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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.

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

Prince - Purple Rain

How Does the Death of Prince’s Brother Impact the Late Rock Star’s Estate?

Alfred Jackson was one of six of Prince’s siblings who were heirs to their brother’s fortune worth at least $100 million. But they sold 90% of his estate rights last year to Primary Wave, a well-funded and growing entertainment company that invests in music publishing and recording rights. Prince’s sister Tyka Nelson also struck a deal with Primary Wave, and was given cash up front as the estate proceedings drag on.

The StarTribune’s recent article entitled “Death of Prince heir complicates estate settlement even more” reports that because of these moves, about a third of Prince’s assets could wind up being controlled by parties who were not related to him—which adds to the tough job of settling the late rock star’s estate.

Just a few hours after signing with Primary Wave in August of 2019, the sixty-six-year-old Jackson succumbed to heart disease, while at his home in Kansas City. However, unlike Prince, he had signed a will. Jackson did not have a wife or children. However, in another twist, rather than leaving his estate to his siblings, he bequeathed all his assets to a friend, Raffles Van Exel, who claims to be an entertainment consultant. However, he’s best known for hanging out with Whitney Houston in her final days, as well as Michael Jackson’s family. Exel was also a creative force behind O.J. Simpson’s notorious “If I Did It” book project.

Primary Wave’s deal with Jackson is being reviewed by his own family, at least his siblings who aren’t related to Prince. They aim to contest his will.

Prince’s accidental death by fentanyl in 2016 created one of the largest and most complicated probate court proceedings in Minnesota history. That’s because the rock star failed to draft a will. The value of his estate is somewhere between $100 million to $300 million estate and is comprised of potential music royalties.

Prince’s heirs are unable to get their money from his estate until it is settled. Because the probate proceedings are dragging on, Primary Wave offered Prince’s heirs the chance to raise cash by selling their estate rights. These heirs are all approaching 60. Jackson wanted to enjoy life now, rather than wait for the process to be finalized. The siblings, by that time, may be too old, sick or dead to enjoy their inheritance.

Primary Wave tried to get at least three of Prince’s siblings — Sharon, Norrine, and John Nelson, to sell their estate rights. However, the three refused and said in a recent court filing that they are concerned that Primary Wave will use its deep pockets to their detriment. The company’s involvement would only lead to more delays and tensions, the siblings said in a letter directly to the probate judge. With the case draining their “limited resources,” the three explained that they are unable to pay legal counsel in this case and are representing themselves.

The terms of Primary Wave’s deals with Tyka Nelson and Alfred Jackson are private. However, the company has been asserting its rights in Prince’s probate case. A 2019 court filing said that the company says it “stands in the shoes” of the two heirs.

Reference: StarTribune (February 22, 2020) “Death of Prince heir complicates estate settlement even more”

Key Terms: Estate Planning Lawyer, Wills, Intestacy, Probate Court, Inheritance, Asset Protection, Will Contest, Probate Attorney

Should You Name a Trust as an IRA Beneficiary?

An IRA may not be placed into a trust while the account owner is alive. An IRA also may not be owned by more than one person. The IRA owner can name a trust as a beneficiary of an IRA. Just because you can do this, does not mean it is a good idea, says the article “Naming Your Trust as an IRA Beneficiary” from The Press of Atlantic City. The IRA owner could also take all of the funds and deposit them into a trust, but that would be another bad idea. Why? It is because all of the funds withdrawn would be subject to income tax.

Therefore, why would anyone want to name a trust as the beneficiary for an IRA?

  • If you want an heir, like a second spouse, to inherit the income but not the balance of the principal after you have died. This is done so the second spouse cannot name their children as the beneficiary, instead of the original account owner’s children.
  • If you are concerned with the ability of heirs to manage your IRA funds wisely, a trust can be the beneficiary and you can set the terms with which the heirs can have access to the funds.
  • Minor children cannot be direct beneficiaries of an IRA, and a disabled child may become ineligible for government benefits, if he or she receives an inheritance directly.
  • If you want your IRA funds to be inherited by grandchildren instead of children, a trust is the way to go.
  • If creditor protection is a concern under the laws of your state, a trust would keep the IRA funds from being tapped by claims of creditors.

Here is why you would NOT want to name a trust as the beneficiary of your IRA:

  • There are no tax benefits to having the trust inherit your IRA.
  • Trusts have expenses. Trustee fees and tax rates on funds left inside the trust, but not in the IRA, may be substantially higher than personal income tax rates, depending on the beneficiary.
  • The trust will have to keep going long after your own death. That means tax returns must be filed, fees paid, and the trustee must maintain the trust.
  • Some companies that hold IRAs do not allow trusts to be beneficiaries of IRAs. Before you get into figuring out if this is the right route for you, find out first if your custodian will permit it.

There are many other facts to consider before deciding to name a trust as the beneficiary of an IRA. Speak with your estate planning attorney to see if it is a suitable solution for you and your family.

Reference: The Press of Atlantic City (February 13, 2020) “Naming Your Trust as an IRA Beneficiary”

Terms: IRA, Trust, Trustee, Personal Income Tax, Beneficiaries, Estate Planning Attorney, Second Spouse

End of Life Checklist

Creating an End-of-Life Checklist

Spend the energy, effort, and time now to consider your wishes, collect information and, most importantly, get everything down on paper, says In Maricopa’s recent article entitled “Make an end-of-life checklist.”

The article says that a list of all your assets and critical personal information is a guarantee that nothing is forgotten, missed, or lost. Estate planning attorneys can assist you and guide you through the process.

Admittedly, it’s an unpleasant subject and a topic that you don’t want to discuss, and it can be a final gift to your family and loved ones.

When you work with an experienced estate planning attorney, you can add any specific instructions you want to make that are not already a part of your will or other estate planning documentation. Make certain that you appoint an executor, one you trust, who will carry out your wishes.

Have ready for your attorney all of your vital, personal information. This should include your name, birthday, and Social Security number, as well as the location of key documents and items, birth certificate, marriage license, military discharge paperwork (if applicable), and your will, powers of attorney, medical directives, ID cards, medical insurance cards, house and car keys and details about your burial plot.

In addition, you need to let your family now about the sources of your income. This type of information should include specifics about pensions, retirement accounts, 401(k), or you 403(b) plan.

Be sure to include company and contact, as well as the account number, date of payment, document location, and when/how received.

You also need to include all medicine and medical equipment used and the location of these items.

And then double check the locations of the following items: bank documents, titles and deeds, credit cards, tax returns, trust and power of attorney, mortgage and loan, personal documents, types of insurance – life, health, auto, home, etc. It’s wise to add account numbers and contact information.

Another area you may want to consider is creating a list of online passwords, in printed form, in a secure place for your family or loved ones to use to access and monitor accounts.

Be sure to keep your End-of-Life Checklist in a secure place, such as a safe or safety deposit box because it has sensitive and private information. Tell your executor where it is located.

Reference: In Maricopa (Feb. 14, 2020) “Make an end-of-life checklist”

Key Terms: Elder Law Attorney, Estate Planning Attorney, Wills, Power of Attorney, Living Will, Advance Directive

C19 UPDATE: Paying for Covid-19 Testing and Treatment if You Have a High Deductible Insurance Plan

What is a High Deductible Health Plan (HDHP)?

A HDHP is a health insurance plan with a higher deductible than traditional insurance plans. Many people choose this type of health insurance for the cost savings as the monthly premiums are usually lower than traditional insurance plans. A high deductible plan (HDHP) can be combined with a health savings account (HSA), allowing you to pay for certain medical expenses with pre-tax money.

For 2020, the IRS defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family. An HDHP’s total yearly out-of-pocket expenses (including deductibles, copayments, and coinsurance) can’t be more than $6,900 for an individual or $13,800 for a family. (This limit doesn’t apply to out-of-network services.)

How Does This Apply to Covid-19 Testing & Treatment?

The IRS recognizes that people with HDHP plans, where in general, all costs are paid out-of-pocket before medical benefits kick in, may be reluctant to seek care or be tested when ill.

To respond to the current Covid-19 emergency, the IRS on March 11 issued guidance in Notice 2020-15 stating (emphasis added)

“a health plan that otherwise satisfies the requirements to be a high deductible health plan (HDHP) under section 223(c)(2)(A) of the Internal Revenue Code (Code) will not fail to be an HDHP under section 223(c)(2)(A) merely because the health plan provides health benefits associated with testing for and treatment of COVID-19 without a deductible, or with a deductible below the minimum deductible (self only or family) for an HDHP. Therefore, an individual covered by the HDHP will not be disqualified from being an eligible individual under section 223(c)(1) who may make tax-favored contributions to a health savings account (HSA).”

In short, the IRS said that health plans that otherwise qualify as HDHPs will not lose that status merely because they cover the cost of testing for or treatment of COVID-19 before plan deductibles have been met. This also means that an individual with an HDHP that covers these costs may continue to contribute to a health savings account (HSA).

The IRS noted that, as in the past, any vaccination costs continue to count as preventive care and can be paid for by an HDHP. Testing and treatment for the virus can be covered under the umbrella of “preventive services.”

This Applies Only to Covid-19 Emergencies

The IRS cautions that this new policy statement only applies to Covid-19 emergencies:

“This guidance does not modify previous guidance with respect to the requirements to be an HDHP in any manner other than with respect to the relief for testing for and treatment of COVID-19.”

Check with Your Provider

If you are currently enrolled in a HDHP health insurance, be sure to check with your provider for details about your specific benefits coverage.

Resources: IRS Notice 2020-15, “HIGH DEDUCTIBLE HEALTH PLANS AND EXPENSES RELATED TO COVID-19,” https://www.irs.gov/pub/irs-drop/n-20-15.pdf

Suggested keywords: COVID-19 health benefits, HDHP health plans, COVID-19 testing, IRS Notice on COVID-19, insurance benefits for coronavirus, paying for coronavirus testing

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