Estate Planning

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.

When planning your estate, you must consider how you hold title to your real and personal property. The title and your designated beneficiaries will control how your real estate, bank accounts, retirement accounts, vehicles and investments are distributed upon your death, regardless of whether there is a will or trust in place and potentially with a result that you never intended.

One of the most important steps in establishing your estate plan is transferring title to your assets. If you have created a living trust, it will not function as intended if you fail to transfer the title on your accounts, real estate or other property into the trust. Unless the assets are formally transferred into your living trust, they will be subject to probate.
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The high cost of long-term care has made planning a critically important issue for most middle class seniors and their families.  In fact, most seniors will likely require some form of long-term care.  Sadly, many of them are unprepared for the significant financial burdens it places on their family’s hard earned savings.

While some seniors are able to afford private pay care, the cost of long-term care will wipe out savings of all but the wealthiest families in a matter of years.  Those who have planned ahead by purchasing long-term care insurance have a degree of certainty and peace of mind, knowing that they have a lesser need to rely on other sources in the future.  Unfortunately, many can’t afford the high cost of long term care insurance or worse, because of age or medical condition cannot qualify for long term care insurance altogether.  If you do have long-term care insurance, you should be aware of what your policy covers.  Many policies have high deductibles or provide for only a short period of care in facility.  In fact, many who have long-term care insurance still have to resort to Medicaid to pay for their care.

The other option to pay for care is Medicaid.  A joint federal-state program, Medicaid provides medical assistance to low-income individuals, including those who are 65 or older, disabled or blind.  Medicaid is the single largest payer of nursing home bills in America and serves as the option of last resort for people who have no other way to finance their long-term care. 

While Medicaid eligibility with respect to long-term care was not difficult in the past, there has been a steady drift towards more complex and restrictive rules.  It’s no longer as easy as reviewing one’s bank statements.  There are a myriad of regulations involving look-back periods, income caps, transfer penalties and waiting periods to plan around.  Unfortunately, the advice given by well-meaning friends is often faulty, placing you or your loved one in a worse situation.

Pre-planning can help avoid the financial ruin associated with the high cost of long-term care. 

Happy New Year!  The chilly January breeze blows in with a sense of new beginnings, fresh starts, and goal setting.  What better time than now to create a “New Year’s Resolution”, a tradition passed down for generations?  As you think about what resolutions you wish to establish, consider making 2016 the year you institute your Estate Plan.

While nobody wants to think about death or disability, establishing an estate plan is one of the most important steps you can take to protect yourself and your loved ones.  Proper estate planning puts you in charge of decisions concerning your legacy, your finances and medical matters.  It can also spare your loved ones the expense, delay and frustration associated with managing your affairs when you pass away or become disabled.

Taking the steps to get Estate Planning documents prepared is a gift, not only to you, but to those you love.  Regardless of the size of your estate, proper planning brings peace of mind.

By taking action now, you can ensure your legacy is as you want it and your family’s needs are provided for when they need it most.  As you start this New Year reflecting, dreaming, and considering your priorities, resolve to take this important step.

Have you ever found yourself frantically searching for an important document, assuming it was in one place but realizing you have no idea where you stored it (or where it seemingly “walked off” to)?  This is common, especially when we have full schedules and an abundance of paperwork.  The good news is that there are ways to help organize your important paperwork and eliminate stress and frustration that comes with being unable to locate paperwork when it is needed.  Here are 5 tips to help you on the journey to organization:

1. Have one centralized location for important documents.
   This could be a home office or a lockable file cabinet in your closet.  Think of a place that is best suited for your needs.  For legal documents, you may want to store originals in a safety deposit box at a bank or secure location in your home, while keeping copies in a more accessible area.  Other hard to replace documents, such as passports and marriage certificates, can be kept in a fireproof box for safe keeping.
2. Utilize organization tools.
   File boxes, colorful folders and tabs, and digital storage options (such as USB drives, CDs, or back-up hard-drives) are excellent tools to assist you.
3. Find a filing system that is most natural to you.
   Alphabetical?  Grouped by category (medical, financial, estate plan documents, tax paperwork, etc.)?  What is your natural way of thinking?
4. Create a consistent routine for filing.
   Consider: (1) Having a “catch-all” folder/bag/box to put bills, statements, and other miscellaneous items that come in throughout the month.  Find one day a month to organize and file those items.  (2) For legal and other critical documents, it is best to store them properly as soon as possible.  (3) You may want to give your successor Trustee or Executor copies of your documents as well.
5. Eliminate unneeded paperwork.
   Once a year, find a time to go through your files and shred or throw away any unnecessary paperwork.  This may be old receipts, old tax papers (it is recommended by the IRS that you keep tax paperwork for 7 years to ensure you no longer will need them), or unneeded paper/envelopes that come with statements and bills.

Taking the time to establish a system can truly save you time and unnecessary stress in the long-run.  The key is to find what works best for you and your personality.