan, provides everyone in the family with peace of mind.

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Categories
Elder Law Estate Planning

What are the “Must Have” Estate Planning Documents?

What are the “Must Have” Estate Planning Documents?

“Leave nothing for tomorrow which can be done today” Abraham Lincoln

“There is nothing like the death of a moneyed member of the family to show persons as they really are, virtuous or conniving, generous or grasping. Many a family has been torn apart by a botched-up will. Each case is a drama in human relationships — and the lawyer, as counselor, draftsman, or advocate, is an important figure in the dramatis personae. This is one reason the estates practitioner enjoys his work, and why we enjoy ours.” Jesse Dukeminier and Stanley M. Johanson, introduction to 1972 edition of Family Wealth Transactions: Wills, Trust, Future Interests, and Estate Planning.

What do Aretha Franklin, Kurt Cobain, and Prince have in common? Aside from being famous and talented, each of these stars passed away without a will. All three had the money and attorneys to draft a proper estate plan, but for whatever reason, they didn’t draft one. It’s a good lesson to not neglect your estate plan.

Motley Fool reports in the article, “3 Must-Have Estate Planning Documents To Get Done This Year,” that dying without a will creates numerous problems for your family. If there are no legal instructions in place, probate law dictates the distribution of your assets and selection of guardians for your minor children, which can cause problems. Regardless of your personal situation, you should think about creating these three important estate planning documents.

Will. A will is used to distribute your estate, according to your instructions. A will can say how much and what type of asset each heir will receive, to minimize family fighting after your death. If you have young children, you can designate guardians in your will to be in charge of their care. If you die without a will, the probate judge will order who becomes their guardian.

You also need a will to make charitable bequests, to expedite the probate court process and to reduce or eliminate estate taxes. When you draft your will, you’ll appoint trusted people to serve as the executor and the trustee.

Living will. A living will can take effect while you are still alive. This is a legal document that sets out your instructions for medical treatment, if you become unable to communicate, such as whether or not you want to be placed on life support. A living will can relieve the emotional burden from your family of having to make difficult decisions.

Power of attorney. This legal document helps in the event you’re incapacitated or in the hospital in an unresponsive state. A power of attorney gives the individual you designate the authority to transact financial and legal matters on your behalf. Set up a power of attorney, before you need it. If you don’t and you’re unable to make decisions, your family may have to petition the court to get those powers, which costs time and money.

Estate planning is a huge favor that you’re doing for your family. Get these three legal documents in place.

ReferenceMotley Fool (February 18, 2019) “3 Must-Have Estate Planning Documents To Get Done This Year”

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