Estate Planning Blog Articles

Estate & Business Planning Law Firm Serving the Providence & Cranston, RI Areas

When Should I Think About Business Succession?

The pandemic has made many business owners rethink their business succession and retirement planning. Insurance News Net’s recent article entitled “Succession Planning For Business Owners: More Important Than Ever” reports that according to PwC’s 2021 US Family Business Survey, only a third of US family businesses have a robust, documented and communicated succession plan in place.

If you wait too long, you may not have the right people in place to run the business. It also restricts the tax planning options for the business and your personal estate. Either error can cause a business to fail, when it passes from one generation to the next.

An exit that is too sudden or without direction can leave a vacuum at the top and damage relationships with existing clients and customers. With clear objectives, a sense of urgency and an experienced estate planning attorney, you can help ensure that your business, and your future, are secure.

There are a number of areas of transition that should be addressed:

  1. Founder Transition: Determine how long you plan to stay with the business, and what your retirement plans are;
  2. Family Transition: If you plan to leave your business to your children, determine the way in which the roles and power relationships will change;
  3. Business Transition: How will the company’s operations and customer relations be maintained through other transitions;
  4. Management Transition: Decide who will make up the new management team, such as family, non-family, or both, and how new leadership will be evaluated. You should also map out the schedule for transferring control of day to day decisions;
  5. Ownership Transition: Determine how ownership is to be transferred; and
  6. Estate Transition: see how you will coordinate your estate plan to ensure that the other transitions above occur as planned.

Many of these transitions will be accomplished through formal documentation, such as an operating agreement, buy-sell agreements and trusts. Sit down with an attorney soon rather than later to sort this out.

Reference: Insurance News Net (December 30, 2021) “Succession Planning For Business Owners: More Important Than Ever”

What Happens to a Pet when Owner Dies?

Pet trusts are a legally binding arrangement in which the donor (the person creating the trust) formally outlines their wishes for how they want their pet to be cared for.

A few more people are involved in a pet trust, according to the article “’Paws-ing’ to plan: How you can ensure your pet’s future well-being with pet trust planning” from The Gilmer Mirror. A trustee oversees the way trust funds are dispensed, a caretaker, who is in charge of the pet’s care and an enforcer, who makes sure the donor’s wishes are followed. Donors may appoint a caretaker of their choice, or work with an agent to find someone suitable for their pet.

Unlike an informal promise to care for a pet made by a well-meaning friend or family member, the pet trust is legally enforceable, giving it more “teeth” than a verbal promise. There is nothing to stop the person you leave your pet with from doing whatever they wish with the pet, from leaving the pet at a shelter to selling the pet. With a trust, all parties are bound to use the money for its intended purposes and to follow pet care instructions.

What can you ask your pet’s caretaker to do? Anything you feel is necessary. It can be as basic or as detailed as you wish. The pet could be cared for as they were by you, with the same kind of food, attention and affection. They can also continue to be seen by the same veterinarian, if one is named in the trust.

Pet planning has become increasingly popular, as more people see their pets as members of the family. However, pet trusts are not just for house cats or dogs. Work animals, show animals, specially trained service and companion animals and animals used for breeding are also protected by pet trusts.

A pet trust could ensure the future of a highly trained show jumper, or to ensure a working dog ends up at a farm where she continues to herd sheep.

Pet trusts are especially important for people with service animals. A blind person who has bonded with a seeing-eye dog may only wish another blind person to inherit a seeing-eye dog. The trust could ensure that animals who have been trained to provide emotional support, or to detect health conditions like seizures, should go to individuals with these same challenges.

Individuals who live with highly trained service animals should consult an experienced estate planning attorney along with the organization that trained the animal to ensure a pet trust is created within the scope and requirements of the organization, as well as the wishes of the owner. The organization may be better able to place the animal, while adhering to the pet trust’s requirements.

A pet trust helps protect our beloved animal companions and provides peace of mind for their humans. It should be part of your overall estate plan and should be updated regularly.

Reference: The Gilmer Mirror (March 23, 2022) “’Paws-ing’ to plan: How you can ensure your pet’s future well-being with pet trust planning”

What Do I Need to ‘Age in Place’?

Home modification is the official term (from the Americans with Disabilities Act) for renovations and remodels aimed for use by the elderly or the impaired. It means physically changing your home, removing potential hazards and making it more accessible, so you can continue living in it independently.

Bankrate’s recent article entitled “The best home modifications for aging in place” reports that home modifications can be pricey—typically ranging from $3,000 to $15,000, with the average national spend being $9,500. However, it can be a worthwhile investment. You can save money by doing the right home modifications. That is because the longer you can safely live in your home, the less you will need to pay for assisted living care.

The best aging-in-place home modifications align with “universal design,” an architectural term for features that are easy for all to use and adaptable, as needs dictate. This includes additions and changes to the exterior and interior of a home. Some of the simplest home modifications include DIY jobs:

  • Adding easy-grip knobs and pulls, swapping knobs for levers
  • Installing adjustable handheld shower heads
  • Rearranging furniture for better movement
  • Removing trip hazards; and
  • Installing mats and non-slip floor coverings.

Next, are some more complex home modifications. These probably would need a professional contractor, especially if you want them up to code standards:

  • Installing handrails
  • Adding automatic outdoor lighting
  • Installing automatic push-button doors
  • Leveling flooring; and
  • Installing doorway ramps

There are also home modifications that can be done by room:

  • In the bathroom, installing grab bars and railing, a roll- or walk-in shower/tub, or a shower bench
  • In the kitchen: adding higher countertops, lever or touchless faucets and cabinet pull-out shelves
  • For the bedroom, use a less-high bed, non-slip floor, walk-in closets and motion-activated lights
  • Outside, you can add ramps, a porch or stair lifts, and automatic push button doors.

Finally, throughout the house, keep things well-lit and widen hallways and doorways; add a first-level master suite, elevators or chair lifts, “smart” window shades/thermostats/lighting and simpler windows.

Note that some home modifications may qualify as medical expenses. As a result, they are eligible for an itemized deduction on your income tax return. A home modification may be tax-deductible as a medical expense, if it has made to accommodate the disabilities (preferably documented by a physician or other health care provider) of someone who lives in the home, according to the IRS.

Reference: Bankrate (March 30, 2022) “The best home modifications for aging in place”

What’s Going on with Veterans Affairs Medical Centers?

In addition to closing or overhauling 35 VA medical centers, 14 new major VA hospitals would be built along with 140 multi-specialty community-based outpatient clinics, reports The Military Times’ recent article entitled “Dozens of VA medical centers slated for closure, total rebuilds under new infrastructure plan.” The plan in total would add 80 new medical buildings to the VA’s existing inventory of more than 1,200 across the country.

The proposals represent a massive overhaul of VA’s footprint in the U.S. in the near future, which may affect millions of veterans seeking medical care and hundreds of thousands of VA employees. However, the plan must also get approval from both an independent commission of veterans advocates and Congress before moving ahead, leaving any potential changes years away.

VA Secretary Denis McDonough said the changes are a critical rethinking of where VA facilities are located and how the department delivers care to vets.

“We will be shifting toward new infrastructure or different infrastructure that accounts for how healthcare has changed, matches the needs of that market and strengthens our research and education missions,” he said. “Most of all, we’ll ensure that veterans who live in [any] location have access to the world-class care they need when they need it.”

Congress mandated a reassessment of VA’s nationwide infrastructure in 2018 as part of a review styled after the military base closing rounds of the 1980s and 1990s. Under the plan suggested by McDonough, 17 medical centers in 12 states would be completely closed. They include three sites in New York state (Castle Point, Manhattan and Brooklyn), and two sites each in Pennsylvania (Philadelphia and Coastesville), Virginia (Hampton and Salem) and South Dakota (Fort Meade and Hot Springs). Other facilities recommended for closure are:

  • The Central Western Massachusetts VAMC
  • The Dublin VAMC in Georgia
  • The Chillicothe VAMC in Ohio
  • The Fort Wayne VAMC in Indiana
  • The Battle Creek VAMC in Michigan
  • The Alexandria VAMC in Louisiana
  • The Muskogee VAMC in Oklahoma; and
  • the Palo Alto Livermore VAMC in California.

Seven of the 17 sites recommended for closing are located in the northeast, where the number of veterans (and the overall population) has declined in recent decades. Services at those sites would be replaced by smaller inpatient and outpatient clinics to be added in those areas, or by construction of new VA medical centers in nearby communities.

The plan calls for the construction of two new major medical sites in Virginia (Newport News and Norfolk) and Georgia (Macon and Gwinnett County), as well as a new New Jersey facility in Camden to offset the loss of some of the New York sites. The new construction list includes:

  • A medical center in King of Prussia, PA
  • A medical center in Huntsville, AL
  • A medical center in Summerville, SC
  • A medical center in Grand Rapids, MI
  • A medical center in Colorado Springs, CO
  • A medical center in Everett, WA
  • A medical center in Anthem, AZ and
  • And a medical center in Rapid City, SD.

A total of 18 medical centers would be rebuilt, either on their existing land or at a nearby new location. Three New York state centers are on that list (Albany, Buffalo and St. Albans), as are several other major metropolitan areas: Miami, Atlanta, Phoenix, Indianapolis, San Antonio and Washington, D.C. Other replacement sites include:

  • Bedford VAMC in Massachusetts
  • Wilkes-Barre VAMC in Pennsylvania
  • Beckley VAMC in West Virginia
  • Roanoke VAMC in Virginia
  • Durham VAMC in North Carolina
  • Tuskegee VAMC in Alabama
  • Hines VAMC in Illinois
  • Shreveport VAMC in Louisiana; and
  • Reno VAMC in Nevada.

McDonough stated that the plan will not displace any VA workers or patients in the short-term. Efforts will also be made to minimize disruptions over the long-term. The plan also calls for many improvements to VA staff pay and benefits as a way to strengthen retention efforts, and improving care throughout the system.

The full recommendations would cost about $98 billion more over the next 30 years than simply maintaining the department’s current infrastructure, and about $41 billion more than modernization efforts projected to be needed over that time frame.

Reference: Military Times (March 14, 2022) “Dozens of VA medical centers slated for closure, total rebuilds under new infrastructure plan”

Can I Avoid Financial Exploitation?

AARP’s recent article entitled “The Legal Consequences of Elder Fraud Can Be Steepreports that romance scams are on the rise. Older, lonely, or heartbroken adults are common targets. In Florida in 2020, $40.1 million was stolen from victims who were victims of a crime ring or bad actor posing as a potential suitor.

Some people lose their whole life savings in a matter of months.

Many other financial crimes are carried out by fraudsters, such as phony investment scams, phone and gift card scams, lottery scams, Medicare and Social Security scams and more.

There is no limit on how creative these criminals can be. Family, friends, and caregivers are also not immune from skimming funds for their own use.

The average amount lost per victim is $34,000. When a person is acting as a fiduciary, the number soars to $83,000. The older the victim, the greater the average amount of stolen assets.

As soon as exploitation is suspected or confirmed, action should be taken. When exploitation is suspected, take these steps to help law enforcement investigate and prosecute the criminals:

  1. Talk to the victim, who may not be aware of the exploitation
  2. Contact the authorities and follow their instructions
  3. Notify financial advisers who may be able to put a freeze on accounts
  4. Document the victim’s interactions with the suspect
  5. Talk to all witnesses to interactions between the suspect and victim; and
  6. Talk to an elder law attorney who can discuss your legal options regarding guardianship or conservatorship if the victim lacks capacity to handle their own affairs.

Reference: AARP (Feb. 22, 2022) “The Legal Consequences of Elder Fraud Can Be Steep”

Can a Vacation Home Be Kept in the Family for Generations?

Many family traditions include gatherings at vacation homes. However, leaving these properties to the next generation is not always in the best interest of the family. Some people try to make a simple solution work for a complex problem, leading to more challenges, as explained in the article “Succession planning for the family lakehouse” from NH Business Review.

Joint ownership among siblings can lead to disputes about how the home is used, operated and maintained. Some children want to continue using the house, while others may see it as an income stream for a rental property. There may be siblings who cannot afford to participate in the house’s upkeep and need the cash more than the tradition. When joint ownership is presented as a surprise in a will, the adult children may find themselves fighting about the vacation home, with no parent around to tell them to knock it off.

Making matters more complicated, if the siblings live in different states and the house is in a neighboring state, ownership of the real estate at death may subject the decedent’s estate to estate taxes where the property is located. As a result, the property may need to go through probate in an additional state. Every state has its own tax rules, so the transfer of joint property will have to be analyzed by an estate planning attorney knowledgeable about the laws in each state involved.

A sensible alternative is creating a Limited Liability Corporation, ideally while the original owners—the parents—are still living. The organizational documents include a certificate of organization to file with the Secretary of State and an operating agreement. The LLC will need its own taxpayer identification number, or EIN.

The operating agreement governs the management of the property and addresses the operating expenses and maintenance of the property. It should also address the process for a child to cash in on their ownership to other children. LLC operating agreements often include these items:

  • Responsibilities for operating expenses
  • Process to transfer member units or interests
  • Duties for regular maintenance, budgeting and approval of property improvements
  • Development of a property use schedule
  • Establishing rules for the home’s use

There are some costs associated with creating an LLC, including annual filing requirements. However, these will be small, when compared to the cost of family fights and untangling joint ownership.

An LLC can also offer personal liability protection from lawsuits brought by renters, creditors, or any litigants. If there is an accident resulting from work being done on the property, the owners may be shielded from the liability because they do not personally own the property, the LLC does.

In the case of divorce, bankruptcy filing, or a large judgement being filed against one of the children, the LLC will protect their interest in the property.

The real estate owned by the LLC is not part of the owner’s probate estate. This avoids the need for a second probate in the state where the property is located. Some states have adopted the Uniform Transfer on Death Security Registration Act, and the LLC membership interest can be assigned along to the terms of the beneficiary designation.

Planning for what will happen to a vacation home after death provides peace of mind for all in the family. Speak with an experienced estate planning attorney to ensure that the property and the family’s peace is preserved.

Reference: NH Business Review (March 23, 2022) “Succession planning for the family lakehouse”

Can I Avoid the Economic Dangers of Caregiving?

AARP’s recent article entitled “5 Steps to Avoid Economic Pitfalls of Caregiving” reports that 20% of family caregivers have to take unpaid time off from work due to their caregiving responsibilities.

The average lifetime cost to caregivers in lost wages and reduced pension and Social Security benefits is $304,000 — that is $388,000 in today’s dollars. This does not count the more than $7,200 that most caregivers spend out of pocket each year, on average, on housing, health care and other needs for loved ones in their care, according to the AARP report.

Step 1: Calculate the gap. The average cost of a full-time home health aide is nearly $62,000 a year, and a semiprivate room in a nursing home runs about $95,000. Ask your parents about the size of their nest egg, how fast they are spending it, whether they have long-term care insurance and how much equity they have in their home. Compare your parents’ assets against their projected expenses to determine your gap.

Step 2: Fill the gap without going broke. Try to find free resources: Use the National Council on Aging’s BenefitsCheckUp tool to find federal, state and private benefit programs that apply to your situation. Then create a budget to determine what you can contribute, physically and in dollars, to closing the gap. In addition, ask your siblings if they can pitch in.

Step 3: If a gap remains, consider Medicaid. This program can cover long-term care. However, your parent or parents may need to spend down assets to qualify. Note that if just only one parent is in a nursing home, the other can generally keep half of the assets, up to a total of $137,400 (not including their house). However, the rules differ by state. As a result, this can get complicated. Speak with an elder-law attorney for help.

Step 4: No matter what the gap, try to get paid. If your parents have enough resources, you may discuss having them pay you for caregiving. However, you should speak with an attorney first about drawing up a contract. This should include issues like the number of hours a day you will spend on providing care and whether doing so will require you to quit your job. The caregiving agreement is written carefully, so that it does not violate Medicaid regulations about spending down assets.

Step 5: Protect your own earning ability. If you are mid-career, it is very difficult to leave a job for ​family responsibilities like caregiving and then go back into the workforce at the same salary. The Society for Human Resource Management says that it costs six to nine months’ salary to replace an employee, so many employers now see it is less expensive to make an accommodation.

Reference: AARP (Feb. 24, 2022) “5 Steps to Avoid Economic Pitfalls of Caregiving”

Is Estate Planning Affected by Property in Two States?

Cleveland Jewish News’ recent article titled “Use attorney when considering multi-state estate plan says that if a person owns real estate or other tangible property (like a boat) in another state, they should think about creating a trust that can hold all their real estate. You don’t need one for each state. You can assign or deed their property to the trust, no matter where the property is located.

Some inherited assets require taxes be paid by the inheritors. Those taxes are determined by the laws of the state in which the asset is located.

A big mistake that people frequently make is not creating a trust. When a person fails to do this, their assets will go to probate. Some other common errors include improperly titling the property in their trust or failing to fund the trust. When those things occur, ancillary probate is required.  This means a probate estate needs to be opened in the other state. As a result, there may be two probate estates going on in two different states, which can mean twice the work and expense, as well as twice the stress.

Having two estates going through probate simultaneously in two different states can delay the time it takes to close the probate estate.

There are some other options besides using a trust to avoid filing an ancillary estate. Most states let an estate holder file a “transfer on death affidavit,” also known as a “transfer on death deed” or “beneficiary deed” when the asset is real estate. This permits property to go directly to a beneficiary without needing to go through probate.

A real estate owner may also avoid probate by appointing a co-owner with survivorship rights on the deed. Do not attempt this without consulting an attorney.

If you have real estate, like a second home, in another state (and) you die owning that individually, you’re going to have to probate that in the state where it’s located. It is usually best to avoid probate in multiple jurisdictions, and also to avoid probate altogether.

A co-owner with survivorship is an option for avoiding probate. If there’s no surviving spouse, or after the first one dies, you could transfer the estate to their revocable trust.

Each state has different requirements. If you’re going to move to another state or have property in another state, you should consult with a local estate planning attorney.

Reference: Cleveland Jewish News (March 21, 2022) “Use attorney when considering multi-state estate plan

Assisted Living Providers Face More Pandemic-Related Scrutiny from OSHA

The U.S. Department of Labor announced this week that the Occupational Safety and Health Administration (OSHA) is beginning a time-limited enforcement effort for focused inspections in assisted living communities, nursing facilities, and hospitals treating people with COVID-19.

McKnight’s Senior Living’s recent article entitled “Assisted living providers to face additional pandemic-related scrutiny from OSHA” reports that the inspections are limited to organizations with previous COVID-19-related citations or complaints. They will look at the correction of the citations and compliance with existing OSHA standards to stress monitoring for current and future readiness.

OSHA explained that its goal is to expand its presence to ensure continued mitigation efforts to control the spread of COVID-19 and future variants, and to protect the health and safety of healthcare workers “at heightened risk for contracting the virus.”

OSHA will devote 15% of all of its inspections to healthcare organizations in the following classifications: assisted living facilities for the elderly, nursing care / skilled nursing facilities, psychiatric and substance abuse hospitals and general medical and surgical hospitals.

“We are using available tools while we finalize a healthcare standard,” Assistant Secretary of Labor for Occupational Safety and Health Dough Parker said. “We want to be ahead of any future events in healthcare.”

This strong effort in pandemic-related scrutiny may be a temporary action until OSHA finalizes an anticipated permanent infectious disease standard for the healthcare industry. OSHA withdrew the non-recordkeeping part of its healthcare emergency temporary standard in December. However, they said it would “work expeditiously to issue a final standard.” The agency said it would accept continued compliance with the healthcare ETS as satisfying employers’ obligations under OSHA’s general duty clause.

OSHA adopted its COVID-19 healthcare ETS in June. This required assisted living communities and other healthcare settings to conduct hazard assessments and have written plans in place to mitigate the spread of the coronavirus. These rules also required healthcare employers to provide some employees with N95 respirators and other personal protective equipment. The standard also included social distancing, employee screening and cleaning and disinfecting protocols.

While OSHA highlights skilled nursing facilities and hospitals in its memorandum for regional administrators, assisted living facilities also are mentioned.

At least 20 states have their own OSHA-approved state plans and may proceed differently than those subject to federal OSHA standards. However, the agency recommended that all healthcare employers in high-risk settings be ready for inspection. Healthcare employers should also have COVID-19 procedures and protocols in place and review their procedures for managing OSHA inspections.

Reference: McKnight’s Senior Living (March 10, 2022) “Assisted living providers to face additional pandemic-related scrutiny from OSHA”

No Will? What Happens Now Can Be a Horror Show

Families who have lived through settling an estate without an estate plan will agree that the title of this article, “Preventing the Horrors of Dying Without a Will,” from Next Avenue, is no exaggeration. When the family is grieving is no time to be fighting, yet the absence of a will and an estate plan leads to this exact situation.

Why do people procrastinate having their wills and estate plans done?

Limited understanding about wealth transfers. People may think they do not have enough assets to require an estate plan. Their home, retirement funds or savings account may not be in the mega-millions, but this is actually more of a reason to have an estate plan.

Fear of mortality. We do not like to talk or think about death. However, talking about what will happen when you die or what may happen if you become incapacitated is very important. Planning so your children or other trusted family member or friends will be able to make decisions on your behalf or care for you alleviates what could otherwise turn into an expensive and emotionally disastrous time.

Perceived lack of benefits. Working with an experienced estate planning attorney who will put your interests first means you will have one less thing to worry about while you are living and towards the end of your life.

Estate planning documents contain the wishes and directives for your legacy and finances after you pass. They answer questions like:

  • Who should look after your minor children, if both primary caregivers die before the children reach adulthood?
  • If you become incapacitated, who should handle your financial affairs, who should be in charge of your healthcare and what kind of end-of-life care do you want?
  • What do you want to happen to your assets after you die? Your estate refers to your financial accounts, personal possessions, retirement funds, pensions and real estate.

Your estate plan includes a will, trusts (if appropriate), a durable financial power of attorney, a health care power of attorney or advanced directive and a living will. The will distributes your property and also names an executor, who is in charge of making sure the directions in the will are carried out.

If you become incapacitated by illness or injury, the POA gives agency to someone else to carry out your wishes while you are living. The living will provides an opportunity to express your wishes regarding end-of-life care.

There are many different reasons to put off having an estate plan, but they all end up in the same place: the potential to create family disruption, unnecessary expenses and stress. Show your family how much you love them, by overcoming your fears and preparing for the next generation. Meet with an estate planning attorney and prepare for the future.

Reference: Next Avenue (March 21, 2022) “Preventing the Horrors of Dying Without a Will”