The Dean Law Firm Blog

Becoming a new parent is a life changing experience, and caring for a child is an awesome responsibility as well as a joy. This is also the time to think about your child's future by asking an important question: who will care for your child if you become disabled or die? The best way to put your mind at ease is by having an estate plan.

The most basic estate planning tool is a Will, which enables you to determine how your assets will be distributed after death. Without this important estate planning tool, the state's intestacy laws will govern how your assets will be distributed. In addition, decisions about who will care for your minor children will be made by the court. For this reason, it is crucial for new parents to have a Will and to designate who you want as guardian for your minor children.

In this regard, selecting guardians involves a number of important considerations. Obviously, it is important to name individuals who are emotionally and financially capable of raising a child. At the same time, a Will can also establish a trust that provides funds to be used to provide for the child's needs. Ultimately, guardians should share the same moral and spiritual values, as well as childrearing philosophy of the parents.

In addition to naming guardians in your Will or separate designation of guardian document, it is also critical to plan for the possibility of incapacity by creating powers of attorney and advance medical directives. A durable power of attorney allows a new parent to name a spouse, or other trusted relative or friend, to handle financial affairs. Further, a medical power of attorney designates a trusted person to make medical decisions in accordance with the parent's preferences.

Finally, new parents should also obtain adequate life insurance to protect the family. The proceeds from an insurance policy can replace lost income, pay household and living expenses, as well as any debts that may have been owed by the deceased parent. It is also important to ensure that beneficiary designations on any retirement accounts are up to date so that these assets can be transferred expediently.

In the end, having a child is a time of joy, but also one that requires careful planning. The best way to protect your family is by consulting with an experienced estate planning attorney who can help you navigate the process. 

Do you want to leave a legacy that creates compounding wealth for your loved ones?

Your retirement funds can be your legacy-producing secret weapon. 

For many Americans, retirement accounts comprise a substantial portion of their wealth. Yet, few people think about utilizing their retirement assets to provide for generational wealth.  Statistics bear out the sad fact that most beneficiaries see these inherited funds as a windfall and choose to withdraw all your hard-earned money within 18 months of your death, usually at the highest tax rate and blowing one of the best opportunities they have for wealth generation.  However, when properly transferred, your retirement assets can be one of the greatest opportunities for wealth building available under the tax laws.

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In the unsettled time after a loved one’s death, imagine the added stress on the family if the loved one died without a Will or any instructions on distributing his or her assets.  Now, imagine the even greater stress to grieving survivors if they know a Will exists, but they cannot find it!  It is not enough to prepare a Will and other estate planning documents like trusts. To ensure that your family clearly understands your wishes after death, you must also take good care to preserve and protect all of your estate planning documents.

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A tax basis is essentially the purchase price of a piece of property. Whenever that property is sold, the seller must pay taxes on the difference between the sale price and the original purchase price.  This concept applies to all property, including stocks, bonds, vehicles, mechanical equipment, and real estate.  If debts are assumed along with the purchase price, the principal amount of the debt will be included in the basis.  The basis can be adjusted downwards when a person deducts depreciation costs on his or her income tax returns, and may be increased for capital investments towards improving the property that are not deducted for income tax purposes.  Selling a property that has been held for a long time can carry a serious tax burden, particularly when real estate prices have increased substantially.

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During the estate planning process, your attorney will draft a number of legal documents such as a will, trust and power of attorney which will help you accomplish your goals.  While these legal documents are required for effective planning, they may not sufficiently convey your thoughts and wishes to your loved ones in your own words.

A non-binding letter of instruction is a great compliment to your “formal” estate plan, allowing you to outline your wishes with your own voice.  

There is no set format as to what to include in this document, though there are a number of common themes.  First, you may wish to explain, in your own words, the reasoning for your personal preferences for medical care, especially near the end of life.
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Joint Bank Accounts and Medicaid Eligibility

You may be in the process of assisting an aging parent in need of nursing home care.  There are many regulations and eligibility requirements to obtain governmental assistance to help pay for their care.  Consultation with an elder law attorney is critical before proceeding to making sure actions are not taken that would penalize them from getting the care they need.  

Like most governmental benefit programs, there are many myths surrounding Medicaid and eligibility for benefits. One of the most common myths is the belief that only 50% of the funds in a jointly-owned bank account will be considered an asset for the purposes of calculating Medicaid eligibility.
Medicaid is a needs-based program that is administered by the state.  Therefore, many of its eligibility requirements and procedures vary across state lines.   Generally, when an applicant is an owner of a joint bank account, the full amount in the account is presumed to belong to the applicant. Regardless of how many other names are listed on the account, 100% of the account balance is typically included when calculating the applicant’s eligibility for Medicaid benefits.    

Why would the state do this?  Often, these jointly held bank accounts consist solely of funds contributed by the Medicaid applicant, with the second person added to the account for administrative or convenience purposes, such as writing checks or discussing matters with bank representatives.  If a joint owner can document that both parties have contributed funds and the account is truly a “joint” account, the state may value the account differently.  Absent clear and convincing evidence, however, the full balance of the joint bank account will be deemed to belong to the applicant.  

If you are considering Medicaid for a loved one, it is important to seek expert advice on how to deal with assets and income correctly.  Preplanning or a strategic crisis plan can make the difference between qualification and disqualification.  

Do I Really Need Advance Directives for Health Care?

Many people are confused by advance directives for health care.  They are unsure what type of directives are available and whether or not they need directives at all, especially if they are young.  There are several types of advance directives.  One is a living will, which communicates what type of life support and medical treatments, such as ventilators or a feeding tube, you wish to receive.  Another type is called a medical power of attorney.  In a medical power of attorney, you name another person to make health care decisions for you in the event are unable to do so for yourself.  A third type of advance directive for health care is a do not resuscitate order or a DNR.  A DNR is a request that you not receive CPR if your heart stops beating or you stop breathing. 

If you are 18 or over, it is time to establish your health care directives.  Although no one thinks they will be in a medical situation requiring a directive at such a young age, it happens every day in the United States.  People of all ages are involved in tragic accidents that could not be foreseen which result in the use of life support.  If you plan in advance, you can make sure you receive the type of medical care you wish, and you can avoid a lot of heartache for your family, who may be forced to guess what you would want done.

Many people do not want to execute health care directives because of some common misperceptions about them.  People are often frightened to name someone to make health care decisions for them, because they fear they will give up the right to make decisions for themselves.  However, an individual always has the right, if he or she is competent, to revoke the directive or make his or her own decisions.  Some also fear they will not be treated if they have health care directives. This is also a common myth – the directives and medical power of attorney simply inform caregivers of the type of treatment you would like to receive in various situations and the person you designate to make health care decisions if you cannot.  Planning ahead can ensure that your treatment preferences are carried out while providing some peace of mind to your loved ones who are in a position to direct them.

 Things to Consider When Picking an Executor

When picking an executor, it is important to consider the role and responsibilities of the position.  The role of an executor is to carry out a deceased person’s wishes as declared in a Will after he or she has passed on.  The executor’s responsibilities include the distribution of assets according to the Will, the maintenance of assets until the Will is settled, and the paying of estate bills and debts.  The following issues should be considered when choosing an executor:

Competency: The executor of an estate will be going through financial and legal documents and transferring assets from the decedent to the beneficiaries.  The executor must make all necessary court appearances.  There is no requirement that the executor have any financial or legal training, but familiarity with these areas does avoid the intimidation felt by lay people, and potentially saves money on professional fees.

Trustworthiness: The signature of an executor is equivalent to that of the decedent.  The executor has full control over all of an estate’s assets.  He or she will be required to go through all the papers of the deceased to confirm what assets are available to be distributed.   The executor handles all assets, pays the debts, handles the tax returns and eventually, distributes the estate assets.  Because of the high level of trust required of this position, it is extremely important to choose a person with great integrity to handle your estate.

Availability: The work of collecting rents, maintaining property, and paying debts can take more than a few hours a week.  Selecting an executor with significant obligations to work or family may cause problems if he or she does not have the time available to devote to the task.  If an executor must travel great distances to address issues that arise, there will be more of a time commitment necessary, not to mention greater expenses for the estate.

Family dynamics: Selection of the wrong person to act as executor can create resentment and hostility among an estate’s heirs.  Consider how family members interact with one another and avoid picking someone who may provoke conflict.  Even the perception of impropriety can lead to a lawsuit, which will serve to take money out of the estate’s coffers and delay the legitimate distribution of the estate.  You may want to consider a corporate trustee or third-party trustee to minimize conflicts. 

Taking time to consider the responsibilities of the executor is an important part of the Estate Planning process.  Gain peace of mind by making these decisions while you have the opportunity.

Life insurance can be an integral part of an estate plan. Policies can be set up to be paid directly to the beneficiary without the need to pass through the probate estate, and may be put in place as part of an overall strategy to pass wealth on to family. Life insurance proceeds transfer to the beneficiary without having to pay income tax and with proper planning, may also avoid the estate tax. Having life insurance ensures that some assets will be liquid, so that non-liquid assets, such as real property, will not have to be sold to pay estate debts, expenses or the estate tax. 

An attorney can set up a life insurance trust to avoid estate taxes on the proceeds.
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Have you ever heard the term “Enhanced Life Estate Deed” or “Lady Bird Deed”?  Many have heard these terms, but may not understand what this document is or what the purpose of having such a deed would be.

Establishing a life estate is a relatively simple process in which you transfer your property to your children or another beneficiary, while retaining your right to use and live in the property. Utilizing an enhanced life estate is different from a traditional life estate. Life estates avoid having to probate the property while maximizing tax benefits.  An enhanced life estate also provides these benefits, but further protects the real property from potential long-term care expenses you may incur in your later years.
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A daughter taking over the care of her mother recently diagnosed with dementia goes to the bank to handle her bills, only to be turned away because she has no authority to handle her mother’s account.  Imagine her frustration…  Because her mother did not plan beforehand for her disability, the daughter’s only option now is a guardianship proceeding through the court.   

One of the common documents that is part of an Estate Plan is the “Durable Power of Attorney.”  What makes this document so powerful?  Essentially, the designation of a Power of Attorney allows you to give financial decision-making power to someone you trust.  You get the option of making it effective immediately, which may be beneficial for spouses, or to make it effective in the event of your disability.

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