Putnam County Estate Planning & Medicaid

Not Having a Will is Risky Business

You know you need life insurance to protect your loved ones. But do you know that having a will is equally important to protect against risks?

Without a will, your family faces a number of potential financial disasters. If you think you don’t need a will because you aren’t wealthy or only own one home, you may be surprised to learn how not having a will leaves your loved ones open to a number of serious and costly problems.

Nerd Wallet’s recent article, “5 Hidden Dangers of Not Having a Will,” lists some of the most challenging issues, reminding you why it’s so important to have an up-to-date, signed will.

1. Spendthrift heirs. It’s pretty rare that a child can handle a large sum of money all at once. Some heirs are just bad at handling money, and others may have addiction issues—like gambling or abusing illegal substances. Either way, handing them a windfall can enable bad habits and anger other beneficiaries. Those who didn’t get as much might hire lawyers to fight the proposed distribution.
2. Unexpected or contested heirs. Sometimes there can be confusion and questions about the actual beneficiaries of an estate. Someone might appear unexpectedly during the settlement.
3. Property (and probate) in more than one state. If you have property in several states, dying without a will can result in some of your estate having to go through probate in multiple states. This can be costly and time-consuming—particularly if each beneficiary hires an attorney in each state. Let’s do a quick math problem: there are three beneficiaries with estate property in four states. How many attorneys might be hired? Answer: 12.
4. Fraudulent wills. If there’s no will in place, it gives the opportunity for a treasure seeker to make a fake, particularly if you have a big estate. Remember Howard Hughes? He died with no immediate family and no will. Within a short period of time there were several purported wills claiming to be the legitimate one. His estate spent millions defending against the fake documents. It’s harder to do this these days with more sophisticated analysis tools, but why subject your heirs to potential headaches and unnecessary legal bills?
5. Beneficiaries don’t like the appointed court executor. Without a will, there’s no designated executor, so the probate court will appoint one—typically an attorney. There’s no way to know how well or poorly the beneficiaries will get along with this person in charge of taking inventory, appraising and distributing the estate. For the most part, family members will do this faster than any court-appointed executor, who has little incentive to hurry things along.

Having a will prepared by a knowledgeable estate planning attorney will help your family avoid these five issues and more. It will also send a clear message that you cared enough to take care of them—a worthwhile legacy.

Reference: Nerd Wallet (August 3, 2016) “5 Hidden Dangers of Not Having a Will”

What You Don’t Know About Estate Planning Could Hurt Your Family

Think of an estate plan as a love letter to your family after you have passed.

You’d be surprised at how many people you know don’t have a will or an estate plan in place. They may be among the many who have an unspoken belief that if they don’t have a will, they won’t die. That would be terrific—if it were true. Or, they think that only people who are wealthy or have complex tax issues require estate planning.

The Sabetha (KS) Herald’s recent article, “Understanding the estate planning process,” says that both of these ideas are wrong because your level of wealth and the ultimate tax consequences of your estate take a back seat to the planning and care of your family and other heirs.

A revocable trust allows you to control the distribution of your assets and possessions, as well as designate guardians for your children or plan care for other dependents. This trust typically has a “pour over will” prepared to “fund” the trust with any assets not titled in the trust while you are alive or designated to pass to the trust (or directly to beneficiaries) at your death. Your estate planning attorney can create this for you and assist you with a complete analysis of your current estate by reviewing your financial position as of today and analyzing your family’s needs in the future.

An experienced estate planning lawyer will help you plan for a family member who has special needs or requires medical attention, prepare for the cost of a college education when your children reach that age and determine how estate taxes may impact your assets as they are currently held. Disclosing relevant information to your estate planning attorney will help you develop an estate plan that will properly provide for your family’s needs.

In order to conduct a complete and thorough estate analysis, your attorney will ask for all materials involving your current or future income, property ownership, insurance and any legal arrangements already in place. In addition, you’ll need to inform him or her about all of your retirement benefits and plans: Social Security, IRAs, pensions and profit-sharing plans, investments, certificates of deposit, real estate, life insurance policies you own (as well as policies you have on others), beneficiaries, other trust agreements and your will.

In addition to these documents, bring a list of your debts (both current and anticipated)—including home mortgage, loans, real estate liens, taxes, credit card debt, consumer debt and estimates of other expenses of which you are aware. Your estate planning attorney will help you put all of this information together to provide you with an estate plan that will give you peace of mind.

Reference: The Sabetha (KS) Herald (August 9, 2016) “Understanding the estate planning process”

Good News About Taxes

Nearly every time I ask an estate planning client, “What concerns you most?” the answer is “Taxes!”

And nearly every time, I get to tell them, “Stop worrying! Death taxes aren’t an issue for you or your family.”

The good news is that the Indiana Inheritance Tax was abolished in 2013. So if you die today, your heirs won’t owe the State of Indiana any inheritance tax – no matter how big your estate.

And here’s more good news. Unless you have more than $5.4 million to pass to your heirs, there’s no federal estate tax due either. And if you’re married, you and your spouse can have more than $10.9 million pass to your heirs without any federal estate tax due. So far, none of my clients have had enough assets to trigger estate taxes.

I guess that’s the “bad” news behind the good news. Most people aren’t going to owe estate taxes because they’re too “poor” to owe the tax. So when you hear politicians saying they’re going to help taxpayers by eliminating or reducing estate taxes, remember that the only people they’re helping are multi-millionaires.

Congress could always change its mind and impose estate taxes on people with smaller estates. But at least for now, the vast majority Hoosiers don’t need to waste time or money trying to “avoid” death taxes.  You won’t owe them anyway.

There are other types of taxes to be concerned about, of course. If you own property in another state, inheritance taxes may be due there. There are income taxes, property taxes, sales taxes and capital gains taxes you may need to address here in Indiana, too.

I have some more good news about gift taxes, though.

Many people will tell you, “You can’t give away more than $14,000 to any one person in any one year.”

That’s not true!

You can give away as much money as you want to any one person in any year. It’s true that if you give away more than $14,000 to someone in one year, you’ll have to file a gift tax return. But you don’t owe any gift tax unless you’ve give away a total of $5.4 million over the course of your lifetime!  And the person who receives the gift doesn’t owe any gift tax, no matter how much he or she receives.

The reason you have to file a gift tax return if you give more than $14,000 to someone in a single year is that the IRS wants to add all those gifts together as time goes by. If the total reaches more than $5.4 million, only then do you owe gift taxes. Until then, the gift tax returns you file will show zero taxes due.

There are other reasons not to give money away, of course.

First, you may need that money yourself sometime.

Second, you may be “enabling” someone who needs to learn how to earn their own way and spend their money wisely.

Third, if you make a gift less than five years before you need long-term care, that gift can make you ineligible for benefits that would help pay for your care.

Finally, if you give an asset to a family member while you are alive, rather than leaving it to them in your estate plan, it may cause that family member to owe more capital gains taxes.

If you’d like to know more about these issues, estate planning in general, or how to pay for long-term care, speak with an attorney who focuses on these matters. If you’d like to know more about taxes and how to reduce or avoid them, speak with a qualified accountant, tax advisor or financial advisor.

How to Address Giving Your Home to Your Heirs

Passing your home to your heirs can occur in a number of ways, depending upon your situation and your family. It’s not a do-it-yourself project—even in the simplest cases.

If you own a home and want to leave it to your loved ones, there are steps you need to take to ensure that your wishes are achieved. According to Fox News, “You're Going to Die—Here Are the Best Ways to Deal with Your Home,”, inheriting a collection of 80s Transformers action figures won’t have a big impact on your heirs, but a sizable asset like a house will.

Here are a few ways to help prepare now.

If you have a couple of kids and a house, as your heirs, the kids will have to wait until after the property passes through probate court. This can take months and can be expensive. Taxes may be levied as well, which can be substantial on a modest home. Once that's done, the kids are then able to take title to the house or sell it; however, there are ways to avoid—or at least minimize—these problems.

1. Tenancy by the entirety. If you're married and own property together, there’s typically not much you need to do to make certain your home is passed on to your spouse. If both spouses have their names on a deed, most states recognize tenancy by the entirety, which says that when one spouse dies, everything he or she owns goes to the other spouse. That's it. No probate at the first death.
2. Joint tenancy. If you're not married or if you want to pass your property to some other relative, you should prepare by transferring part of your interest to that other person to create a joint tenancy. This is nearly identical to tenancy by the entirety, but there is no wedding ring involved. These are the easiest ways to transfer title, but there are downsides. Remember, the other person now owns your property as well. You have now exposed the property to outside control and to the lawsuits, creditors, divorces and other issues of another party. Yes, your property could be lost due to the financial troubles of the person whose name you just added to the title. The better answer may be to create a living trust.
3. Living trusts. If you place property in trust, it means that you’re letting someone else—the trustee—take care of it for the benefit of another person—the beneficiary. However, with a living trust, you can act as the trustee of the property yourself and can elect to pass it on to another person only when you die. You can also change your mind and name a different beneficiary. Trust language can be complicated. This is definitely not a do-it-yourself project. Generally speaking, a living trust will avoid probate, and the transfer is usually smooth and seamless.
4. Land trusts (if valid in your state). Like living trusts, land trusts have the same anonymity and ease of transfer. They also require a setup fee and an annual fee on top of that—though typically this fee is less than $100. Unlike a living trust that can hold all sorts of assets, a land trust can hold only one thing: land. A living trust offers a lot more flexibility. In light of this, land trusts are usually set up when someone wants only to pass down real property or as part of a more complex estate planning strategy.

If you own a home or other real estate property, planning in advance with an experienced estate planning attorney can make settling your affairs easier for those you leave behind.

Reference: Fox News (July 22, 2016) “You're Going to Die—Here Are the Best Ways to Deal with Your Home”

Growing Problem of Elder Abuse Takes Many Forms

Telephone scams and theft of prescriptions pills are among the many different types of elder abuse, but in all instances, the numbers are rising.

It is estimated that more than $2.6 billion dollars are lost to elder financial abuse and exploitation, according to The Hillsdale (MI) Daily News in “Understanding Elder Abuse.” Another statistic of concern: The Administration for Community Living reports that one out of every ten people age 60 and older who live at home experiences elder abuse of some kind. Also, the administration reports that these numbers are probably on the low side because so many victims are unable to report the crime—or are afraid that reporting the crime will make their situations worse.

When it comes to scams, IRS phone scam are popular. A scammer calls a senior and threatens prison time because the senior owes the IRS money. In reality, the IRS doesn’t call people.

Unfortunately, many senior citizens are the target of scammers through phone calls, email and postal mail. Scammers can use charm, intimidation or scare tactics to convince their victims to hand over cash or credit card information.

Also, many seniors don’t look at their Medicare Summary Notices (MSNs), which are received quarterly. This provides details for all of the services received and what Medicare will pay. It’s not a bill. It’s a summary of services and Medicare payments. Keep a log of when you go to the doctor or have a test or treatment so you can compare what you actually received to what Medicare paid.

There also can be problems with seniors who become attached to a caregiver, whether paid or not. This can lead to poor choices, especially when a caregiver has financial or family issues and shares these problems with a sympathetic senior. Frequently the senior can’t afford to help financially but will still do so because of his or her attachment to the caregiver.

Theft of prescription drugs by family members is another problem for many seniors. One official noted that often seniors have to choose between buying medication and purchasing food or paying bills. When the medications are stolen, their situations become even more dire. Many social service agencies are working to reach seniors with a message that they can and should ask for help if they have been victimized. It is not how they expected to spend their golden years.

Reference: Hillsdale (MI) Daily News (July 13, 2016) “Understanding Elder Abuse”

Got Kids in College? You Need These Documents

Far too many parents are stunned to learn that healthcare providers and colleges are by law not permitted to speak with them about their children without the correct documents in place.

That long-awaited, bittersweet moment has finally arrived: your children are headed off to college. They are now adults—and likely far from home, where they must learn to fend for themselves. But if they run into a problem, let’s say a health emergency, the hospital might not take your phone call. As reported in businessinsavannah.com’s article, “College-bound children need critical financial, health documents,” there are certain steps you can take so that you will be able to speak with doctors at a hospital and college officials on his or her behalf.

Otherwise, you’re not legally allowed to help him. Why not?

Many state privacy laws don’t let parents make healthcare or financial decisions for their adult children. It doesn’t matter if you’re paying their college tuition and health insurance, your hands are legally tied. To solve this issue, you can have legal documents prepared that will allow you to continue in your guardianship role.

Two important documents are an advance directive for healthcare and a durable power of attorney to assign you or another trusted adult as your child’s representative. Without these, your child could be incapacitated and alone in a hospital or financially stranded somewhere. You could be required to petition a judge to let you help your child.

Two other forms that can help with your child’s care are a Health Insurance Portability and Accountability Act (HIPAA) form and an In Case of Emergency (ICE) card. The pre-signed HIPAA form lets you immediately access your child’s medical records, and an ICE card that can fit in a wallet will have all of his or her approved emergency contacts, health insurance info and known allergies.

While you hope that you will never need any of these items, knowing that you will be able to help your college student if necessary will provide some peace of mind.

Reference: businessinsavannah.com (July 22, 2016) “College-bound children need critical financial, health documents”

Second Marriage and Blended Families Add Complexity to Estate Planning

The old adage is right—a second marriage is indeed the triumph of hope over experience. Add estate planning to keep that hope—and peace in the family—intact.

It’s a delicate balance to hold: preserving assets for children from a first marriage and—at the same time—ensuring that your new spouse will have the assets needed to maintain his or her life in comfort. Balancing the two often requires coming to terms with realistic expectations for all.

CNBC’s article, “Getting remarried? Protect your assets and your interests,” recommends looking ahead and addressing questions about your goals, how your existing family and new spouse will relate to one another when you're gone and who will be in charge of the money. The big issue that heirs of a remarrying couple need to worry about more than federal estate tax is the new spouse.

The reason for this is that every state except Georgia gives rights to a spouse to make an elective share against a decedent spouse's estate or have the right to community property. That means that a portion of an estate could go to the new spouse even if the decedent's will disinherits him or her. Unless you expressly exclude your new spouse from your will, he or she typically has an intestate right against the probate estate.

If an individual has an ERISA retirement account, the spouse likely has certain rights to it—whether it is a defined benefit or a defined contribution plan. IRAs aren’t subject to the same rules. In many states, the surviving spouse has rights to certain personal property. Sometimes this is based on values, and other times it’s set out in a state statute.

If there is no estate planning document, such as a will, power of attorney or health care directive, the new spouse is often statutorily designated as the first decision-maker with the legal authority to deny access to anyone who might want to have a say in the affairs or care of the incapacitated spouse.

The ex-spouse may still be involved because assets could still be left to your ex if you fail to update your beneficiary designations—even if you intended to leave things to your new spouse and/or children instead. You might be contractually obligated to keep your ex-spouse as beneficiary of a retirement account or life insurance policy for a certain period of time. Check the fine print.

When you’re updating your estate planning documents, also think about the following issues. First, consider whether you’d like to name your new spouse as your trustee/executor/agent because the disposition of assets becomes tricky when there are kids from prior marriages. Next, take a look at your assets and decide if you want to hold them individually or jointly. Jointly-held assets with rights of survivorship means that your surviving spouse will inherit these assets automatically without probate. Note that in a community property state, property that is obtained prior to marriage or in an inheritance can retain its character as separate property.

If your new spouse moves into your house, you’ll have to decide if you want to add his or her name to the deed and to the mortgage. You should consider where your spouse will live if you die first. Also, you may need to specifically bequeath certain personal items to your children—depending on family significance and your wishes—and be aware of how “children” is defined by your will. This could include only your own children or also your spouse's children. Here are a few other common estate planning mistakes people make after remarrying:

• Beneficiary designations left out-of-date;
• Assets unintentionally comingled;
• Failure to work with estate planning attorney on new estate planning documents;
• No prenuptial;
• Instructions to loved ones are verbal, not in writing;
• Failure to properly title the house; and
• Not buying long-term care insurance or planning for possible nursing home care.

There are a lot of pitfalls in creating an estate plan for a second marriage, and you’ll want to speak with an estate planning attorney who is sensitive to the needs of a blended family. Also, be clear about your goals and your intentions with your children and your spouse. They may not like your decisions, but you may do a big disservice to both by waiting until after you are gone for your plans to be revealed.

Reference: CNBC (July 28, 2016) “Getting remarried? Protect your assets and your interests”

How to Prepare for Long-Term Care Costs

The cost of long-term care can take a huge bite out of retirement savings, exhaust family resources and create strain on relationships. Don’t count on Medicare, but do plan in advance.

At least seven out of ten Americans age 65 and over will need long-term care at some point. Most people simply underestimate the cost of long-term care, or they think that Medicaid will cover the costs. Your best defense against long-term care costs: advance planning with professional help.

The Memphis Daily News article, “Long-Term Care – Not for Everyone,” says that Medicare does little for these costs and only for a short time period. Medicaid doesn’t apply until the assets of an estate are spent down, so many people must pay for these costs out-of-pocket. The article says that there are only two ways to address these expenses: with your investment/retirement portfolio and with long-term care insurance. Most people review the cost of long-term care insurance and elect to roll the dice, but when that first round of expenses hits, they probably will wish they’d bought it long ago. Now it’s usually too late to buy it. If you can afford to self-insure, you can save your estate and yourself some serious money.

Long-term care insurance as part of your overall retirement plan is an option you should consider sooner if you don’t have other options to cover the expense. And if passing on an estate to your heirs is important to you, then shifting some of the risk to insurance makes sense. The best time to start looking at coverage is age 55. If you wait beyond that, you may see higher premiums and an increased possibility of being denied coverage.

Talking with a qualified estate planning attorney can help you discover a solution that works best for your individual situation.

Of course, active aging is great, but with age can come injury or illness, so you should look at your options. If you rely on family for long-term care, it can take a huge toll on the caregivers—both emotionally and physically—while the adult children also help to manage their own households.

Make sure that all members of the family are on board before making at-home care your plan. Discuss how your care may include outside sources of help, including a hired nurse aide or adult daycare. This is not an easy task for even the closest of families. Before making this decision, consider the short-term and long-term impact it may have on your loved ones and if they—and you—are being realistic about home care.

Reference: Memphis Daily News (July 29, 2016) “Long-Term Care – Not for Everyone”