Putnam County Estate Planning & Medicaid

Wrong Answers to Two Misconceptions about Estate Planning

The moment you become a parent, you need a will. The same is true once you acquire any kind of asset that you want to give to someone after you die. It’s really that simple.

The reasons why so many people don’t think they need a will fall into a number of different categories.  However, the two biggest ones are described in an article appearing in the Pauls Valley Daily Democrat titled “More on estate planning myths.” Chances are good you’ve heard them before, but you may not have heard why they are plain old wrong. Here’s why:

 “I’m young, so I don’t need a will.” This is not true. One of the most important parts of a will for a young couple, is a provision that designates a guardian—the person(s) who will care for their young children in the event of their mutual death. This is rare, although it does happen. To make matters worse, what if there’s a family fight for custody of your children? Make this selection so the court isn’t forced to select a guardian for your minor children if the event arises. A will can give you peace of mind concerning the care of your children.

“I really don’t have much of an estate, so I don’t need a will.” This is also not true. Even if you don’t have young children, a will is essential for the distribution of your personal effects. Surprisingly, even some very large estates have been contested simply because of disputes over small items.

Large cash amounts can typically be resolved without difficulty because the details should be provided in the will. However, sentimental family items, like jewelry, family photographs, a valuable baseball card collection, and other articles become the source of conflict and lawsuits. A will can clarify your wishes.

An estate planning attorney will also advise you to use techniques like Payable on Death transfers, TOD deeds or other non-probate transfers that simplify and speed up most asset transfers after death without probate. Nonetheless, it’s still smart to have a will prepared as a backup, in case you’ve forgotten to provide for the transfer of any asset.

 The following is what most people fail to understand. When family members are grieving from the loss of a loved one, objects that may not have any market worth, suddenly attain great emotional importance. Families have been fractured over something as simple as a serving dish. When there’s no will, the simple items as well as assets of great value can become a battle ground. A will gives you the opportunity to map out exactly what you want to happen to these objects, valuable or not. An estate plan is a gift to your heirs, providing clear directions from you after you are gone.

Reference: Pauls Valley Daily Democrat (March 1, 2017) “More on estate planning myths”

Can an Estate Plan Protect an Adult Child with an Addiction or Mental Illness?

When all of your time is spent battling the challenges of mental illness or addiction, it’s hard to imagine what the future will bring.  However, that’s exactly why estate planning is so important.

It’s not an easy issue to discuss with an estate planning attorney for the first time.  However, if your children, minors or adults, suffer from mental illnesses or addiction to drugs, alcohol, gambling or any other form of addiction, the attorney will need to know so they can advise you properly. As described in Trust Advisor’s helpful article, “Hope For The Best, But Build Trusts For The Future Of Children With Special Challenges,” there are certain planning techniques that could be used in these situations.

Before diving in, estate planning requires a parent to acknowledge that an addicted son or daughter may never recover. With this in mind, estate planning must be done so that the child never has easy access to the funds. In this instance, a trust with special-purpose language may be a wise option.

This solution gives you traditional estate planning goals like avoiding probate, minimizing taxes and ensuring that the intended beneficiaries are named. However, it also needs to be customized for a unique family situation, such as a child with addiction.

Parents can add a clause that lets the trustee deal with such a child. The clause can even have an incentive for the child to meet certain goals or requirements in order to receive a distribution from the trust, like staying sober.

An experienced estate planning attorney who has helped those who face these issues, will be able to help you create an estate plan that will work for your family. Don’t be discouraged; yours will not be the first family needing this kind of planning and it is not that different from traditional estate planning.

Reference: Trust Advisor (February 15, 2017) “Hope For The Best, But Build Trusts For The Future Of Children With Special Challenges”

Millennials, It’s Your Time to Start Planning for the Future

Now that many members of the millennial generation are parents, it’s time for them to protect their families with estate plans, including naming guardians for their minor children. Yes, that generation is growing up!

The numbers are pretty extreme. A recent study by caring.com reveals that 88% of 18–36 year-old Americans don’t have either a will or a trust, as reported in Financial Buzz in a recent article, “Millennials: Start thinking about estate planning now!”

This compares to the 81% of Americans aged 72 and older who do have a will or at least a trust. If it seems like younger adults don’t think they need to deal with estate planning, that’s true. But they do, especially if they have minor children.

If we look at the next age bracket—53 to 71—there’s a significant drop in the number of people who have worked up a formal estate plan. That number is 60%.

For those in the f 37 to 52 age group, the percentage of those who’ve planned adequately drops to only 36%.

Overall, this research shows that Americans really need to get on the stick and do some estate planning. They also need to start doing it earlier in life.

The respondents gave two main reasons for failing to do their estate planning. One is they felt they didn’t have enough assets to warrant drafting a will or doing other estate planning. The other was one of the most historically popular: they felt they had time to get around to it.

Most people learn the hard way that life is unpredictable. Having an estate plan in place, means that your assets are distributed according to your wishes, your spouse or partner can make the necessary legal and financial decisions if you become incapacitated and your children are raised by people who you chose, not the courts. In a perfect world, you prepare the documents and don’t need to look at them for several years, until they need to be updated. But when tragedy strikes, it’s good to be prepared.

Reference: Financial Buzz (March 3, 2017) “Millennials: Start thinking about estate planning now!”

When Caring for an Elderly Parent Becomes a Second Job

More than 45 million Americans take care of an elderly family member, usually an aging parent. This can have negative impact on their own family, from finances to strained relationships.

It only seems fair: your parents took care of you when you were young, and now they need your help. Aging parents often need adult children to handle medical care and finances, when they can no longer manage on their own. When the level of care spills over into the adult child’s own finances and impacts their careers, it can become a hardship.

MarketWatch’s article, “Read this before becoming your parents’ caregiver,” reports that, in many instances, the adult child caregiver is still able to maintain a full career and family life. However, in certain situations, the family member who’s assumed the role of a full-time caregiver must reduce his or her work hours or forego a promotion because of the time commitment. In the majority of situations, we see adult children answer the call of caregiving in a crisis when there’s an imminent need. A short-term assignment can be doable for a professional with his or her other family and personal responsibilities, but when the duties last longer, he or she will realize there isn’t enough time or resources to do it all.

A caregiver needs to take the actions necessary to help without putting his or her own family’s financial future at issue. When there are siblings and other family members involved, it is necessary to communicate realistic expectations of what areas of care are needed, responsibilities, time commitments and whether there will be any financial compensation.

A Personal Care Agreement can be a good guideline.  It will help to detail which individuals are responsible for various aspects of care, the amount of time required and any compensation. The biggest question that people have about this agreement, is how to get paid to be a family caregiver.

A Personal Care Agreement can give an adult child caregiver the peace of mind and security that he or she won’t suffer undue financial consequences, as well as provide clear details for other family members as to the expectations when assuming these important caregiving responsibilities.

This agreement can help avoid some of the misunderstandings that can occur when many siblings and loved ones are trying to help (or fail to pitch in). It also can protect a family member who is losing his or her own income and time to provide caregiving. This is because reduced hours or an exit from the workforce to care for a loved one, can have a major personal financial impact. In addition, the time for a personal and immediate family life with one’s own spouse and children can nearly evaporate with caregiving demands.

An Elder Law attorney can help create a Personal Care Agreement that will protect you from any accusations of financial elder abuse and clarify the responsibilities and role that you have taken on as the parent’s primary caregiver. This will also protect you from any charges that care payments were a way of hiding assets from Medicaid.  It is also suggested that you hold a family meeting, with the Elder Law attorney, if necessary, so that all family members understand the situation.

Reference: MarketWatch (February 22, 2017) “Read this before becoming your parents’ caregiver”

Passing Down the Family Home: Joint Tenancy vs. Trust

There are two ways to give the family home to your children without having the property go through probate, but how do you know which one is better?

Being in the position to give your children or child ownership of the family home, keeps the house in the family and is a financial blessing for the family member. However, it’s important to note that this kind of a transaction needs the guidance of an estate planning attorney in order to make sure that it goes right, because every situation is different. These are general guidelines that can help get you started.

If you add another person, i.e., an adult child, as a joint tenant on your home, then you each have an equal ownership interest in the house. When one of you passes, the other owns the entire property and there is no need for probate. But there are some risks, according to a recent article, “Is It Better to Use Joint Ownership or a Trust to Pass Down a Home? in elderlawanswers.com.

One disadvantage of joint tenancy is that creditors can attach the tenant's property to satisfy a debt. In such a case, if a co-tenant defaults on his or her debts, the creditors can sue in a partition proceeding to have the property interests uncoupled so the property can be sold, even over the objections of the non-debtor owner(s). What’s more, without a creditor issue, one co-owner of the property can sue to partition the property and can force another owner to move out.

Joint tenancy can also impact the capital gains treatment of the property. When you give property to a child, the tax basis for the property is the same price for which you purchased the property.  However, inherited property receives a step up in basis. This means that the basis would be the current value of the property. When you pass, your child inherits your half of the property—one half of the property will receive a step up in basis.  However, the tax basis of the gifted half of the property will be the same as the original purchase price. If your child sells the home after the parent dies, he or she would have to pay capital gains taxes on the difference between the tax basis and the selling price. To avoid this tax, the child must live in the house for at least two years before selling it. When that happens, he or she can exclude up to $250,000 ($500,000 for a couple) of capital gains from taxes.

Revocable Trust

If you place the property in a revocable trust and name yourself as the beneficiary and your child as the beneficiary after you die, the property will go to your child without going through probate when you pass away. A trust will also be able to guarantee you the right to live in the house and take into account changes in circumstances, like if your child passes away before you do.

One other important benefit of a trust pertains to capital gains taxes. The tax basis of property in a revocable trust is stepped up when you die. This means the basis in the home would be the date of death value of the property. Therefore, if your child sells the property immediately after inheriting it, the value of the property would not see much change. As a result, the capital gains taxes would be little or nothing.

Trusts can be structured to offer more flexibility and protection for all concerned. An estate planning attorney will be able to help you choose the best option for your family and prepare all of the necessary legal documents.

Reference: elderlawanswers.com (February 27, 2017) “Is It Better to Use Joint Ownership or a Trust to Pass Down a Home?

Make a Will to Help Your Heirs

If we remove the reluctance to consider our own mortality and focus on the legal aspects, perhaps it becomes easier to see why having a will is so important.

Ben Franklin had it mostly right – “…nothing can be said to be certain, except death and taxes.” We’d add one more thing: people who do not plan for their eventual demise with a will and an estate plan make things harder for their heirs, according to The Reading Eagle Business Weekly “Make a will, plan for distribution of assets.”

You can pass your wealth to anyone you want, but state and/or federal taxes may be due on these transfers. The rules are also complex, and if you die without a will, the state laws of intestacy may say who gets your wealth.

Most folks make the mistake of signing their wills and life insurance policies, then putting them in files and forgetting about them. These documents and your intentions will become out-of-date. It’s not uncommon for a decedent to have been divorced for five years when they die, but the ex-spouse still inherits all of his or her assets. Why? Because the ex’s name is still in the will or is listed as the beneficiary of the life insurance policy. This happens more frequently than you might think.

Probate?

Probate versus non-probate assets is one of the most misunderstood concepts in estate planning. Probate is the process that deals with proving a will's validity by filing it in court. The will names an executor who is responsible for fulfilling its terms. The estate assets are identified and valued, then given to the individuals named in the will.

There are also non-probate assets that are transferred by operation of law. They specifically include accounts with beneficiary designations like IRAs, 401(k)s, pensions, retirement accounts, life insurance, annuities, and transfer-on-death accounts. These non-probate assets supersede what’s written in the will. The beneficiary designations control them.

If you don’t have a will or you haven’t reviewed it in a while, make this a priority in 2017.

Meet with an estate planning attorney who will be able to create a plan to transfer your assets and coordinate your beneficiary designations. Think of this as a way to show your loved ones that you cared enough to plan ahead so that they are not left cleaning up an expensive and stressful legal and financial mess.

Reference: Reading (PA) Eagle Business Weekly (January 17, 2017) “Make a will, plan for distribution of assets.”

Savvy Tips for Dealing with an Inheritance

Inheritances by their very nature, create many mixed emotions. While you are grateful for the inheritance, you are grieving, which is a painful experience that impacts decision-making skills.

Perhaps the most important thing to know when you are grieving the loss of a loved one and expect to receive an inheritance, is not to make any big decisions. While an inheritance may change your life in a financially good way, as reported in The Reading (PA) Eagle Business Weekly’s recent article, “What to do and what not to do with your inheritance,” you are in a state of emotional crisis. Financial planning and big financial decisions will need to be made, but nothing needs to be done immediately, except for settling the business of the estate, if you are the executor. Here are some dos and don’ts to keep in mind:

What not to do with an inheritance

There’s no rush. Don't go nuts and spend every dollar immediately. Don't invest in long term or risky projects. Be patient.

Don't pay too much in taxes. Work with an estate planning attorney so you pay the appropriate amount to the IRS.

Don't pay off the mortgage. Although this can be emotionally fulfilling, it may not be the best use of your money. Take advantage of today's low interest rates and the tax-advantaged deductible mortgage payments. Create a financial plan so that you don’t run out of retirement funds.

Don't go on a mad spending spree. This should be self-explanatory.

Don't be pressured. Don’t be surprised if many people suddenly come out of the woodwork to offer their unsolicited advice—relatives, old pals, insurance agents, bankers and investment advisers. Just say, "No, I am not ready to make a decision yet." Likewise, don't get pressured into sharing your money with a friend or family member.

What to do with an inheritance

Save it. Deposit the money in the bank, a money market account or a short-term CD.

Pay off debt. Get rid of credit card balances and other high-interest debts that don't have tax benefits.

Do some financial planning. Figure out your long-range financial plan before spending any of this new found wealth and make plans for your retirement.

Update your estate plan. Make sure that your estate plan is up-to-date so your assets go to the intended persons, and you don’t waste it on probate fees and unnecessary taxes.

Meet with an estate planning attorney. If your financial situation has changed as a result of the inheritance, it makes sense for you to meet with a qualified estate planning attorney to update your will and other documents.

Reference: Reading (PA) Eagle Business Weekly (January 17, 2017) “Office Space: What to do and what not to do with your inheritance”

Touch Choices and Challenges for Special Needs Families: Retirement Planning

One of the hardest pieces of the financial puzzle for Special Needs Families is balancing parent’s retirement planning while ensuring that the Special Needs family member gets the care they need.

Planning for life after the parents of a Special Needs child pass away, must include ensuring that the individual retains their eligibility for government assistance. This requires an experienced estate attorney who is familiar with government program requirements, ABLE accounts and retirement planning.

Morningstar’s recent article, “Retirement Planning for Special-Needs Families,” explains that the need is growing. One in every five Americans has a disability, and 20 million families have at least one family member who has a disability, says the National Disability Institute. The costs can also be extremely high, with the lifetime cost of caring for a person with autism ranging from $1.4 million to $2.4 million, according to an advocacy and research group. Lifetime costs are similar for people affected by other severe impairments.

While government benefit programs provide some assistance, the eligibility rules vary depending on when a disability is incurred. There’s a set of rules for people disabled as children (prior to age 22) and another for those disabled at older ages. Here some key topics for consideration and action:

• The care plan should include the safety of the child, along with aspects of life fulfillment, including work, learning and play.
• Projected cash flow needs will depend on the type of disability, capability of the individual needing care and the level of care needed.
• Investment allocations. Families who have a child with special-needs should be more conservative in how they allocate their retirement portfolios, and maintain a higher level of cash.
• Government benefits include Social Security, Medicare and Medicaid.
• Families need to understand all of the government rules on asset and income limits for a person with disabilities.
• A Special Needs Trust is a critical part of a family retirement plan.
• Beneficiary designations must be structured properly, because inheritances can jeopardize government benefits eligibility.

Parents are advised to create a document that offers details of the specific needs and wants of the family member, so that his or her guardian will have as much information as possible when the parents are no longer present. Everyone in the family needs to be educated and prepared. A special needs attorney will be able to guide the family through the planning process.

Reference: Morningstar (January 17, 2017) “Retirement Planning for Special-Needs Families”

Alzheimer’s or Dementia Screening Now Covered by Medicare

You might think that any doctor seeing patients over a certain age would automatically screen for Alzheimer’s or other dementia-related diseases, but until now that has not been the case.

Starting in January, Medicare will now begin reimbursing doctors for screening and providing information about care planning for patients with Alzheimer’s and other cognitive impairment diseases. What seems like common sense public health policy, took many years of advocacy from patient groups.

Santa Cruz Sentinel’s recent article, “Diagnosing Alzheimer’s: Medicare now pays doctors to stop and assess memory loss,” reports that more than 5 million Americans are living with Alzheimer’s, and as many as 16 million will have the disease in 2050.  The cost of caring for those with the disease and other types of dementia is also skyrocketing. In the U.S., it’s estimated to total $236 billion in 2016 and is anticipated to increase to $1.1 trillion by 2050.

However, many people are unaware that they are afflicted with the disease: only about 50% of Americans are diagnosed. Experts contend that many doctors don’t take the time required to test for Alzheimer’s disease. But the new Medicare billing code will provide more incentive for primary care doctors to take the time for more evaluation and care-coordination.

An early and documented diagnosis—along with access to care planning services—gives Alzheimer’s patients better outcomes. It’s even possible to see signs of cognitive problems before the person realizes it themselves. However, research thus far, suggests that medications will only be effective in the early stages of the disease, when the symptoms are the mildest. Therefore, primary care doctors must look for those mild cognitive problems.

However, many physicians aren’t equipped to help their patients take advantage of the new Medicare rule. The issue is that most front-line physicians typically aren’t trained in this area. They first need to understand how to assess these patients before referring them to neurologists or to develop care plans.

A spokesperson from the Centers for Medicare & Medicaid Services says that the new rule does not include anything about educating doctors. Many patient advocate groups are mobilizing to educate physicians, some in tandem with their states, to increase awareness of the new coverage and to encourage doctors to include screening during their patient appointments.

Reference: Santa Cruz Sentinel (January 7, 2017) “Diagnosing Alzheimer’s: Medicare now pays doctors to stop and assess memory loss”

When Time is Critical, Where’s Your Health Care Proxy?

All too often, adult children are at a loss when their elderly parents encounter a health care emergency. If the kids can’t find health care proxies and DNRs (Do Not Resuscitate orders), they won’t be able to help their parents the way their parents had wished.

Before an emergency strikes, certain legal documents should be prepared so that children or other trusted family members will be able to help loved ones. Explain to elderly parents that this simply means that their wishes will be known and it is necessary to do this while they are healthy and well, or at least able to articulate their wishes. That means speaking with an estate planning attorney to have the documents created and also making sure that family members know where important papers are located.

Las Cruces Sun-News published an article recently about this topic, “Getting affairs in order,” that suggests if you have siblings or other relatives, you need to think about who will be the health care proxy.

Consider who among you shares similar views and values about life and medical decisions as your loved one.  You should also name an alternate proxy. It’s important to have a detailed living will, so that the loved one can choose the amount of authority the proxy will have over their medical care and the types of decisions he or she can make. Make sure that the proxy and alternate are comfortable with this responsibility. He or she must then complete the legal forms detailing their wishes. Start the process by talking with their doctor and consulting with an elder law attorney.

Failing to plan in advance may result in your inability to gain access to the information you need or to act on your loved one’s behalf, if they’re unable to do so. You can avoid time-consuming and costly court fights by working with your loved one to prepare these documents.

Other important health care documents include a medical directive or a “living will” or “advance health care directive” that describes the kind of care your loved one wants to receive if and when they become ill or incapacitated. This must be completed while your loved one is of sound mind and can decide what treatments they want to receive.

A durable power of attorney for health care allows you to make health care decisions for your loved one. On the other hand, a durable power of attorney for finances lets you manage your loved one’s financial affairs. A HIPAA release says that you have access to their health records and medical staff.

Another important document is a revocable living trust. This allows your loved one to retain control over their estate, while making transfers of his or her assets to beneficiaries. They select property to go into the trust and who will receive it. During their lifetime, they act as trustees (managers) of their own living trust. A revocable living trust allows the estate to avoid probate at the time of death.

A will needs to be prepared so that your loved one can convey their assets and other personal property as they see fit. An estate planning attorney will help draft and execute these documents. Remember that the documents are not simply written up and stored somewhere. Every four or five years they need to be updated to take into account changes in family situations and changes in the law.

Reference: Las Cruces Sun-News (January 1, 2017) “Getting affairs in order”