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What Does Pandemic Estate Planning Look Like?

In the pandemic, it’s a good idea to know your affairs are in order. If you already have an estate plan, it may be time to review it with an experienced estate planning attorney, especially if your family’s had a marriage, divorce, remarriage, new children or grandchildren, or other changes in personal or financial circumstances. The Pointe Vedra Recorder’s article entitled “Estate planning during a pandemic: steps to take” explains some of the most commonly used documents in an estate plan:

Will. This basic estate planning document is what you use to state how you want your assets to be distributed after your death. You name an executor to coordinate the distribution and name a guardian to take care of minor children.

Financial power of attorney: This legal document allows you to name an agent with the authority to conduct your financial affairs, if you’re unable. You let them pay your bills, write checks, make deposits and sell or purchase assets.

Living trust: This lets you leave assets to your heirs, without going the probate process. A living trust also gives you considerable flexibility in dispersing your estate. You can instruct your trustee to pass your assets to your beneficiaries immediately upon your death or set up more elaborate directions to distribute the assets over time and in amounts you specify.

Health care proxy: This is also called a health care power of attorney. It is a legal document that designates an individual to act for you, if you become incapacitated. Similar to the financial power of attorney, your agent has the power to speak with your doctors, manage your medical care and make medical decisions for you, if you can’t.

Living will: This is also known as an advance health care directive. It provides information about the types of end-of-life treatment you do or don’t want, if you become terminally ill or permanently unconscious.

These are the basics. However, there may be other things to look at, based on your specific circumstances. Consult with an experienced estate planning attorney about tax issues, titling property correctly and a host of other things that may need to be addressed to take care of your family. Pandemic estate planning may sound morbid in these tough times, but it’s a good time to get this accomplished.

Reference: Pointe Vedra (Beach, FL) Recorder (July 16, 2020) “Estate planning during a pandemic: steps to take”

 

Different Trusts for Different Estate Planning Purposes

There are a few things all trusts have in common, explains the article “All trusts are not alike,” from the Times Herald-Record. They all have a “grantor,” the person who creates the trust, a “trustee,” the person who is in charge of the trust, and “beneficiaries,” the people who receive trust income or assets. After that, they are all different. Here’s an overview of the different types of trusts and how they are used in estate planning.

Revocable Living Trust” is a trust created while the grantor is still alive, when assets are transferred into the trust. The trustee transfers assets to beneficiaries, when the grantor dies. The trustee does not have to be appointed by the court, so there’s no need for the assets in the trust to go through probate. Living trusts are used to save time and money, when settling estates and to avoid will contests.

A “Medicaid Asset Protection Trust” (MAPT) is an irrevocable trust created during the lifetime of the grantor. It is used to shield assets from the grantor’s nursing home costs but is only effective five years after assets have been placed in the trust. The assets are also shielded from home care costs after assets are in the trust for two and a half years. Assets in the MAPT trust do not go through probate.

The Supplemental or Special Needs Trust (SNT) is used to hold assets for a disabled person who receives means-tested government benefits, like Supplemental Security Income and Medicaid. The trustee is permitted to use the trust assets to benefit the individual but may not give trust assets directly to the individual. The SNT lets the beneficiary have access to assets, without jeopardizing their government benefits.

An “Inheritance Trust” is created by the grantor for a beneficiary and leaves the inheritance in trust for the beneficiary on the death of the trust’s creator. Assets do not go directly to the beneficiary. If the beneficiary dies, the remaining assets in the trust go to the beneficiary’s children, and not to the spouse. This is a means of keeping assets in the bloodline and protected from the beneficiary’s divorces, creditors and lawsuits.

An “Irrevocable Life Insurance Trust” (ILIT) owns life insurance to pay for the grantor’s estate taxes and keeps the value of the life insurance policy out of the grantor’s estate, minimizing estate taxes. As of this writing, the federal estate tax exemption is $11.58 million per person.

A “Pet Trust” holds assets to be used to care for the grantor’s surviving pets. There is a trustee who is charge of the assets, and usually a caretaker is tasked to care for the pets. There are instances where the same person serves as the trustee and the caretaker. When the pets die, remaining trust assets go to named contingent beneficiaries.

A “Testamentary Trust” is created by a will, and assets held in a Testamentary Trust do not avoid probate and do not help to minimize estate taxes.

An estate planning attorney in your area will know which of these trusts will best benefit your situation.

Reference: Times Herald-Record (August 1,2020) “All trusts are not alike”

 

August 31 – The Deadline for Rolling Back RMDs into Retirement Accounts

President Trump officially signed the CARES Act on March 27, 2020. The Act allows retirement plan owners to skip taking their Required Minimum Distributions (RMDs) in 2020, if they so choose. This is intended to benefit those who are in a good financial position and do not need to take their RMDs during these unsettling times. What about those who already had taken their RMDs for 2020?

This is the subject of a recent article titled “Don’t Miss the August 31 Deadline to Return 2020 Required Minimum Distributions” from The Street.

First, the IRS announced that anyone who had already taken RMDs before the CARES Act became law could return the funds to their retirement accounts. However, the window of time to return the withdrawn funds was pretty short—only 60 days.

On June 23, the IRS extended the time period to Aug. 31, 2020. That seemed like a long time ago, back in late June. But now the clock is ticking, and Aug. 31 is just around the corner!

Note: the repayment is not subject to the singular 12-month rollover limitation, also known as the “once-per-year rollover rule.” And the same repayment applies to beneficiary, or inherited, IRAs.

The ability to rollover funds back into tax-deferred accounts is a help on several different levels. One, the account owner does not have to pay income taxes on RMDs for the year (unless they were Roth accounts, which pay taxes on contributions and not withdrawals). Also, this spring was a rocky one for markets, and returning money into tax-deferred accounts gives the accounts a chance to recover from some significant market swings.

Speak with your estate planning attorney and financial advisor about your RMDs for 2020, and how the CARES Act RMD waiver may apply to your situation.

Reference: The Street (July 29, 2020) “Don’t Miss the August 31 Deadline to Return 2020 Required Minimum Distributions”

 

Social Security Administration Announces Advance Designation for Representative Payees

In April 2020, the Social Security Administration announced that individuals are now able to designate “preferred individual(s) to serve as payee should the need arise.” This designation can be made online though the Administrations “my Social Security” website.

If you are not familiar with Social Security’s “representative payee” program, a ‘rep payee’ is a person or organization who receives social security or SSI benefits for a recipient who is unable to manage benefits on his or her own. Once the rep payee is chosen, benefit payments will be sent to that person. The benefits must be used for the benefit of the person unable to manage the funds and Social Security requires regular reporting on how the benefits are used.

Up to three persons may be designated as a potential representative payee. Contact information for each designation must also be provided.

It is important to note that while this new program permits Social Security to take into account the preference of the person receiving benefits, Social Security still has its own criteria for selective who may actually serve – considering things like the potential rep payee’s criminal record and the nature of his or her relationship to the person receiving benefits. Even so, this new program will allow beneficiaries to have a greater input into management of their affairs, in a way not possible before. It also makes advance designation of a potential representative payee another component of a solid estate plan.

 

 

 

Do You Need a Revocable Trust?

A will lets you determine how your property will be distributed when you die, and a revocable living trust also accomplishes that task. However, the owner of the trust can make strict stipulations about how specific assets should be distributed, says Barron’s in the article “Revocable Living Trusts Can Help Your Heirs Avoid Probate. Here’s How They Work.” Another advantage of a revocable trust—avoiding probate, which gives the trust owner far more control over asset distribution.

Remember, probate is a process that takes place under the supervision of a judge in a court. Things don’t always happen the way the decedent may have wanted.

It’s best for individuals or couples with complex estate planning needs to meet with an estate planning lawyer, who will discuss whether a living trust is the right option. One question couples should ask: does it make sense for them to have a living will, and should it be a joint trust, or should it be two separate ones?

When a trust is created, it needs to be funded. Assets such as real estate, bank accounts, taxable non-retirement investment accounts all need to be retitled so they are owned by the trust. The person who creates the trust has no restrictions as to how the assets within the trust are used while they are alive. The trust can also be revoked during the owner’s lifetime, but it’s more common for owners to make tweaks to the trust.

Trusts are very popular in states like California and Massachusetts, which have more restrictive probate laws than other states. Trusts are very good for people who own property in multiple states and would otherwise have to deal with probate in multiple states. Trusts are also excellent for people who wish to maintain privacy about their assets, since the trust’s contents remain private. A will, once it enters the probate process, becomes a public document.

Someone who does not own his or her own home and has limited assets may prefer to use a will, which is less expensive and simpler than a trust. Once they do own a home and have more extensive assets, they can always have a trust created.

A living trust is part of a larger estate plan. Other estate planning documents are still needed, including a durable power of attorney for finances, an advance health care directive, a nomination of guardianship for families with minor children and a living will.

People who have revocable trusts should ask their estate planning attorney about something called a “pour-over” will. This is a will that ensures that any assets accidentally left out of the trust are added to the trust after the death of the owner. If the majority of assets are in the trust, the probate of the pour-over will should be much simpler and there may even be a “fast-track” option for assets under a certain dollar level.

Reference: Barron’s (February 22, 2020) “Revocable Living Trusts Can Help Your Heirs Avoid Probate. Here’s How They Work”

Suggested Key Terms: Irrevocable Living Trust, Estate Planning, Probate, Heirs, Pour-Over Will, Health Care Directive, Power of Attorney, Assets, Joint Revocable Trust

C19 UPDATE: Emergency Estate Planning Decisions to Make Right Now

Though it may be hard not to panic when the grocery store shelves are empty, the number of confirmed cases of COVID-19 keeps rising, and we see sobering statistics across the globe … we will not overcome this challenge with a panicked response.

Nonetheless, there are certain things we all need to be doing right now – and your public health officials are the best resource on how to stay personally safe and help prevent the virus from spreading.

When it comes to the seriousness of this outbreak, however, there also are some critical estate planning decisions you should make – or review – right now.

Ask yourself these questions:

  1. Who will make medical decisions for me should I become severely ill and unable to make these decisions myself?
  2. Who will make my financial decisions in that same situation — for example, who will be authorized to sign my income tax return, write checks or pay my bills online?
  3. Who is authorized to take care of my minor children in the event of my severe illness? What decisions are they authorized to make? How will they absorb the financial burden?
  4. If the unthinkable happens – what arrangements have I made for the care of my minor children, any family members with special needs, my pets or other vulnerable loved ones?
  5. How will my business continue if I were to become seriously ill and unable to work, even remotely … or in the event of my death?

These are the most personal decisions to make right now to protect yourself and your loved ones during this emergency. Now is also a good time to ask yourself if you have plans in place for the smooth transfer of your assets and preservation of your legacy.

We are ready to help walk you through these decisions, understand the ramifications of your choices, and memorialize your plans in binding legal documents. We are currently offering no-contact initial conferences remotely if you prefer. Book a call now and let us help you make the right choices for yourself and your loved ones.

C19 UPDATE: Employers Now May Help Employees with Tax-Free Direct Disaster Relief Assistance

As the coronavirus pandemic emergency unfolds, it’s clear that increasing numbers of employees will likely suffer financial impacts … from quarantines, illnesses, workplace closings, etc. President Trump’s declaration of a national emergency on March 13 now allows employers to make direct disaster-relief payments to assist employees affected by the virus.

These types of payments are not treated as income/wages to the employees and are deductible to the employer as ordinary and necessary business expenses. There is no specific cap on the amount of assistance that may be provided to an employee other than it must be “reasonable and necessary” and must not be for an expense reimbursable by the employee’s insurance.

Section 139 of the Internal Revenue Code, allows that a “qualified disaster relief payment” of any amount may be paid to reimburse or pay reasonable and necessary personal, family, living or funeral expenses (not otherwise compensated for by insurance) incurred because of a “qualified disaster.” The term “qualified disaster” includes a federally declared disaster or emergency under the Stafford Act. Accordingly, due to the Declaration, Coronavirus is now a “qualified disaster” for Section 139 purposes, so disaster relief may be provided to employees on a tax-free basis (assuming all the requirements of Section 139 are satisfied).

As always check with your CPA or attorney before implementing any tax planning strategy for your business.

Read more at The National Review, Coronavirus National Emergency Declaration Permits Employers to Offer Tax-Favored Financial Assistance to Employees, March 14, 2020

Keywords: Tax planning for small business owners, disaster relief payments for employees, coronavirus disaster relief payments

Senior Driving

When Is It Time For My Dad To Give Up The Car Keys?

Because the odds of a fatal crash go up significantly at 70, adult children want to make sure their elderly parents do not become part of those unfortunate statistics. Taking a proactive approach to making certain that a parent or other vulnerable adult is still fit to drive is the key, says AARP in its recent article entitled “Is It Time for Your Loved One to Retire From Driving?”

Many seniors derive a sense of freedom and independence—perhaps even a source of pride from driving—so it’s a sensitive subject. One option is to ask your parent’s physician to broach the subject. If your loved one’s physician doesn’t bring up the topic, ask her to address it.

It’s really not realistic to expect your aging parent to hand over the car keys at the appropriate time. Some might, but others will refuse. Experts say that as we get older, we are apt to develop a more positive outlook on things. However, this gives us a false sense of security when it comes to things like driving. However, normal aging is linked with decreased reaction time, vision problems and hearing problems—all of which place them at greater risk.

Some medical conditions —like arthritis, cardiovascular disease, dementia, glaucoma and macular degeneration, Parkinson’s disease and stroke — can compromise a senior’s driving abilities. The more prescriptions a senior takes and the more medical conditions a senior has, the greater risk when a senior gets behind the wheel.

In addition to the safety of an aging parent and other drivers, a senior who drives but shouldn’t, may also put grandchildren at risk.

Some other reasons to be concerned about the senior’s driving abilities include driving too slowly or too fast, getting lost in the neighborhood, a recent car accident or close call, difficulties with parking, getting tickets for driving violations and running red lights or stop signs.

One way to gauge an aging adult’s driving capabilities is to run an errand with them. Some may also recognize some of the signs in themselves and realize that they’ve been feeling less confident driving under certain conditions.

You can always encourage your mother or father to have an older adult driving evaluation, which may be available at hospitals and administered by occupational therapists or driving rehab specialists. This evaluation won’t affect their driver’s license, which may ease a parent’s reluctance to have one.

There are 33 states and DC that have special provisions for mature drivers. Some states require vision tests and might include in-person license renewals, more frequent renewals and road tests.

Reference: AARP (November 5, 2019) “Is It Time for Your Loved One to Retire From Driving?”

Key Terms: Elder Law Attorney, Disability, Elder Care

What Is The Latest On The New York Legislation Concerning Medicaid Spousal Refusal?

The last five governors in New York targeted a maneuver called “spousal refusal” for repeal 28 times. Newsday’s recent article entitled “State considers end to ‘spousal refusal’ to pay for nursing home care” says that there are some who think that this practice is a scheme to benefit the wealthy. However, an increasing number of advocates for middle-class elderly New Yorkers strongly support it as an essential way to keep a “well” spouse from poverty, when health care costs are skyrocketing.

Currently, New York and Florida are the only states that permit this practice.

However, now the state Medicaid Redesign Team is looking at if they should stop the decades-old practice. Governor Andrew M. Cuomo appointed the group of health care leaders to cut $2.5 billion from Medicaid, and their recommendations are due by mid-March.

Eligibility for Medicaid is based on family income and wealth, but there can be exemptions and special circumstances. A married couple who are both 65 years old or older can have no more than about $38,000 in annual income, and assets of no more than about $120,000, if one spouse is to be covered by Medicaid for nursing home care or comparable home care. As a result, any income and assets above those thresholds must be used to help pay for this care, which averages more than $10,000 a month in the Empire State.

This spousal refusal option lets the “well” spouse—the one who is not in need of care— to collect more income and retain more of the couple’s assets under his or her name. This process is replete with loopholes and is also complicated by federal law designed to protect more assets to avoid “spousal impoverishment.”

With a mandate to trim $2.5 billion from Medicaid in New York, it’s not clear how much spousal refusal costs the state. In 2016, the price was estimated at $10 million. However, this didn’t consider the continuing annual costs of each refusal, or the increased costs of care as the spouse who entered a nursing home gets older.

Spousal refusal has an increasing number of supporters for maintaining the practice, who say that it helps middle class families deal with soaring health care costs, prevents couples from having to spend their savings and give away assets to qualify for Medicaid and makes it unnecessary to contemplate divorce only to protect assets.

There’s one additional benefit: a spouse could enter a nursing home more quickly because Medicaid payments will kick in immediately and would avoid the lengthy process of determining eligibility.

Reference: Newsday (February 23, 2020) “State considers end to ‘spousal refusal’ to pay for nursing home care”

Key Terms: Elder Law Attorney, Medicaid, Paying for a Nursing Home, Long-Term Care Planning, Medicaid Trust Planning, Medicaid Nursing Home Planning, Assisted Living, Nursing Home Care, Medicaid Planning Lawyer, Disability, Elder Care

What Is So Important About Powers Of Attorney?

Powers of attorney can provide significant authority to another person, if you are unable to do so. These powers can include the right to access your bank accounts and to make decisions for you.

AARP’s article from last October entitled, “Powers of Attorney: Crucial Documents for Caregiving,” describes the different types of powers of attorney.

Just like it sounds, a specific power of attorney restricts your agent to taking care of only certain tasks, such as paying bills or selling a house. This power is typically only on a temporary basis.

A general power of attorney provides your agent with sweeping authority. The agent has the authority to step into your shoes and handle all of your legal and financial affairs.

The authority of these powers of attorney can stop at the time you become incapacitated. Durable powers of attorney may be specific or general. However, the “durable” part means your agent retains the authority, even if you become physically or mentally incapacitated. In effect, your family probably won’t need to petition a court to intervene, if you have a medical crisis or have severe cognitive decline like late stage dementia.

In some instances, medical decision-making is part of a durable power of attorney for health care. This can also be addressed in a separate document that is just for health care, like a health care surrogate designation.

There are a few states that recognize “springing” durable powers of attorney. With these, the agent can begin using her authority, only after you become incapacitated. Other states don’t have these, which means your agent can use the document the day you sign the durable power of attorney.

A well-drafted power of attorney helps your agent help you, because she can keep the details of your life addressed, if you cannot. That can be things like applying for financial assistance or a public benefit, such as Medicaid, or verifying that your utilities stay on and your taxes get paid. Attempting to take care of any of these things without the proper document can be almost impossible.

In the absence of proper incapacity legal planning, your loved ones will need to initiate a court procedure known as a guardianship or conservatorship. However, these hearings can be expensive, time-consuming and contested by family members who don’t agree with moving forward.

Don’t wait to do this. Every person who’s at least age 18 should have a power of attorney in place. If you do have a power of attorney, be sure that it’s up to date. Ask an experienced elder law or estate planning attorney to help you create these documents.

Reference: AARP (October 31, 2019) “Powers of Attorney: Crucial Documents for Caregiving”

Suggested Key Terms: Elder Law Attorney, Elder Care, Estate Planning, Guardianship, Conservatorship, Probate Court, Power of Attorney, Caregiving, Dementia, Alzheimer’s Disease

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