Have You Prepared Your Family for Your Death?

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Napoleon Bonaparte said that most battles are won or lost in the preparation stage, long before the first shot is fired. Have you prepared your family for your death?

MarketWatch’s recent article, “Breaking the taboo: How to prepare your heirs for your death” says that when it comes to retirement, 60s are the new 50s!

This is a critical lesson when planning for your own death and the related issue of transitioning assets to your family. The majority of estates lose assets—as well as peace within the family—after a transition. That’s because the heirs were unprepared, they didn’t trust each other and communications fell apart.

The preparation of your death should involve making heirs aware of the location of all important estate planning documents and financial assets. They should also have the contact info of your financial professionals and attorney. They should understand how the parents want to deal with end of life and incapacity issues. These are some important questions that will help you see, if your heirs are prepared:

  • Do your children (and their spouses, if any) know your estate plan?
  • Is there a plan to provide certain information sooner and other information at a later time?
  • Has your family read your will/trust and other estate planning documents?
  • Does your family know the family’s net worth?
  • Are your heirs in communication with your attorney, accountant, insurance advisors, and investment advisor?

Family battles can easily happen when members don’t believe they’ve been given their fair share and weren’t part of the process. Although it’s important to treat family wealth as a private matter, it should not be private within the family. Good communication between parents and heirs can prevent many issues.

Attaining the optimal degree of knowledge-sharing and family involvement requires its own planning. Family values, as well as current and future goals, should be a part of the entire financial planning process. When done well, financial planning is about much more than investment management. The success of a family wealth transition plan depends on preparing the family for the transition of the family’s wealth and its values.

Reference: MarketWatch (March 7, 2019) “Breaking the taboo: How to prepare your heirs for your death”

As a New Parent, Have You Updated (or Created) Your Estate Plan?

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Congrats, you are a new parent! Now you’re sleep-deprived, overwhelmed, and frazzled. Having a child dramatically changes one’s legacy plan and makes having a plan all the more necessary, says ThinkAdvisor’s recent article, “5 Legacy Planning Basics for New Parents.” If you don’t have an estate plan, now is the time to create one.

Even though you are tired, it is important to take time to talk through two high-priority items. Create a staggered checklist—starting with today—and set attainable dates to complete the rest of the tasks. Here are five things to put on that list:

  1. Will/Guardianship Nomination. This gives the probate court your instructions on who will care for your children, if something happens to both you and your spouse. A will also should name a guardian to be responsible for the children. Parents also should think about how they want to share their personal belongings and financial assets. Without a will, the state of California decides what goes to whom. Lastly, a will must name an executor to carry out your wishes.
  2. Beneficiaries. Review your beneficiary designations when you create your will, because you don’t want your will and designations (on life insurance policies and investments) telling two different stories. If there’s an issue, the beneficiary designation overrides the will. All accounts with a beneficiary listed automatically avoid probate court.
  3. Trust. Created by an experienced estate planning attorney, a trust has some excellent benefits, particularly if you have young children. Everything in a trust is shielded from probate court, including property. This avoids court fees and hassle. A trust also provides some flexibility and customization to your plan. You can instruct that your children get a sum of money at 18, 25 or 30, and you can say that the money is for school, among other conditions. The trustee will distribute funds, according to your instructions.
  4. Power of Attorney and Advance Health Care Directive. These are two separate documents, but they’re both used in the event of incapacitation. Their power of attorney for finance and health care directive designees can make important financial and medical decisions when you’re incapable of doing so.
  5. Life Insurance. Most people don’t think about purchasing life insurance, until they have children. Therefore, if you haven’t thought about it, you’re not alone. If you are among the few who bought a policy pre-child, consider increasing the amount so your child is covered, if something should happen.

Reference: ThinkAdvisor (March 7, 2019) “5 Legacy Planning Basics for New Parents”

 

How Can I Protect My Child’s Inheritance, If They Have a Substance Abuse Problem?

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Kiplinger’s recent article, “Selecting the Right Trustee and Protector for a Substance Abuse Trust,” explains that selecting the trustee for a substance abuse trust should start with a good idea of the duties they will perform. Next, find a person or institutional trustee that’s most qualified to fulfill those obligations to ensure that the child’s inheritance is protected. Parents should then think about naming a trust protector, who serves in a supervisory role to ensure that the trust is being properly administered.

The basic duties of a trustee include a fiduciary duty to administer the trust in good faith and in accordance with its terms and purposes; loyalty to the beneficiaries, by acting solely in their interests; invest the trust property prudently by considering the purposes, terms, distributional requirements, and other circumstances of the trust; and to act impartially, when there are multiple beneficiaries.

There may also be special duties of the trustee. For a child with a substance use disorder, the trustee’s duties for distributions could be linked specifically to paying for the costs of rehab, job training, professional service fees and other items that are part of the treatment plan developed by the beneficiary’s treatment team. Tying distributions into the treatment plan would mean the trustee, and maybe someone familiar with treatment management, would have to work closely with the treatment team to carry out the plan.

If the trust has incentive clauses, the trustee will also have to determine if the beneficiary has attained the goal (like sobriety for a certain period of time) and if so, the benefit to which he or she’s entitled. These can be hard to administer, since it can be hard to verify if the beneficiary has actually met the goals.

If the beneficiary is eligible for government program benefits, like SSI or Medicaid or from private health insurance, another set of duties will be placed upon the trustee to make certain that distributions won’t be classified as “maintenance” or “support.” If so, it could result in the child being declared ineligible. Since distributions from the trust are meant only to supplement the benefits that SSI or Medicaid is providing (and not duplicate or supplant them), the trustee will have to closely watch the uses of the distributions, so they aren’t support and maintenance.

You must next look at potential candidates to see who’s best suited for the role of trustee. There are two categories of trustees: individual and institutional. Individual trustees can include family members. The advantage here is that they’ll know the beneficiary and can give more personalized service than an institutional trustee. However, appointing a family member or friend as trustee may ruin the relationship, if the trustee denies the beneficiary’s demands.

You can appoint a licensed private fiduciary, trust company, bank trust department, or a corporate trustee connected to a brokerage firm to serve as the trustee to avoid possible family conflicts. However, some institutional trustees may be more focused on their investment performance, than on tending to the mental and physical needs of their beneficiaries. In the case of a substance abuse trust, “hands-on” involvement with the beneficiary is vital.

One alternative may be to appoint an individual and an institutional company to serve as co-trustees. The individual could be personally involved with the beneficiary and their treatment plan, and the professional trustee could deal with and handle the investments. However, both trustees should make distribution decisions. The best type of professional trustee for a substance abuse trust, would be one that works primarily in administering special needs trusts. These are created for the benefit of children with disabilities. These trustees will be knowledgeable about SSI and Medicaid eligibility rules.

A trust protector, depending on applicable state law, acts as the settlor’s surrogate. This continues even after the settlor dies. This allows the trust to adapt to changing circumstances. The trust protector could also direct the trustee’s actions concerning how the trust assets would be invested and could approve or deny proposed disbursements from the trust. The trustee would be obligated to comply with such directions, unless they would be manifestly contrary to the trust’s terms or a breach of the protector’s duties.

As far as a substance abuse trust, a trust protector can provide supervision, if the trustee doesn’t possess experience in coordinating trust distributions with a substance abuse treatment plan, or with monitoring the beneficiary’s eligibility for government aid programs. Instead of the trustee appointing agents to assist in these matters, the protector would actively monitor the progress of the beneficiary’s recovery and, if necessary, direct the trustee to engage a treatment manager for the beneficiary or an advocate to secure SSI and Medicaid benefits.

Support from all parties will help the beneficiary continue on the road to recovery, which is the ultimate goal of the trust.

Reference: Kiplinger (March 8, 2019) “Selecting the Right Trustee and Protector for a Substance Abuse Trust”

 

How Do I Find the Right Estate Planning Attorney?

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When looking for an estate planning attorney, many people feel more comfortable with getting a personal referral, than by trying to find an attorney on their own.

While a referral from friends can be a good start to finding an experienced attorney, it may not be enough to cultivate a successful working relationship, says The San Francisco Business Times in the recently published article, “Guide to finding an estate planning attorney who is right for you.”

  1. Identify the type of estate planning attorney needed. Many people can use the services of an estate planning attorney to draft wills, powers of attorney, and basic trusts. However, some situations require an attorney with certain focuses. For example, those who are concerned about maximizing benefits for beneficiaries with special needs or who are interested in programs like Medicaid or addressing long-term care may want a practitioner who concentrates in elder law.
  2. Interview your short list. See if there’s a fee for a “meet and greet” before you schedule a meeting. Most attorneys welcome the opportunity to meet with potential clients.
  3. Find the attorney’s educational credentials online. At the introductory meeting, ask procedural questions rather than asking for specific legal advice. You may want to ask about topics such as relevant experience, preferred methods of communication and points of contact, billing practices and whether the attorney has the bandwidth (capacity) to work on your issues.
  4. Make an assessment after the meeting. After the interview, assess how the meeting went. Ask yourself the following questions:
  • Did they respond in a timely manner?
  • Did you understand the answers they gave you?
  • Did you feel comfortable asking follow-up questions?

If you weren’t totally comfortable with this first meeting, you may never develop the type of open conversation that’s critical to have with your estate planning attorney. You don’t need your estate planning attorney to be your best friend, but you do need to trust them with your family’s future. If one does not suit you, continue looking until you find one who is a good fit.

  1. Move ahead. If you felt good and liked the attorney’s approach, go ahead and move forward.
  2. Get all the fee info out in the open. An estate planning attorney will usually prepare fee engagement letters that sets out the scope of services and billing practices. If your attorney doesn’t give this type of letter for you to review and sign, ask her to put the fee agreement in writing. Make certain that you understand the letter. If you have questions, get answers before signing.

Reference: San Francisco Business Times (January 4, 2019) “Guide to finding an estate planning attorney who is right for you”

Blue Water’ Vietnam Vets Can Now Get Agent Orange Benefits

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Until now, the Veterans Administration (VA) has denied disability benefits for Agent Orange exposure to tens of thousands of Vietnam veterans who served on boats off the coast of Vietnam. A federal Court of Appeals has rejected that denial of benefits. The Department of Veteran Affairs is reviewing the decision. The department has not yet announced whether it will appeal the decision. As for now, ‘Blue Water’ Vietnam vets can now get Agent Orange benefits.

Historically, the VA has only allowed veterans who served on land or the inland waters of Vietnam to get compensation for illness after exposure to Agent Orange. The federal appeals court ruled that this interpretation is contrary to what Congress intended, when it passed the Agent Orange Act of 1991. The court stated that Congress intended to include Vietnam’s territorial sea in the Act, which would allow veterans who served on ships off the shore of Vietnam to get the same benefits as other Agent Orange-exposed veterans.

The Agent Orange Act contains a list of diseases. If a veteran who served in Vietnam develops any of those diseases, the Act creates the presumption that Agent Orange caused the illness. As a result, veterans can receive disability payments. The government used Agent Orange, a herbicide, to clear foliage in Vietnam. We now know that Agent Orange is a toxic chemical compound that causes significant health problems.

The specific diseases on the Agent Orange Act’s presumptive list include:

  • Parkinson’s disease
  • type II diabetes
  • soft tissue sarcomas
  • prostate cancer
  • respiratory cancers
  • coronary artery disease
  • Hodgkin’s disease
  • non-Hodgkin’s lymphoma
  • multiple myeloma
  • AL amyloidosis
  • early-onset peripheral neuropathy
  • porphyria cutanea tarda
  • chloracne

The VA reports that it is evaluating whether to add hypertension, bladder cancer, Parkinson’s-like symptoms and hypothyroidism to the list of presumptive diseases.

If a Vietnam veteran has a disease on the presumptive list, it is easier for that veteran to qualify for disability benefits. Once a veteran qualifies for disability, his or her survivors can also eventually receive death benefits.

Veterans advocates see this decision as a step in the right direction for the fair treatment of Vietnam veterans. They say this case rights an injustice that has been going on for decades. Some advocates are waiting to see if the VA will appeal the decision before they celebrate. Veterans groups are also asking for additional legislation to protect servicemembers who were in other situations, in addition to Agent Orange exposure.

The federal case took 10 years to make its way through the court system to the federal appeals court. The case, Procopio v. Wilkie, involved a veteran who developed diabetes and prostate cancer, after serving for three years on a military ship off the coast of Vietnam.

The VA denied his claim for disability benefits because he had served in the territorial waters of Vietnam, not on land or in the inland waters. The National Veterans Legal Services Program brought the lawsuit to have the courts rule on how the VA handles Agent Orange cases involving military personnel who had served on “Blue Water,” as opposed to on land or inland waters.

Your local elder law attorney can advise you on veterans’ disability issues and answer your questions about how your state’s laws might vary from the general law of this article.

References:

AARP. “Court Rules ‘Blue Water’ Vietnam Veterans Eligible for Agent Orange Benefits.” (accessed February 28, 2019) https://www.aarp.org/home-family/voices/veterans/info-2019/blue-water-vietnam-benefits.html

At What Life Stages Should I Review My Estate Plan?

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When a person hits the age of 18, they should at least have powers of attorney to designate who will make their healthcare decisions and handle their finances, in the event of any incapacity. When a person starts to accumulate assets and have children, it’s critical to have an estate plan in place, including guardianship nominations.

Bankrate’s recent article, “Estate planning triggers: When to re-evaluate your estate planning strategy,” says the risk of not having a current estate plan and will that state your wishes is significant. When people fail to put any plan into place, it leads to confusion, chaos and unintended consequences. Use this list of important life events as triggers to remind you to discuss your current situation with a trusted attorney.

Getting married. You and your future spouse probably have had some financial conversations before getting engaged. However, if you haven’t, once wedding plans are set, it’s vital to discuss all aspects of each partner’s financial situation and the desired distribution of assets. You should decide whether to sign a prenuptial agreement, the totals of your separate and joint assets and who you want to inherit those assets should one or both spouses pass on. In light of these factors and the prenuptial agreement, an estate plan that satisfies both parties must be created.

Starting a family. The decision to have a child comes with the responsibility of planning for that child’s care. You and your partner will want to determine the amount of your assets you want to pass to your children in the case of a death, at what age your children will inherit those assets and name a legal guardian.

Divorce. If a couple decides to divorce, it’s important to update their separate estates. If you fail to change the beneficiary designations for a trust or life insurance policy after getting divorced, your ex-spouse may receive the life insurance that was supposed to be paid out to the trust to provide liquidity to pay off debts and administration expenses.

Retirement. Beneficiaries are named when setting up a 401k or Roth IRA account. If you started the account years ago, the beneficiaries may be out-of-date. Account owners should look at their total retirement assets and update their beneficiaries to reflect their current relationship and financial circumstances.

Other life events. Any significant change in assets, a move to another state, the death or disability of a person named in your estate plan, a change in tax laws, a disability of a beneficiary that arises after the initial plan is executed, and/or the birth, adoption, or death of a child are all important life events that should trigger a revision of your estate plan.

Reference: Bankrate (March 4, 2019) “Estate planning triggers: When to re-evaluate your estate planning strategy”

What Should My Fiancé and I Discuss About Finances Before We Say “I Do”?

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If you’re older and remarry, you may have more assets and you probably have children. That’s different than a first marriage, where people often enter as financial equals. In subsequent unions, situations are more complicated—and the stakes are higher. You should protect your money in the event of divorce and protect your children in the event of your death.

Barron’s recent article, “How to Manage Your Money When You’re Remarrying,” says the subject of money should be easier this time around. Money talk might have been taboo going into your first marriage, but experience—and the battle wounds of divorce—tend to make this dialog much easier.

The best strategy for navigating the financial side of remarriage is to be direct and give yourself plenty of time before the wedding to work out the details. All good financial plans start with a broader discussion that has more to do with identifying and setting goals, than it does about dollar signs.

Consider what you hope to achieve individually and as a couple over the next year, five years, decade, and so on. Discuss your priorities and intentions, be specific, and write it all down. Your conversation will be the groundwork for the specific financial planning decisions the two of you will need to make, when it’s time to formalize your plans for merging finances or—as the case may be—keeping them separate.

Prenuptial agreements, or “prenups,” are becoming more frequently used by millennials because they are marrying later and bringing more assets and debt to the marriage. In the case of remarriage, a prenup should be strongly considered by most couples. This legally-binding agreement details how assets and liabilities will be divided, in the event of divorce.

Many experts suggest keeping separate checking, savings, and investment accounts—but setting up joint accounts for shared lifestyle expenses. Having a joint account removes the need for constant discussion about how you’ll divide expenses. Create a monthly joint budget and agree on the fairest way to split it. Some couples divide it down the middle, while others base it on a percentage of their respective incomes.

You don’t need to have all of your estate plans settled before the wedding but be certain to update key documents where appropriate—such as your wills, medical advance directives, retirement plan, and insurance beneficiaries.

A big trouble spot for couples remarrying—especially if there are children and grandchildren from other marriages—is how assets will be divided in the future. Without a clear estate plan, if you die first, then the assets will pass to your spouse and then to that spouse’s children, depending on the type of asset. That can be a big source of family strife—even for families who aren’t wealthy. A good solution is to set up revocable livings trusts that say exactly how you want your respective and joint assets to be distributed when you die.

Reference: Barron’s (March 2, 2019) “How to Manage Your Money When You’re Remarrying”

Estate Planning for Parents with Young Children

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Attorneys who focus their practices on estate planning, know that not every story has a happy ending. For some of them, it’s a professional mission to make sure that young parents are prepared for the unthinkable, says KTVO in the article “Family 411: Thinking about estate planning while your kids are young.”

It’s a very easy thing to forget, because it’s so unpleasant to consider. The idea of becoming seriously ill or even dying while your children are young, is every parent’s worst fear. But putting off having an estate plan with a will that prepares for this possibility is so important. Doing it will provide peace of mind, and a road forward for those who survive you, if your worst fears were to come true.

Start with a will and/or a guardianship nomination. In a will, you can name a guardian, the person who would be in charge of rearing your children and have physical custody of them. Don’t assume that your parents will take over, or that your spouse’s parents will. What if both sets of parents want to be the custodians? The last thing you want is for your in-laws and parents to end up in a court battle over custody of your children.

Another important document: a trust. You should have life insurance that will be the source for paying for the children’s education, including college, summer camps, after-school activities and their overall cost of living. In addition, proceeds from a life insurance policy cannot be given to a minor without the need for Court supervision and orders.

However, what if your son or daughter turned 18 and were suddenly awarded $500,000? At that age, would they know how to handle such a large sum of money? Many adults don’t. A trust allows you to give clear directions regarding how old the child must be, before receiving a set amount of money. You can also stipulate that the child must complete college before receiving funds or reach certain milestones. You may not want to have their legal guardian in charge of the finances; by dividing up the responsibilities, a checks and balances system is set into place.

While you are creating an estate plan with your children in mind, make sure your estate plan has the same documents for you and your spouse: Power of Attorney for Finance, Advance Healthcare Directive, and a HIPAA release form.

Speak with a local estate planning attorney who has experience in planning for young families.

Reference: KTVO.com (Feb. 6, 2019) “Family 411: Thinking about estate planning while your kids are young”

 

Who Will Pay for Your Nursing Home Care?

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It’s hard for everyone in the family, when a beloved parent or grandparent must enter a nursing home, because they can no longer live on their own. Often the result of a physical or mental decline, the difficulty is compounded by worries about how to pay for the care, reports The Ledger in the article “The Law: Are you eligible for Medicaid nursing home coverage?”

Once health insurance coverage ends, the cost of care becomes enormous, with the monthly cost for a private-pay resident at nursing homes often exceeding $10,000 a month. What usually happens? Residents can’t afford the care and only have two options: qualify for Medicaid Nursing Home coverage, or sell every asset they can, impoverish the spouse, and ask adult children or other family members for help. Most people contact an elder law attorney and explore becoming eligible for Medicaid Nursing Home coverage.

Let’s use the state of Florida for an example of how to qualify for this coverage. A person must pass a three-part test that examines their assets, income, and health, at the time the application is filed.

Income. As of Jan. 1, 2019, you could have a maximum of $2,313 per month in income (before deductions) to be eligible for Medicaid Nursing Home coverage. If your income was above that number, then legal planning is necessary to create a qualified income trust. Timing is extremely important, because if the trust is not set up correctly or in a timely fashion, you will not qualify for Medicaid.

There is a common mistake made about a spouse’s income being too high. It’s happily not true: a spouse’s income can be unlimited, and it does not impact a Medicaid applicant’s eligibility for benefits.

Assets. As of Jan. 1, 2019, you may have a maximum of $2,000 of countable assets and be eligible for Medicaid Nursing Home coverage. If the assets are above that threshold, there are a number of acceptable legal options to help the individual become eligible. There are two types of asset classes to consider when applying for Medicaid Nursing Home coverage: countable and non-countable.

Some non-countable assets are as follows: In Florida, homestead property up to $585,000 in value, one automobile, a prepaid burial contract and term life insurance without a cash value. Countable assets include bank accounts, investment accounts, life insurance with cash value, CDs and annuities.

As of Jan. 1, 2019, a spouse may have a maximum of $126,420 of countable assets, without having an impact on their spouses’ Medicaid eligibility.

An elder law attorney should be consulted to help the family understand the income and asset tests and create a strategy to help the individual qualify, if they anticipate needing Medicaid Nursing Home coverage. It’s best to do this well in advance, if possible. In addition, California has it’s own rules, so it is important to make sure you understand the rules in your specific state.

Reference: The Ledger (Jan. 9, 2019) “The Law: Are you eligible for Medicaid nursing home coverage?”

How Do I Plan for a Blended Family?

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A blended family (or stepfamily) can be thought of as the result of two or more people forming a life together (married or not) that includes children from one or both of their previous relationships, says The Pittsburgh Post-Gazette in a recent article, “You’re in love again, but consider the legal and financial issues before it’s too late.”

Research from the Pew Research Center study reveals a high remarriage rate for those 55 and older—67% between the ages 55 and 64 remarry. Some of the high remarriage percentage may be due to increasing life expectancies or the death of a spouse. In addition, divorces are increasing for older people who may have decided that, with the children grown, they want to go their separate ways.

It’s important to note that although 50% of first marriages end in divorce, that number jumps to 67% of second marriages and 80% of third marriages end in divorce.

So if you’re remarrying, you should think about starting out with a prenuptial agreement. This type of agreement is made between two people prior to marriage. It sets out rights to property and support, in case there’s a divorce or death. Both parties must reveal their finances. This is really helpful, when each may have different income sources, assets and expenses.

You should discuss whose name will be on the deed to your home, which is often the asset with the most value, as well as the beneficiary designations of your life insurance policies, 401(k)s and individual retirement accounts.

It is also important to review the agents under your health care directives and financial powers of attorney. Ask yourself if you truly want your stepchildren in any of these agent roles, which may include “pulling the plug” or ending life support.

Talk to an experienced estate planning attorney about these important documents that you’ll need, when you say “I do” for the second (or third) time.

Reference: Pittsburgh Post-Gazette (February 24, 2019) “You’re in love again, but consider the legal and financial issues before it’s too late”