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Estate Planning Guardianship

Creating an Estate Plan for a Child with Special Needs

“As special needs parents we don’t have the power to make life “fair,” but we do have the power to make life joyful.” Anonymous

“All kids need is a little help, a little hope, and someone who believes in them” Magic Johnson.

Parents want their children to be taken care of after they die. But children with special needs have increased financial and care needs, so ensuring their long-term welfare can be tricky. Proper planning by parents is necessary to benefit the child with a disability, including an adult child, as well as assist any siblings who may be left with the caretaking responsibility.

Special Needs Trusts

The best and most comprehensive option to protect a loved one is to set up a special needs trust (also called a supplemental needs trust). These trusts allow beneficiaries to receive inheritances, gifts, lawsuit settlements, or other funds and yet not lose their eligibility for certain government programs, such as Medicaid and Supplemental Security Income (SSI). The trusts are drafted so that the funds will not be considered to belong to the beneficiaries in determining their eligibility for public benefits.

There are three main types of special needs trusts:

A first-party trust is designed to hold a beneficiary’s own assets. While the beneficiary is living, the funds in the trust are used for the beneficiary’s benefit, and when the beneficiary dies, any assets remaining in the trust are used to reimburse the government for the cost of medical care. These trusts are especially useful for beneficiaries who are receiving Medicaid, SSI or other needs-based benefits and come into large amounts of money, because the trust allows the beneficiaries to retain their benefits while still being able to use their own funds when necessary.

The third-party special needs trust is most often used by parents and other family members to assist a person with special needs. These trusts can hold any kind of asset imaginable belonging to the family member or other individual, including a house, stocks and bonds, and other types of investments. The third-party trust functions like a first-party special needs trust in that the assets held in the trust do not affect a beneficiary’s access to benefits and the funds can be used to pay for the beneficiary’s supplemental needs beyond those covered by government benefits. The key distinction is that a third-party special needs trust does not contain the “payback” provision found in first-party trusts. This means that when the beneficiary with special needs dies, any funds remaining in the trust can pass to other family members, or to charity, without having to be used to reimburse the government.

A pooled trust is an alternative to the first-party special needs trust. Essentially, a charity sets up these trusts that allow beneficiaries to pool their resources with those of other trust beneficiaries for investment purposes, while still maintaining separate accounts for each beneficiary’s needs. When the beneficiary dies, the funds remaining in the account reimburse the government for care, but a portion also goes towards the non-profit organization responsible for managing the trust.

Life Insurance

Not everyone has a large chunk of money that can be left to a special needs trust, so life insurance can be an essential tool. If a special needs trust has been created, a life insurance policy can pay directly into it, and it does not have to go through probate or be subject to estate tax. Be sure to review the beneficiary designation to make sure it names the trust, not the child. You should make sure you have enough insurance to pay for your child’s care long after you are gone. Without proper funding, the burden of care may fall on siblings or other family members. Using a life insurance policy will also guarantee future funding for the trust while keeping the parents estate intact for other family members. When looking for life insurance, consider a second-to-die policy. This type of policy only pays out after the second parent dies, and it has the benefit of lower premiums than regular life insurance policies.

ABLE Account

An Achieving a Better Life Experience (ABLE) account allows people with disabilities who became disabled before they turned 26 to set aside up to $15,000 a year in tax-free savings accounts without affecting their eligibility for government benefits. This money can come from the individual with the disability or anyone else who may wish to give him money.

Created by Congress in 2014 and modeled on 529 savings plans for higher education, these accounts can be used to pay for qualifying expenses of the account beneficiary, such as the costs of treating the disability or for education, housing and health care, among other things. ABLE account programs have been rolling out on a state-by-state basis, but even if your state does not yet have its own program, many state programs allow out-of-state beneficiaries to open accounts. (For a directory of state programs, click here.)

Although it may be easy to set up an ABLE account, there are many hidden pitfalls associated with spending the funds in the accounts, both for the beneficiary and for her family members. In addition, ABLE accounts cannot hold more than $100,000 without jeopardizing government benefits like Medicaid and SSI. If there are funds remaining in an ABLE account upon the death of the account beneficiary, they must be first used to reimburse the government for Medicaid benefits received by the beneficiary, and then the remaining funds will have to pass through probate in order to be transferred to the beneficiary & heirs.

Get Help With Your desire to Create an Estate Plan for a Child with Special Needs.

Creating an Estate Plan for a Child with Special Needs takes forethought, patience and a willingness to include caregivers in your plan. you decide to provide for a child with special needs, proper planning is essential. Talk to your attorney to determine the best plan for your family.

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Elder Law Estate Planning

What the Elder Law Estate Planning Attorney Needs to Know

“Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.” Learned Hand

“In America, there are two tax systems: one for the informed and one for the uninformed. Both are legal.” Learned hand
If you went to a doctor’s office and did not tell the doctor what your symptoms were, it would be hard to get a good diagnosis and treatment. The same goes for a visit to the elder law estate planning attorney. Without all the necessary facts, advises the Times Herald-Record in the article “What you need to tell the elder law estate planning attorney,” the estate plan may need to be revised or created all over again, the inheritance may be given to people other than those you intended and there could be family conflicts.

Elder law is all about the issues that affect the elderly client. The planning for disability and incapacity, to include identifying the people who would make decisions for you, if you become incapacitated and protecting your hard-earned assets from the cost of nursing home care.

Estate planning is focused on transferring assets to the desired people, the way you want, when you want, with minimal court costs, taxes, or unnecessary legal fees and avoiding disputes over an inheritance. Here are some of the things your attorney will need to know, with full disclosure from you:

Family dynamics. Do you have a child out of wedlock? Are you part of a blended family or do you have a child you haven’t seen in years, you need to discuss the child. They may have a legal claim to your estate, and that must be planned for. Perhaps you want to include the child in the estate, perhaps you don’t. If you disinherit a child in a will and you die without a plan, that child becomes a necessary party to probate proceedings and has the right to contest your will.

Health issues are important to disclose. If you don’t have long-term care insurance, you need five years to protect assets in a Medicaid Asset Protection Trust (MAPT). Therefore, now may be the time to start a plan. If you have a child who is disabled and receives government benefits, you can leave them money in a Special Needs Trust (SNT).

Full disclosure of all your assets, income, how assets are titled, who the beneficiaries are on your IRAs, 401(k)s and life insurance policies, are all the kinds of information needed to create a comprehensive estate plan. Keeping secrets during this process could lead to a wide variety of problems for your family. Your entire estate could be consumed by taxes, or the cost of nursing home care.

There’s no doubt of the seriousness of these issues. You or your spouse may experience some strong emotions, while discussing them with your attorney. However, creating a proper estate plan, preparing for incapacity and loved ones with special challenges will provide you with peace of mind.

One last point: an estate plan is like your home, requiring maintenance and updates. Once it is done, make a note in your schedule to review it every time there is a major life event or every three or four years. Laws change, and life changes. Your estate plan may also need to change.

Reference: Times Herald-Record (May 25, 2019) “What you need to tell the elder law estate planning attorney”

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Elder Law Estate Planning

End of Life Planning for Loved Ones

It’s definitely an uncomfortable thing to do. However, making funeral arrangements for yourself eliminates a lot of stress and anxiety for the family members, who are left to guess what you may have wanted. This, says the Leesville Daily Leader in the article “Planning for the end of your life” lets you make the decisions.

When considering end-of-life care for loved ones here are some of the things to consider:

  • Do you want to be buried or cremated?
  • Do you want a funeral or a memorial service?
  • What music do you want to be played?
  • Do you want flowers, or would you prefer donations to a charity?
  • Do you want people to speak or prefer that only a religious leader speak?
  • What clothing do you want to be buried in?
  • Have you purchased a plot? A gravestone?
  • Who should be notified about your death?
  • Do you want an obituary published in the newspaper?

There are also estate matters that need to be attended to before you pass. Do you have a will, power of attorney, healthcare power of attorney, or a living will? Make sure that your family members or your executor know where these documents can be found.

If you do not have an estate plan in place, now is the time to meet with an estate planning attorney and have a plan created.

Your family will also need to be able to access information about your accounts: investment accounts, credit cards, utility bills, Social Security, pension, retirement funds and other assets and property. A list of the professionals, including your estate planning attorney, CPA and financial advisor, along with the names of your healthcare providers, will be needed.

If you are a veteran, you’ll need to have a copy of your DD-214 in your documents or let family members know where this is located. They will need it, or the funeral home will need it, when applying for burial benefits from the Department of Veterans Affairs and the National Cemetery Administration.

If you wish to be buried in a national cemetery, you’ll need VA Form 40-10007, Application for Pre-Need Determination of Eligibility for Burial in a VA National Cemetery. This must be completed and sent to the National Cemetery Scheduling Office. Include a copy of the DD-214 with the application.

End-of-life care for loved ones grieving in your family may find discussing these details difficult, but when the time comes, they will appreciate the care that you took, one last time, to take care of them.

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Elder Law Estate Planning

How to Decide Who Your Healthcare Proxy Should Be

It’s especially important to name a healthcare proxy, because the chances of having a crisis escalates dramatically as we age. That’s why so many people put off naming a healthcare proxy, says Forbes in the article “How to Select A Healthcare Proxy,” often only addressing this, when they are completing other documents for their overall estate plan.

What usually happens is that people get so stressed out about naming a healthcare proxy that they put it off or make a bad selection. Making it even worse, is neglecting to tell the person they have chosen for this important responsibility.

healthcare proxy comic

How to Decide Who Your Healthcare Proxy Should Be. It’s not guaranteed that the person you chose as your healthcare proxy will ever be called on to serve. However, if they are, you’ll want to make sure they meet certain guidelines. For one thing, they’ll need to be at least 18 years old. They cannot be your direct health care provider or any of the direct health care provider’s employees, unless that person is also your spouse. They have to be willing to speak up and adhere to your own wishes, even if those wishes are not the same as their own. You’ll want to have a very candid conversation with the person you think you want to name as your healthcare proxy.

You might want to go through this exercise to make sure they are really willing to carry out your wishes. Create a worksheet that describes in detail some of the situations they may face. There are a few sources for this kind of worksheet, including one from a group called Compassion and Choices, a nonprofit centered on helping people get what they want at the end of their lives.

If you are close with your family, it may seem obvious to select your spouse, first-born child, or a sibling for this task. However, be realistic: when push comes to shove, will they be able to stand up for your wishes? Will they be able to deal with the fallout from family members, who may not agree with what you want at the end of your life? They’ll need to be up to the challenge.

Age is a real factor here. You want your proxy to be available in both the immediate and distant future. If you have a sibling who is only two years younger than you, she’ll be 81 when you are 83. That may not be the time for her to make hard decisions, or she may not be available—or alive. Select a few backups, and make sure the primary, secondary and even tertiary are listed on your advance directive.

Geography also matters. The person may be called upon in a crisis—if you are on the West Coast and they are in the Midwest, will they be able to get to your bedside in time? Many hospitals and skilled nursing facilities require a live human being to be physically present, if critical care decisions need to be made. Someone who lives within a 50-mile radius of you, might be a better choice.

Once you’ve made the decision, you’re almost done. Have a conversation with the person, whether they are the primary or a backup. You should also have a conversation with your estate planning attorney, to make sure that your healthcare directive and any related documents are all set for your future.

Reference: Forbes (April 10, 2019) “How to Select A Healthcare Proxy”

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Estate Planning

What Will My Social Security Benefits Be?

Your Social Security benefits in retirement are primarily dependent on the wages you get while working. The Social Security taxes deducted from your paycheck are based on that amount. If you’re still working and at retirement age, you can get benefits while earning other income. And depending on your age, you can also decrease and delay your Social Security payouts. The other important factors for determining Social Security benefits include inflation and the formula used by the Social Security Administration in its calculations.

Investopedia’s recent article asks “How Are Social Security Benefits Affected by Your Income?” The article explains how Social Security income is calculated—the more you earned while working, the higher the income benefit you get from Social Security. The government keeps track of your income from every year, and the part of your earned income subject to FICA taxes is used to determine your benefits in retirement.

What Will My Social Security Benefits Be?
If you paid into the Social Security system for more than 35 years, the Social Security Administration only uses the 35 highest earning years and won’t include any others in its formula. If you didn’t pay into the system for at least 35 years, a value of $0 is entered for all missing years. After you apply for benefits, these earnings are indexed and used to calculate a “primary insurance amount” that shows the maximum sum you’re eligible to receive after reaching full retirement age. The age when you begin getting benefits is also significant. As of 2018, the youngest age to receive benefits is 62. However, your benefits are reduced if you opt to get them that early. But if you take benefits prior to reaching full retirement age and continue to work, you may be able to delay some benefits to get higher payouts in the future. These days, many folks are working into or beyond retirement age. If you are earning an income while getting Social Security benefits, you may have some benefits withheld if you make up to a certain threshold. Until you reach full retirement age, earning more than the IRS income threshold decreases your benefits by $1 for every $2 earned in excess of the minimum. That money isn’t lost forever. Instead, your Social Security income is upped once you reach full retirement age. Under normal circumstances, your Social Security benefits aren’t taxable. But if your income while taking benefits is more than the maximum limits established by the IRS, your benefits will be partially taxable. Nonetheless, no one has to pay income taxes on more than 85% of benefits.
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Estate Planning

Why Do I Need an Estate Plan?

“Some are sad.
And some are glad.
And some are very, very bad.
Why are they Sad and glad and bad?
I do not know.
Go ask your dad.”

Dr. Seuss, One Fish, Two Fish, Red Fish, Blue Fish

Did you know that more than half of American adults—and 78% of millennials—don’t have any basic estate planning documents like a will or living trust? It may not be that much of a shock, since younger adults tend to put off thoughts of estate planning. However, even if you don’t have children or many assets yet, you can benefit from creating an estate plan now. Forbes’s recent article, “6 Reasons Why You Should Have An Estate Plan,” provided six reasons why you should have an estate plan at any point in life:  

Why Do I Need an Estate Plan?

Plan for yourself.
A big step in the estate planning process, is deciding who will make decisions on your behalf, if you’re unable to do so yourself. If you become incapacitated, a revocable trust will hold assets for your benefit, while you’re alive and name the individuals you want to receive your property when you pass. Designating an agent under a durable power of attorney to act on your behalf when it comes to financial and legal matters, if you become physically or mentally disabled, can help make certain that any decisions made, are in your best interest. If you can’t make medical decisions for yourself, you should have a healthcare proxy, agent or power of attorney, HIPAA release, and living will.

Decide How to Dispose of Your Wealth.
A will names an executor or personal representative who’s responsible for the administration of your estate after you die. He or she distributes property, as you determine in your will. If you have minor children, you can also designate a guardian to care for them in your will. Any life insurance, retirement accounts, or annuities require you to name beneficiaries, so they don’t need to be included in a will.

Lessen Transfer Taxes.
One goal of estate planning is to maximize the wealth you transfer to your beneficiaries, along with minimizing transfer taxes. The Tax Cuts and Jobs Act of 2017 expanded the amount individuals may give away at death—or during life—without any transfer taxes. The new law offers an increased exemption amount and portability. That means spouses can share one another’s exemption. You can make annual tax-free gifts up to $15,000 in 2019 (twice this amount for married couples). You can also pay medical and educational expenses for someone else without any gift tax.

Include Charitable Giving.
If you have philanthropic goals, an estate plan can help make certain that your objectives are satisfied. You can select a charity that’s important to you, choose the assets you want to donate, and decide—along with your attorney—the best way to make your gift.

Protect Family Wealth.
There can also be wealth protection benefits in estate planning through asset ownership arrangements, insurance, limited liability entities, irrevocable trusts and asset protection trusts. These are designed to protect your assets from creditors. An experienced estate planning attorney can help you decide, if one of these options is appropriate for your situation.

Ready your Family to Receive Wealth.
You can also prepare the next generation to receive wealth, which can also be helpful in preserving family wealth in the long run. Your estate plan can set out wealth planning goals, facilitate conversations about what wealth means to your family and educate your adult children about financial ideas and the ways in which they can get involved in creating and sustaining the family legacy.

Why Do I Need an Estate Plan? Estate planning can be a formidable task, especially if you’re starting from ground zero. However, you can always engage an estate planning attorney to help you develop the documents you need to give you peace of mind about your financial affairs.

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Elder Law Estate Planning

Using Trusts to Maintain Control of Inheritances

Using Trusts to Maintain Control of Inheritances.

“The spendthrift robs his heirs the miser robs himself.” Jean De La Bruyere

“If the Nation is living within its income, its credit is good. If, in some crises, it lives beyond its income for a year or two, it can usually borrow temporarily at reasonable rates. But if, like a spendthrift, it throws discretion to the winds, and is willing to make no sacrifice at all in spending; if it extends its taxing to the limit of the peoples power to pay and continues to pile up deficits, then it is on the road to bankruptcy.” Franklin D. Roosevelt

Trusts, like estate plans, are not just for the wealthy. They are used to provide control, in how assets of any size are passed to another person. Leaving an inheritance to a beneficiary in a trust, according to the article from Times Herald-Record titled “Leaving inheritances to trusts puts you in control,” can protect the inheritance and the asset from being mishandled. Protection can be the main intention for creating a trust.

For many parents, the inheritance equation is simple. They leave their estate to their children “per stirpes,” which in Latin translates to “by roots.” In other words, the assets are left to children according to the roots of the family tree. The assets go to the children, but if they predecease you, the assets go to their children. The assets remain in the family. If the child dies after the parent, they leave the inheritance to their spouse.

An alternative is to create inheritance trusts for children. They may spend the money as they wish, but any remaining assets goes to their children (your grandchildren) and not to the surviving spouse of your child. The grandchildren won’t gain access to the money, until you so provide. However, someone older, a trustee, may spend the money on them for their health, education and general welfare. The inheritance trust also protects the assets from any divorces, lawsuits or creditors.

This is also a good way for parents, who are concerned about the impact of their wealth on their children, to maintain some degree of control. One strategy is a graduated payment plan. A certain amount of money is given to the child at certain ages, often 20% when they reach 35, half of the remainder at age 40 and the balance at age 45. Until distributions are made to the heirs, a trustee may use the money for the person’s benefit at the trustee’s discretion.

The main concern is that money not be wasted by spendthrift heirs. In that situation, a spendthrift trust restricts payments to or for the beneficiary and may only be used at the trustee’s discretion. A lavish lifestyle won’t be funded by the trust.

If money is being left to a disabled individual who receives government benefits, like Medicaid or Supplemental Security Income (SSI), you may need a Special Needs Trust. The trustee can pay for services or items for the beneficiary directly, without affecting government benefits. The beneficiary may not receive any money directly.

If an older person is a beneficiary, you also have the option to leave them an “income only trust.” They have no right to receive any of the trust’s principal. If the beneficiary requires nursing home care and must apply for Medicaid, the principal is protected from nursing home costs.

An estate planning attorney will be able to review your family’s situation and determine which type of trust would be best for your family because using trusts to maintain control of inheritances works best.

ReferenceTimes Herald-Record (Feb. 16, 2019) “Leaving inheritances to trusts puts you in control”

Using Trusts to Maintain Control of Inheritances.

Categories
Estate Planning

Here’s Why You Need an Estate Plan

It’s always the right time to do your estate planning, but it’s most critical when you have beneficiaries who are minors or with special needs, says the Capital Press in the recent article, “Ag Finance: Why you need to do estate planning.”

While it’s likely that most adult children can work things out, even if it’s costly and time-consuming in probate, minor young children must have protections in place. Wills are frequently written, so the estate goes to the child when he reaches age 18. However, few teens can manage big property at that age. A trust can help, by directing that the property will be held for him by a trustee or executor until a set age, like 25 or 30.

Probate is the default process to administer an estate after someone’s death, when a will or other documents are presented in court and an executor is appointed to manage it. It also gives creditors a chance to present claims for money owed to them. Distribution of assets will occur only after all proper notices have been issued, and all outstanding bills have been paid.

Probate can be expensive. However, wise estate planning can help most families avoid this and ensure the transition of wealth and property in a smooth manner. Talk to an experienced estate planning attorney about establishing a trust. Farmers can name themselves as the beneficiaries during their lifetime, and instruct to whom it will pass after their death. A living trust can be amended or revoked at any time, if circumstances change.

The title of the farm is transferred to the trust with the farm’s former owner as trustee. With a trust, it makes it easier to avoid probate because nothing’s in his name, and the property can transition to the beneficiaries without having to go to court. Living trusts also help in the event of incapacity or a disease, like Alzheimer’s, to avoid conservatorship (guardianship of an adult who loses capacity). It can also help to decrease capital gains taxes, since the property transfers before their death.

If you have several children, but only two work with you on the farm, an attorney can help you with how to divide an estate that is land rich and cash poor.

ReferenceCapital Press (December 20, 2018) “Ag Finance: Why you need to do estate planning”