Estate planning: Planning ahead for your death in order to pass the assets on to the people you wish at the time you wish and in the manner you prefer while paying the least amount of tax and legal costs.
Legal issues relating to elder law: planning for Disability to ensure that you have the person who you would like to handle your affairs, and also to safeguard those assets that are used up to provide long-term care.
An introduction to Estate Planning and Elder LawPracticing estate planning and elder law is among the most enjoyable and rewarding professions an attorney can select. Imagine a work environment where your clients are impressed by your expertise as well as treat you with respect and respect. They pay your charges promptly and share with their friends about how much they been enjoying working for you as well as your team. However you’re not often under the pressure of a deadline or even an adversarial attorney on the other side trying to beat your. In the majority of cases you’re working as counselor of law (trusted advisor) instead of the role of an attorney (professional representation).
We are constantly in contact with clients, chatting about their lives and families, and discussing their worries and worries. By utilizing our training, knowledge and experience we devise solutions, sometimes elegant to the age-old issue of passing assets on between generations in the fastest and most painless manner is possible. In the same way we strive to shield these assets from being wiped out by legal fees, taxes and nursing home expenses in the manner that the law permits.
The final result of this process will be the client feeling safe and confident that in the case of a disability or death they will have their needs secured. After gaining confidence that their future is in good hands and is in the right hands they can go about the task of living their lives. The attorney will be an extremely satisfied and happy client has joined the practice and a lasting and mutually rewarding partnership has been established. Let’s take a look at the strategies and strategies we employ to achieve this amazing result.
Major Issues Facing Senior Clients Today
One of the ways we assist clients is by making an extensive plan to ensure they are able to avoid court proceedings following death or in the case of disability. Trusts can be used instead of wills in the case of older people as they don’t need courts to pay the estate. Trusts can also be used to avoid the probate process in foreign countries that is required for property belonging to another state, referred to as the ancillary probate. This can save the family time when it comes to settlement of the estate and also the costly cost of legal proceedings. Furthermore, since irrevocable living trusts, as opposed to wills, are in effect for the life of the grantor and the grantor can decide who will take over during the time of incapacity. Making plans ahead can help keep control within the family or with trusted advisors , and prevents situations that might cause harm to the best interests. For instance when there is a disability for which there is no plan in the first place or a formal application to the court could be necessary to get a legal guardian appointed for the person with a disability. It could not be the individual the person would have selected. In this case assets can’t be transferred to safeguard them from being used for nursing home expenses without permission from the court. This could or might never be given.
Another area where we aid clients is in reducing estate tax that are federal and state-based for married couples making use of the two trust method. The assets are distributed equally between the spouses’ trusts. If the spouse who died is able to use and enjoy the benefits of the trust that was left to the deceased spouse the trust’s assets trust are not transferred to any estates of the deceased spouse and are transferred directly to the beneficiaries named after the death of the spouse who died. The tens of thousands to hundreds of thousands in dollars or even more in estate taxes can be avoided in the case of the amount that the estate. Additionally, the revocable living trust prevents probate process that could occur if the client were to use wills, since the estate of the couple has to be settled following the death of the spouses so as to reduce taxes on estates. Additionally, we help protect assets from being wiped out because of the cost of nursing homes. Irrevocable Medicaid trusts are created and subject to the five-year period for look-back in order to shield the home of the client as well as other property from being reduced due to the cost for nursing care. We employ Medicaid rules for asset transfer and transfers to safeguard properties in cases where that a client requires care in a nursing home but has not made any pre-planning. By using Medicaid eligible annuities, promissory note, along with housing agreements and other care and accommodation arrangements, large assets could be protected even if the five-year look-backperiod, even if the patient happens to be at the nursing home’s doorstep.
Five Steps to Estate Planning for Seniors
1. Understanding the Family Dynamics
One of the first steps in an elder law trusts or estates case is to get a better understanding of the family relationships. If there are childrenin the family, as is the norm then we must determine whether or not they’re married. Are they in an initial or second marriage? Do they have children from previous marriages or are their spouses married? What type of jobs do they have and where are they? Are they able to get along with one another and parents clients? We want to know which family members don’t like each other and what the reason could be. This can go a long ways in helping us determine who is the best person to make medical decisions as well as who should manage financial and legal matters. Is it one as well as more? What is the best way to have the estate divided? Are the clients married to another person? Which children, if there are any are theirs, his or theirs? There are times when all three situations occur within the same family. In this case, further investigation of family dynamics is necessary because the risk of conflict between interests, as well as miscommunications increase. Furthermore, attention must be given to create a strategy to manage, control as well as the distribution which is not just fair to children of the previous marriage but also be viewed as fair too. Sometimes, the assistance of a professional advisor the role of trustee can help maintain peace between the family members. In addition, this process will help determine if there are any children with disabilities and what family members and assets could be most suitable to care to these children.
2. Reviewing Existing Estate Planning Documents
The next step in the elder law trusts and estates issue is to look over any documents for estate planning the client might have, including trust, will or power of attorney, health care proxy, and living will, in order to decide if they’re legally valid and represent the client’s current desires or if they’re outdated. The most fundamental questions regarding elder law estate planning issues are also dealt with currently, including:
an. Are they is a US citizen? This can affect the ability of the client to avoid taxes on estates.
B. Do they expect to inherit? This information can help in the preparation of an estate plan that addresses not just the assets the client is currently residing with but also what they could have in the near future.
C. Do they have long-term health insurance? If yes the elder law attorney should be able to examine the policy and decide if it offers a sufficient benefit based on the client’s other assets and income, if it incorporates inflation and if it’s capable of being upgraded. This will enable the attorney to decide if other methods to protect assets are required now or in the future.
D. Do they require financial planning? A lot of clients who come to the office of an elder law attorney have not had financial expert advice or are not satisfied with their advisors. They may require assistance with understanding their assets or assist in the organization and consolidation of their assets in order to simplify administration. They might also be worried about not having enough money to sustain them for the remainder the time. The legal counsel for elders will usually be able to recommend a variety of financial planners who have experience in dealing with the desires and requirements of the elderly client and include (1) safe investments that provide protection of the principal as well as (2) the assets which are likely to boost the amount of income.
3. Reviewing the Client’s Assets
The next step is to get an exhaustive list of the client’s assets including their titles and the value of their assets, whether they’re qualified investments, like IRA’s or 401(k)’s and If they have beneficiary designations, which beneficiaries are. With these details, an advisor will be in a position to assess whether the estate is subject to estate tax that are federal or state-based and can then create a plan of action to minimize or eliminate taxes the extent that the law permits. It is common for this to result in the transfer of assets between spouses and trusts, altering beneficiary designations and, at the discretion of the advisor trying to determine which spouse is likely to die first, in order to achieve the most tax-efficient savings. The ideal scenario is for the attorney to ask the client to fill out an anonymous finance questionnaire before their initial consultation.
4. Developing the Estate Plan
A fourth and final step would be to decide in consultation with your client who is to take medical decisions on behalf of the client in the event that they become incapable of making them or are unable to. The person should also be designated to manage the financial and legal issues by a authority of the attorney, in case of incapacity. The next step is to examine what kind of trust should be utilized, if an ordinary will suffices and who should be trustees (for the trust) or executors (for the will) and what the strategy for distribution is. To avoid a disagreement, the trustees that are selected in place of the grantor must be the same individuals identified as the executors on the power of attorneys. In this instance, extreme consideration should be taken so that emotions of the heirs won’t be damaged. A good estate plan considers the estate of the client from the viewpoint of the heirs and also from the perspective of the client. For instance, if there are three children it might be better that only one person be designated as executor or trustee, because three names are generally too heavy and if the client selects just two trustees or executors, they’re not letting one of them out. If there are more than five children, we’d prefer to have the trustee or executor in two groups selected. So, the burden will be lessened on one person who has to answer to everyone else. Additionally, all the other siblings will feel much more secure knowing that the two siblings are protecting their interests.
If the distribution of funds is going to be uneven, it might require discussion with the children who are affected prior to the time of distribution in order to avoid any unhappiness or lawsuits after the parents have passed away. When considering the age of the children, their location, and their interactions with one another and with their parents the advisor should be able to find ways to develop an arrangement that meets the desires and needs of all the parties involved. A few of the methods that we have found useful for this purpose is to provide a deferred distribution, for example, 20 percent at the time of death of the grantor and one-half of the remaining funds after five years and the rest after 10 years. These percentages could also be utilized at specific ages like thirty, thirty-five and forty. When giving percentages of an estate, except solely to children with equal shares, it is sometimes necessary to establish the worth of the percentages in the estate of the client. This allows the client to determine if they really have the amount they want to leave. Donations to charities that are based on percentages are not recommended so that the family does not end up having to pay the charity for the costs of handling the estate.
When it comes to the type of trust we are typically looking at a variety of options for our clients. It is essential to determine whether you want to have two trusts or one. To avoid or lessen estate tax it is recommended to have the two trusts that spouses have whose assets exceed or at some point surpass the federal or state threshold for estate taxes. Is the trust irrevocable or revocable? This is crucial to protect funds from nursing facility charges that are subject to the five-year lookback period. The most important characteristics of an irrevocable Medicaid trust is it is not possible for the grantor nor his spouse can be trustees and that they are solely for income. A majority of people pick either one of their children who is an adult to serve as trustees for this irrevocable trust. Because the principal cannot be transferred for the trust’s grantor, the beneficiary would not wish to put all their assets in this type of trust. Assets that must be kept out include IRA’s, 401(k)’s, 403(b)’s, etc. The majority of these eligible assets is usually not subject to Medicaid and shouldn’t be placed in a trust since this could result in an income tax liable event that requires tax to be reimbursed on the entire value of the assets in the IRA. If the client is an institutionalized one and has a spouse in the community who lives there, as much as one hundred thousand dollars could be exempted. Even though the house is exempted if the spouse of the community lives there and is recommended to secure the home earlier than wait until the spouse who was first married is gone, because of the five-year period of look-back. It is worth noting that the look-back is once funds are transferred into the irrevocable trust it will take five years to be exempt or protected from having to be used for the medical needs of the patient prior to being eligible to receive Medicaid benefits. What happens if the patient is not able to make it through the required five years? Imagine that the client has to enter a nursing home within four years of the time that the trust was set up. In this case when the client pays privately for the nursing home for the year that remains the family will become qualified to apply for Medicaid only after the final year of the penalty period has passed.
While Medicaid trusts are considered irrevocable, even though the Medicaid trust is considered irrevocable, the house could be sold, as well as other trust assets exchanged. The trust, by the trustees’ actions could sell the house and then purchase a condominium under the name of trust, so that the asset remains secured. The trust could sell one stock and purchase another. If clients want to trade independently the adult trustee can make a third-party consent with the broker company which permits the parent trade through the account. The trust will continue to make the entire income (i.e. dividends, interest, or dividends) to the grantor’s parent. Therefore, irrevocable trust’s payments will not have an impact on the lifestyle of the client in conjunction with any social security, pensions or IRA distributions that the client is receiving outside of the trust. It is also important to note that, while no tax return is required for a revocable trust the irrevocable trust must submit the filing of an “informational return” which advises the IRS that the trust’s income has been “passing through” to the grantors and is declared on their individual tax returns.
In the case of a child who is disabled it is worth looking into to the creation of a supplemental need trust, which pays in addition to what the child might be receiving from government benefits, particularly the social security income as well as Medicaid to ensure that the inheritance won’t be able to disqualify them from these benefits.
Additionally, with the size of estates growing today to the point that middle-class families are leaving massive inheritances for their kids (depending on course on the number of kids they’ve) The trend is towards establishing trusts for children in order to ensure that the inheritance stays within the bloodline. These trusts are sometimes referred to as inheritance trusts heritage trusts or dynasty trusts these trusts can include additional benefits, like shielding the inheritance from child’s divorce and lawsuits, as well as creditors and estate taxes if they pass away. The most important feature trusts for beneficiaries is to ensure that when the child dies, which is the majority of cases, many years after their parent’s death has passed away, the hard-earned wealth of the family won’t pass to a daughter-in-law or son-inlaw who might remarry, instead, it will go to the grandchildren of the grantor. However when the grantor wishes to give preference to the son-in-law or daughter-in law, they could decide to have their trust or a part of it, remain an “income only” trust for their adult child’s spouse who survives them for the rest of their lives. It will then pass only later on to the Grantor’s children.
5. Applying for Medicaid Benefits
If the patient requires care at home or care that is institutionalized in a facility and is eligible for it, the request for Medicaid benefits could be necessary. Because of the complex transfer and asset rules and regulations, an application must be done with the assistance of a skilled lawyer for elder law. It is also beneficial in this case to have confidential surveys of the client’s assets and any transfer of assets to be completed prior to the first consultation. This type of financial survey is quite different from that employed for estate planning. Because it is a federal and state-wide program, Medicaid rules regarding transfer and asset differ greatly from state states. Certain methods, however can be used in a wide range of situations. First, in the event that an adult child is able to take the parent in their home to provide care in their later years, a home and care contract should be in place so that assets can be legally transferred by the parents to children prior to receiving any health care facility. The adult child is obliged to report any income that are made pursuant to the agreement as income earned in their taxes. Additionally, as the family home is often the most valuable asset, thought will have to be taken into consideration whether the house should be transferred to the adult children of the client with an estate that is inherited by the name of the parent, or if an irrevocable Medicaid trust is appropriate to safeguard the assets.
While a deed with the life estate is cheaper for the client however, it comes with significant disadvantages contrasted with the trust. In the first instance, if the house is sold before dying of the Medicaid beneficiary, the life worth of the estate property must be used towards the care of the recipient. If the property is rented out, the rents are payable to the facility as they are the property of tenants who are life-long. The client also is unable to claim a substantial portion of the capital gains tax exemption in the event of selling their primary residence, since they will be eligible for a pro rata part based on the value of the estate that they have left for the home in its entirety. The above may result in a situation where the family is forced to keep a home vacant for several years. In contrast, a properly designed irrevocable Medicaid trust will preserve the full capital gains tax exemption for the primary residence . Additionally, the home can be sold by the trust , without the obligation to pay any principal amount towards the care of the client, as long as we have not passed the look-back time. It is important to note that life estates as well as an irrevocable Medicaid trust will protect the basis of the stepped-up property if it is sold upon that parent’s death. grantor or owner. When the deceased parent the basis of calculating Capital Gains Tax is increased from the amount the parent paid, as well as any improvements, to the amount it was worth at parent’s death date. This effectively stops the payment of capital gains tax for the sale of appreciated property, like the home, when the parent’s death. The irrevocable and revocable trusts can also safeguard any tax exemptions the beneficiary may enjoy in their residence, for example, veterans and senior exemptions.
Additionally, even when a patient is already in a nursing facility, important assets could be protected with advanced techniques that are outside the limits of this guide. Consult your attorney in the field of elder law for more details if you or one of your family members are in this position.
Major Mistakes in Estate Planning and Elder Law
1. Inability to address all the problems.
An in-depth examination of the client’s needs must include planning for disability and the event of death, which includes minimizing the estate tax as well as legal fees and court proceedings. An estate plan must be established to shield assets from the costs of nursing homes. As a chess player counsel must look ahead about two or three steps to see what might be the case in the future. For instance, attorneys frequently place the majority of assets in the wife’s name or into her trust due to the husband’s substantial IRA funds in the account. However, because the husband tends to be older and has less lifespan, it could result in IRA assets being transferred onto the wife. and all of the assets belonging to the couple end in the estate of the wife and there being no estate tax savings are impacted. Another instance is when the child of the client is married to a different person but have children (the grandchildren of the client) from prior marriages. If planning is not done using an inheritance trust for the child of the client the possibility exists that when the client’s child dies before their spouse. All assets go to the second spouse and the children of the client from a daughter or son’s previous marriage, are not entitled to any benefits from the estate of the grantor.
2. Failure to Regularly Review the Estate Plan
In the minimum every client’s estate planning should be reviewed at least every three years to see if any changes in the individual’s life, including the state of their health or assets or family background (births death, marriages, deaths and divorces, etc.) can affect the estate plan. It is not realistic to assume that a plan created today to work for ten, twenty, 30 or more years in the future. In time, clients may need to alter their back-up trustees or their distribution plan. They might also want to include an inheritance trust for children. After some time may decide to switch from a revocable trust into an irrevocable trust due to the fact that they weren’t able or not willing to get long-term health insurance. The attorney will gain by the extra legal tasks required while the client will gain from having a plan that is more that is suited to their specific requirements at any moment.
Despite the experience, knowledge, and even the charm from some of the most reputable practitioners sometimes, clients don’t follow the advice provided. As experienced lawyers We know to not blame clients when they decide to disregard our recommendations or opt for another counsel. We understand that people don’t always follow the rules they are supposed to do. They choose what they wish to do, and even then only when they wish to. Recently, a ninety three year old client of ours said that she “wanted to think about it” in terms of making plans for her future. We have learned that the client isn’t prepared to make plans at the moment even though she is getting older and we are grateful for her decision. However we have received a call from a client to see us after 11 years after their first consultation and told us that they were in a position to take the next step. We created an estate plan for them.
The best way to approach an estate plan and practice in elder law is to adhere to these four steps. Some will, and some will not, so why there’s always someone waiting. We continue to help those who allow themselves to be assisted by us, and continue to turn toward those for who our company’s services are admired, appreciated and, sometimes, even considered heroic.
Principal attorney Michael Kentucky estate planning lawyer is an active participant in the New York State Bar Association since the year 1980. He graduated from law school from McGill University in Montreal, Canada and earned the Master’s degree in Law degree from The London School of Economics in 1978. The Law Firm which is devoted to legal estate planning as well as elder law was established in the year 1991. Mr. is a founding member of his organization, the American Academy of Estate Planning Attorneys as well as the American Association of Trust, Estate and Elder Law Attorneys.
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