Protecting Your Assets from Nursing Home Costs

Elder law attorneys see firsthand the financial strain that nursing home expenses can place on families. With the rising costs of long-term care and the complexities of becoming eligible for Medicaid benefits, it’s crucial to understand how to protect your nest egg. This article sheds light on the financial strain many Americans face regarding elder care costs. Using planning methods to preserve your hard-earned assets while ensuring quality care for yourself or your loved ones by working with an experienced elder law attorney is crucial. Start the discussion early with your spouse or family about ways to protect your assets to cover nursing home or in-home care, if and when needed.

The Financial Challenges of Long-Term Care in America

The growing number of seniors requiring long-term care presents a significant challenge in the United States. This demographic shift, primarily due to the aging Baby Boom generation, has profound implications for families and the healthcare system. From 1960 to 2021, the number of Americans aged 85 and older increased more than six times the rate of the general population, cites a recent article from the New York Times, “Facing Financial Ruin as Costs Soar for Elder Care,” that highlights the significant long-term care issues, especially for middle-class Americans. A Health and Retirement Study found that individuals with greater long-term care needs were much more likely to exhaust their savings than those who did not have long-term care costs.

Why Do American Seniors Face Such High Costs of Care?

The United States allocates a smaller portion of its GDP to long-term care than other wealthy nations. This underinvestment is evident in the insufficient financial support for elder care, leading to significant out-of-pocket expenses for families. The healthcare system also faces staffing shortages, both for in-home care and long-term care facilities, further complicating access to necessary services.

Federal Programs are Not Equipped to Help Protect the Elderly in Long Term Care

Despite the demographic changes in the United States, including longer life spans that increase the number of seniors who need care, federal long-term care policies have remained largely unchanged since the inception of Medicare and Medicaid in 1965. This stagnation in policy reform fails to address the evolving needs of an aging population, leaving many families to shoulder the burden of care. Recent studies have shown that very few people learn how to protect assets by developing a plan for paying for elder care when needed.

How Do Many People Pay for Nursing Home Costs?

Because Medicare does not pay for long-term care costs, Medicaid is reserved for low-income people. The program has difficult eligibility requirements; private pay when a loved one needs nursing home care is often the only choice for many people. Individuals will deplete their savings or personal assets to pay for nursing home care until they qualify for Medicaid benefits.

A Personal Story of Financial Ruin to Pay for Elder Care

The story of Gay Glenn and her mother, Betty Mae Glenn, poignantly illustrates the harsh financial realities many American families face when dealing with long-term care for elderly relatives. The cost of Betty Mae’s care in a nursing home in Kansas was staggering, exceeding $10,000 per month. To afford this, Betty Mae had to deplete her savings entirely. This process of spending down personal assets to qualify for Medicaid is a common yet financially devastating reality and a mistake that many Americans make to afford long-term care.

At age 61, Betty Mae’s daughter, Gay Glenn, relocated from Chicago to Topeka and moved into one of her mother’s rental properties to oversee her mother’s care and finances. Under the complex and often perplexing rules of the state Medicaid program, Gay had to pay rent to her mother. This rent then contributed to the funds used for Betty Mae’s nursing home care. The financial intricacies didn’t end there. After Betty Mae’s passing, Gay faced the additional burden of selling the family home. From the sale, approximately $20,000 had to be paid back to Medicaid, as per her lawyer’s advice. This repayment reflects the Medicaid estate recovery process, where states recoup costs for care provided.

Why Planning Now for Asset Protection Is Crucial

Over the last two decades, the median annual cost of all types of long-term care has risen at a rate surpassing inflation. This increase places a substantial financial strain on individuals and families, making long-term care unaffordable for many. Asset protection is not just about preserving wealth; it’s about ensuring that you or your loved ones receive the necessary care without depleting all your resources.

How Does Estate Planning Protect Assets from Elder Care Costs?

Although many people think they are not wealthy enough for estate planning, the truth is that everyone needs to have an estate plan. Seniors often do not plan because they anticipate that they can stay home and that their spouse and children will manage their care. Yet the financial strain of providing in-home care can be just as burdensome as when the senior goes into a nursing home.

Various types of trusts and a well-crafted estate plan can include provisions for long-term care and play a pivotal role in asset protection and/or Medicaid eligibility. Estate planning protects seniors’ savings rather than spending all their wealth until they are practically impoverished.

How Do You Qualify for Medicaid without Losing Everything?

Applying for Medicaid without making common mistakes like gifting property to spend down countable assets is complex. However, an experienced elder law or estate planning attorney can use strategies like an asset protection trust to shield your hard-earned wealth from nursing home care costs, while enabling you to qualify for Medicaid.

How Can an Elder Law Attorney Help

Elder law attorneys specialize in Medicaid planning and asset protection. They have experience guiding seniors to apply for Medicaid while shielding assets. Since every family’s situation is unique, working with a knowledgeable professional who can provide strategies tailored to different family dynamics and financial situations is essential. The key is to talk with family members early about how long-term care costs will be managed in the future so that if a loved one enters a nursing home, the family does not face financial burdens. However, even if a senior family member is already receiving long-term care, working with a professional is essential now to protect the individual’s remaining life savings.

Conclusion: Protecting Your Assets is Possible

Early planning is critical as it’s pivotal to be aware of:

the rising costs of nursing home care and the importance of asset protection.
the role of trusts and estate planning in protecting the family’s wealth.
working with an elder law attorney to apply for Medicaid and avoid common mistakes.
the importance of early planning and using available tools and resources.

Protecting your assets from nursing home costs is not only possible but essential. With the proper planning and legal strategies, you can ensure that your or your loved one’s care needs are met without sacrificing your financial security.

Digital Assets in Estate Planning

In the contemporary world, digital assets have evolved to become an essential component of our lives. From emails and photos to online financial portfolios, these assets play a vital role and are of significant value. However, what happens to these assets when we are no longer around? Integrating digital assets in your estate planning is a step towards ensuring that these assets are managed and passed on according to one’s wishes.

What is a Digital Asset?

A digital asset is any content owned by an individual in digital form. This can include everything from email accounts and online accounts to social media accounts and even digital photos. With the shift towards digitalization, the significance and value of these assets, be they monetary or sentimental, have grown.

Why is it Important to Include Digital Assets in Your Estate Plan?

It’s crucial to understand that much of our lives are now online. These digital assets carry both monetary value and sentimental value. By integrating digital assets in your estate plan, you ensure that these assets are not lost, misused, or left unattended upon your demise. It also provides clarity to the executor and beneficiaries about how to handle these assets.

What Types of Digital Assets Should Be Included?

When considering types of digital assets, the list can be extensive. It includes email and social media accounts, online financial portfolios, online content and assets stored in the cloud. Some assets, like online financial accounts, may have clear monetary value, while others, like digital photos or emails, might carry sentimental value.

How to Create Your Digital Estate Plan?

Creating your digital estate plan involves a series of steps. Start with making a list, appropriately named the list of digital assets. This should detail every digital property you own. Subsequently, use a password manager like 1Password to keep track of usernames and passwords. Finally, appoint a digital executor, someone you trust, to manage your online assets after you pass.

What Challenges Might Arise?

Even with a comprehensive digital estate plan, challenges can arise. Some service providers may not easily grant access to the data, even with a death certificate. There might also be legal complications, as laws governing fiduciary access to digital assets are still evolving. Seeking legal advice can help navigate these waters.

Designating Access: Executor or Beneficiary?

When planning for digital assets, it’s essential to designate someone to manage them. While an executor is an obvious choice, there are instances where you might want a beneficiary to have direct access. This choice often depends on the nature of the asset and your personal wishes.

Legal Implications and Rights

The Uniform Fiduciary Access to Digital Assets Act is a legal framework addressing the executor’s access to digital assets. However, nuances exist. Some assets, especially those you’ve licensed but don’t own, may not be transferable. Understanding the legal landscape and seeking professional guidance is crucial.

What About Security and Unauthorized Access?

Security is paramount as much as you want your executor or beneficiaries to access your online accounts and passwords. Unauthorized access to computer systems is illegal. Therefore, ensuring that your executor has the proper legal authority is crucial. Using tools like password managers and keeping a master password in a secure but accessible location can be beneficial.

The Future of Digital Assets in Estate Planning

With ever-increasing digitalization, digital assets will play an even more significant role in estate planning. With potential changes in the law and the evolving nature of digital platforms, staying updated is essential. Regularly revisiting and updating your estate plan can help protect your digital legacy.

Key Takeaways:

Digital assets encompass everything from emails and photos to online portfolios.
Integrating these assets into your estate plan ensures that they are managed per your wishes.
A comprehensive list and password manager can help organize and grant access.
Legal challenges can arise; seeking professional advice is essential.
Keeping security at the forefront is crucial to prevent unauthorized access.
The landscape of digital assets in estate planning is evolving; staying updated is vital.

In conclusion, as the digital world continues to expand, integrating digital assets into your estate planning is not just recommended but essential. By doing so, you not only protect your assets but ensure a smooth transition for your loved ones.

Protecting Elders from Guardianship Abuse

Issues Inherent in the Guardianship System

Elder law attorneys see firsthand the complexities and potential pitfalls of guardianship arrangements. The recent investigation into guardianship practices in Florida, as reported by the Washington Post, underscores the urgent need for vigilance and reform in this area. While guardianships are designed to protect the vulnerable, they can sometimes lead to significant abuses, including forced isolation and financial exploitation. This article aims to shed light on the complexities of the guardianship system, expose issues related to guardian-inflicted elder abuse and provide practical advice for avoiding guardianship by planning before becoming incapacitated.

What Is Guardianship?

Guardianship is a legal process where a court appoints an individual (the guardian) to make decisions for someone deemed unable to make decisions for themselves (the ward). This arrangement is often necessary for seniors who can no longer manage their affairs due to health issues like dementia or stroke. It’s estimated that more than one million Americans are in a guardianship, a number that will only grow as the U.S. population ages and elderly people no longer have family living nearby to provide the care and protections they need.

A Cautionary Guardianship Case

Douglas Hulse, a former pilot from Florida, was hospitalized due to a stroke. After his recovery period ended and his condition did not improve, Orlando Health South Seminole Hospital could not discharge him without having an assigned caretaker. Therefore, the hospital petitioned the court to assign him a guardian due to the inability to locate his family. His loss of control over his assets and personal decisions to a court-appointed guardian is a stark reminder of guardianship risks. His guardian, responsible for 19 other wards, made questionable decisions like selling his home without seeking to locate his family.

What Role Do Hospitals have in Guardianship Appointments?

Hospitals often play a significant role in initiating guardianship proceedings. Cases like Hulse’s in which the hospital petitions for a court-appointed guardian are becoming more common nationwide, especially when elderly patients have no known family or friends to care for them. While this process is meant to ensure the patient’s well-being, it can inadvertently lead to the appointment of guardians who may not act in the best interest of the ward or, worse, will exploit the senior ward through financial abuse or other ways.

Why Is the Adult Guardianship System Allowing Abuse and Exploitation of Wards?

The discrepancies in the guardianship appointment and training process further complicate this issue. There is often a lack of standardized procedures for appointing and monitoring guardians, leading to inconsistent practices and an increased risk of abuse. This situation calls for a more rigorous and standardized approach to guardianship appointments at the state level, ensuring that only qualified and ethical individuals are entrusted with such significant responsibilities.

How Do Guardianships Put Seniors at Risk of Abuse?

The Hulse case highlights several risks associated with guardianship:

Loss of Personal Freedom and Fundamental Rights: Once under guardianship, individuals may lose basic rights, such as voting, consenting to medical treatment, managing their finances, or deciding where to live.
Financial Exploitation: Guardians have significant control over the ward’s assets, allowing them to access financial accounts directly and conduct financial transactions without oversight. This access can lead to mismanagement or outright theft.
Lack of Oversight: Guardianships often lack sufficient legal or administrative oversight, allowing unscrupulous guardians to take advantage of their wards. Because a judge appoints guardians, they often do not face punishment or legal recourse for abusive behavior.

How to Protect Yourself From Court-Ordered Guardianship

Advance Planning: The best defense against guardianship abuse is advance planning. This includes setting up durable powers of attorney for health care and finances, which allow you to designate someone you trust to make decisions on your behalf if you become incapacitated.
Regular Monitoring: If guardianship is unavoidable, family members should stay involved and monitor the guardian’s actions. Regularly reviewing financial statements and staying in close contact with the ward can help detect any irregularities.
Choosing the Right Guardian: If a guardian is necessary, choose someone trustworthy and capable. This could be a family member or a professional with a good reputation and credentials.
Legal Oversight: Courts should have robust systems to monitor guardianships. This includes regular reporting by guardians and audits of their financial management.
Awareness and Education: Seniors and their families should be educated about the risks of guardianship and the importance of advance planning. Community programs and legal clinics can provide valuable information and resources.
Advocacy and Reform: Advocacy for better laws and policies around guardianship is crucial. This includes pushing for reforms that increase transparency, accountability and oversight in the guardianship process.

Key Takeaways:

Guardianship can lead to significant abuses, including loss of autonomy and financial exploitation.
Hospitals often initiate guardianship proceedings for incapacitated patients without family, which can lead to inappropriate guardian appointments.
Advance planning, such as establishing durable powers of attorney, helps prevent guardianship abuses.
There is a need for increased legal oversight and reform in the guardianship system to protect the rights and well-being of the elderly.

Work with an experienced elder law or estate planning attorney to ensure that someone you love does not fall prey to abuse but has a legally documented estate plan to protect them and their financial well-being.

Florida Guardianship Case Raises Red Flag for Estate Planning

No one likes to think of themselves as being older and vulnerable. However, for one Florida man, a medical crisis and the lack of family nearby led to a terrible series of events. The article’s title, from The Washington Post, sums it up: “The retired pilot went to the hospital. Then his life went into a tailspin.”

The former pilot pulled his Ford Mustang convertible into a gas station and appeared so distressed that someone called 911. He was taken to a nearby hospital, where doctors said he had a stroke. He lived alone, as three out of five Americans in their 80s now do. There didn’t seem to be any family members to call. The hospital went to court and argued that the pilot needed a guardian. The judge agreed.

This is not an unusual situation. More than one million Americans are under guardianship, which has been widely criticized for inviting abuse and theft. As Americans age, there is more focus on this arrangement, but few solutions. This man was like many seniors who relocate far from family, and when they show up alone in emergency rooms, they are at risk of falling into the guardianship system.

The court-appointed guardian sold his home for a very low price to a neighbor who was a realtor. An inspector general’s investigation later found “probable cause” for the exploitation of an elderly person and a scheme to defraud. However, the guardian denied any wrongdoing, and there was no criminal investigation.

As it turned out, the pilot, who never married or had children of his own, did have a family. In the past, he had regularly visited his sister, her spouse and a niece and nephew in the Philadelphia area. The visits stopped when his sister developed dementia and died in 2018. His niece said he became harder to reach but eventually would respond to calls and emails until he entered the hospital and no one heard from him.

After the stroke, he was unable to tell anyone to call his family. It’s not clear how hard the hospital tried to reach any relatives.

Like most senior patients, the pilot was covered by Medicare, which pays the hospital by diagnosis, not by length of stay. Generally, in this part of Florida, Medicare pays $23,000 for an elderly stroke patient, assuming a five-day stay. After that, the hospital begins to lose money. Putting a new patient in the same bed would bring in thousands of dollars a day.

The guardian began liquidating his possessions, selling his cars, gun collection, camera equipment and more at an estate sale. She then sold his home before it even went on the market with a private arrangement with a husband and wife real estate team who lived in her community. She sold it to them for at least $100,000 under market value.

While this was happening, a woman who had become an unpaid citizen watchdog after her own father’s horrible guardianship experience uncovered the case, finding court papers about the sale of the house and seeing the undervalued sale. She filed a complaint with the office regulating guardians, hoping it would draw scrutiny to the situation.

At the same time, the pilot’s niece and nephew were searching for their uncle, including writing a letter to the court. However, months went by without a response. Their letter to the court finally got to someone, and the guardian called the nephew. They were happy to establish contact with their uncle, talking with him on FaceTime calls, but had questions the guardian did not answer.

In July 2022, the inspector general’s office issued a critical report stating the guardian had used a “deficient, deceptive and fraudulent” market analysis submitted by the real estate agent. The home was “undervalued and not publicly advertised.” The inspector general’s office urged law enforcement to look into the handling of this home and two other homes the guardian had sold with the same real estate agents. Sadly, the pilot died two days after the state declined to pursue a criminal investigation.

To protect yourself and your family, speak with an estate planning attorney about the documents you need during life: Power of Attorney, Health Care Proxy, trusts, a will and, equally importantly, creating a plan for contact with family members, no matter the status of your relationships.

Reference: The Washington Post (Nov. 4, 2023) “The retired pilot went to the hospital. Then his life went into a tailspin”

Strategies to Build and Preserve Generational Wealth

Generational wealth is a topic of immense importance. It represents the financial legacy one generation leaves for the next, enabling families to build a stable foundation for their descendants. However, preserving this wealth for future generations requires careful planning and management. This article delves into the intricacies of preserving generational wealth and the strategies wealthy families employ to ensure that their assets last for generations.

What Is Generational Wealth?

Generational wealth refers to assets passed down from one generation to the next. This can include property, money, stocks, businesses and other valuable resources. Many wealthy families aim to grow their wealth over time, ensuring that their future generations benefit from their hard work and financial acumen.

How Do Families Build Generational Wealth?

Building generational wealth isn’t just about accumulating assets. It’s a process that requires a strategic financial plan, sound investment decisions and a commitment to wealth preservation. Diversifying investments is critical in building generational wealth and ensuring security and potential growth across multiple sectors.

Why Do Many Families Lose Their Wealth?

Surprisingly, a vast majority of wealthy families lose their wealth by the second generation. A lack of financial literacy, poor investment choices and mismanagement can erode family wealth over time. Proper planning and education among family members can mitigate these risks.

How Can You Preserve Generational Wealth?

Preserving generational wealth involves a multi-pronged approach:

Estate Planning: Crafting a comprehensive estate plan ensures that assets are distributed according to your wishes. This often involves setting up a trust, which offers more control over the distribution and use of assets, while also offering potential tax benefits.
Investment Strategies: Diversifying investments can protect generational wealth from market fluctuations. This can include a mix of stocks and bonds, real estate and alternative investments.
Insurance: A life insurance policy can provide a financial safety net, ensuring that beneficiaries have the necessary resources, even if the primary breadwinner dies.

Why Is a Trust Essential for Wealth Preservation?

A trust is a legal entity that holds and manages assets for the benefit of certain individuals or entities. For wealthy families, trusts are often a cornerstone of their wealth management strategy. A trust can protect assets from creditors, ensure that they’re used according to the grantor’s wishes and provide tax benefits.

What Role Does Investment Play in Protecting Wealth?

Investment plays a pivotal role in preserving and growing generational wealth. With the right investment strategies, families can grow their wealth through multiple generations, ensuring that assets don’t just remain static but appreciate over time. Seeking advice from a registered investment advisor can offer tailored recommendations to maximize returns and minimize risks.

How Can Financial Planning Secure Your Family’s Future?

A holistic financial plan can guide a family’s spending, saving and investing decisions. It offers a roadmap to achieve financial goals, ensuring that assets are preserved and grow. Moreover, financial planning promotes financial literacy, equipping the next generation with the knowledge to manage and build upon their inherited wealth.

Is Education Crucial in Wealth Preservation?

Absolutely. Financial literacy and an understanding of how to manage and invest wealth are paramount. Wealthy families often prioritize educating their heirs about finances, investments and the responsibilities that come with great wealth. This ensures that future generations can make informed decisions and avoid pitfalls that can erode their inheritance.

How Can One Prepare for Unforeseen Challenges?

Life is unpredictable. Economic downturns, personal tragedies, or changes in estate taxes can pose challenges. It’s vital to have contingencies, like a robust estate plan, insurance coverage and diversified investments, to navigate these challenges without compromising generational wealth.

Summary:

Generational Wealth is the legacy passed from one generation to the next.
Building this wealth requires a strategic financial plan and diversified investment.
Trusts play a pivotal role in a family’s wealth management and preservation.
Financial literacy and education are vital to ensure that future generations can manage and grow their wealth.
Proper preparation and planning can help families navigate unforeseen challenges and ensure that their wealth lasts for generations.

Navigating Estate Tax Planning

Navigating the intricacies of your financial legacy can be a daunting task. Understanding the nuances of the estate tax and implementing robust estate tax planning strategies can ensure that your beneficiaries enjoy the fruits of your labor without being overburdened by tax liabilities.

What Is Estate Tax and Who Is Subject to Estate Tax?

The estate tax, often called the “death tax,” is a tax levied on the total value of a person’s estate upon their death. If the estate exceeds certain thresholds, it becomes subject to federal estate tax, potentially diminishing the wealth passed on to heirs.

Understanding who is subject to estate tax requires knowledge of current tax laws, which often change. These laws dictate specific exemption amounts and continually adjust what constitutes a taxable estate.

Why Is Estate Tax Planning Essential?

Proactive estate tax planning is crucial to preventing your heirs from facing unexpected tax burdens. Without careful planning, a significant portion of the estate you’ve worked hard to build could end up in the hands of the government, instead of your loved ones.

Tax planning involves a comprehensive look at your assets and potential tax liabilities, ensuring that your beneficiaries are safeguarded. The goal is to reduce estate tax significantly, allowing more wealth to transition to the next generation.

How Can Trusts Benefit Your Estate Plan?

Incorporating trusts into your estate plan can be a strategic move to minimize estate taxes. Trusts, particularly irrevocable ones, allow you to transfer wealth from your estate, reducing the overall value subject to estate taxes upon your death.

Trusts offer control over assets even after death, ensuring that your wishes concerning asset distribution are honored. Grantor trusts and other types of trust arrangements are advanced estate planning tools that can significantly reduce your taxable estate.

Are Gift Taxes and Estate Taxes Interconnected?

Yes, gift taxes and estate taxes are closely linked. Strategically gifting assets during your lifetime can reduce your estate’s size, subsequently decreasing estate tax liability. However, it’s essential to understand the gift tax exclusion limits in your tax planning.

Large gifts that exceed these exclusions may still be taxable. These count towards your estate and are potentially subject to estate tax if they surpass the lifetime exemption limit. It’s wise to consider the long-term implications of gifting on your overall estate.

What Changes in Tax Laws Mean for Your Estate Planning Strategies?

Estate tax laws are not static; they undergo changes and adjustments that could impact your estate. These changes in tax laws could influence exemption thresholds, tax rates and what assets are considered part of your taxable estate.

Keeping abreast of these changes is critical. Working with a tax professional who understands the latest federal estate tax laws ensures that your estate plan remains effective and compliant, safeguarding your estate from increased tax liability.

Can You Minimize Estate Taxes with Charitable Contributions?

Making charitable contributions is an effective strategy to minimize estate taxes. Donations to qualifying charitable organizations can reduce your taxable estate’s size, while allowing you to contribute to causes you care about.

This estate planning tool requires proper documentation and adherence to tax laws to ensure that your estate benefits from the tax reductions applicable to charitable contributions.

Do All States Impose Own Estate Taxes?

The estate tax isn’t just a federal matter. Several states impose their own estate taxes, with exemption thresholds and tax rates that differ from federal guidelines. State estate taxes can complicate estate planning, especially if you own assets in multiple states.

Understanding how state tax laws affect your estate is crucial. It involves complex considerations, particularly if you’re planning for properties in states with distinct estate or inheritance taxes.

How Does the Tax Cuts and Jobs Act Affect Estate Tax Planning?

The Tax Cuts and Jobs Act significantly impacted estate tax planning by increasing the federal estate tax exemption. This change means fewer estates will be subject to the estate tax. However, it is essential to remember that many parts of the Jobs Act are temporary.

Estate plans should consider future changes, possibly with lower exemptions. Careful planning and continual review of your estate strategy are necessary to adapt to legislative shifts and protect your estate from excessive taxation.

Closing Thoughts: Estate Tax Planning Takeaways

To encapsulate, here are the key points to remember in your estate tax planning journey:

Understand the implications of the estate tax on your assets.
Utilize trusts and lifetime gifts strategically to reduce estate size.
Keep updated with changes in tax laws, including state estate taxes.
Consider charitable contributions as part of your estate strategy.
Consult with a tax professional to navigate complex estate scenarios.

Effective estate tax planning can preserve your wealth for future generations, ensuring that your legacy endures as you envision.

When Should You Update Your Estate Plan?

We know we need to see our doctor for annual checkups and see the dentist every six months, not to mention getting a good night’s sleep, brushing and flossing our teeth. In the same way, your estate plan needs regular maintenance, according to an article from The Street, which asks, “When Is It Time to Update Your Estate Plan?”

Far too often, estate plans are created with the best intentions and then lie dormant, in many cases, for decades. Provisions no longer make sense, or people in key roles, like executors, either move away or die.

Failing to update an estate plan can lead to a beloved child being disinherited or an animal companion ending up in a shelter.

This is an easy problem to solve. However, it requires taking action. Scanning your estate plan once a year won’t take long. However, when certain events occur, it’s time to bring all your estate planning documents to an estate planning attorney’s office.

Here are a few trigger events when you may want to make changes:

Welcoming a new child into the family. Wills and trusts often contemplate future children. However, when the children arrive, you’ll need to update wills, trusts and beneficiary designations. Life insurance policies, investment accounts and retirement accounts allow you to name a beneficiary, and the proceeds from these accounts go directly to the beneficiaries, bypassing probate.

If no beneficiary is named or cannot be located, the asset usually goes back into the estate, meaning it goes through probate and there may be tax liabilities.

Charitable giving goals often change over time. An organization with great personal meaning in your twenties may be less important or may have closed. If you’ve become involved with a charitable mission and want to leave assets to the organization, you’ll want to create a charitable bequest in your will or trust. Those changes need to be reflected in your estate plan.

People’s ability to serve in fiduciary roles may have changed. If the people you assigned certain roles to—like trustees, executors, agents, or the guardian named for minor children—may no longer be suitable for the role. The person you selected to serve as a guardian for minor children may not be available or willing to manage adolescents. If your trustees are over 70, you may want to name an adult child to serve in this role.

Reviewing insurance policies needs to be done regularly. In some cases, the value of life insurance proceeds may be subject to estate tax. Proper planning should be able to avoid this by making certain the policy is not included in your taxable estate.

If you are considering taking out a new life insurance policy, revisit your existing plans with your estate planning attorney. It may make sense for you to create an insurance trust, which allows you to exempt certain assets from your taxable estate.

Are pets an important part of your life? If so, you may want to make plans for who should take care of your pet if you pass away. In many cases, a pet trust works to name a trustee to manage funds for the pet’s care and formally outlines how you want your pet to be cared for.

Reviewing your estate plan every three to five years with your estate planning attorney or whenever a significant life event occurs will ensure that your wishes are followed.

Reference: The Street (Oct. 30, 2023) “When Is It Time to Update Your Estate Plan?”

Do Heirs Pay Credit Card Debt?

When you consider the average credit card balance in 2023 was $6,365, chances are many Americans will leave an unpaid credit card balance if they die suddenly. A recent article from yahoo! finance asks and answers the question, “What happens to credit card debt when you die?”

Many people think death leads to debt forgiveness. However, this isn’t the case. Some forms of debt, like federal student loans, may be discharged if the borrower dies. However, this is the exception and not the rule.

Credit card debt doesn’t evaporate when the cardholder goes away. It generally must be paid by the estate, which means the amount of debt will reduce your loved one’s inheritance. In some cases, credit card debt might mean they don’t receive an inheritance at all.

Outstanding credit card debt is paid by your estate, which means your individual assets owned at the time of death, including real estate, bank accounts, or any other valuables acquired during your life.

Upon death, your will is submitted to the court for probate, the legal process of reviewing the transfer of assets. It ensures that all debts and taxes are paid before issuing the remaining assets to your designated heirs.

If you have a will, you likely have an executor—the person you named responsible for carrying out your wishes. They are responsible for settling any outstanding debts of the estate. If there’s no will, the court will appoint an administrator or a personal representative to manage the assets.

In most cases, your heirs won’t have to pay off your credit card debt with their own funds. However, you may be surprised to learn there are exceptions:

Married people living in community property states. In a community property state, the deceased spouse is responsible for repaying credit card debt incurred by their spouse. In 2023, those states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.
Credit cards with joint owners. If you had a joint credit card shared with a partner or relative, the surviving joint owner is responsible for the full outstanding balance. Only joint users are responsible for repaying credit card debt. If your partner was an authorized user and not an owner, they aren’t legally responsible for the debt.

Debt collectors may try to collect from family members, even though the family members are not responsible for paying credit card debts. The debt collector may not state or imply that the family member is personally responsible for the debt, unless they are the spouse in a community property state or a joint account owner.

If a debt collector claims you personally owe money, request a debt validation letter showing your legal responsibility for the debt. Otherwise, you have no legal obligation to pay for it yourself.

When someone dies, their estate is responsible for paying debts, including credit card debt. However, debt is repaid in a certain order. In general, unsecured debt like credit card balances are the lowest priority and paid last.

Some accounts are exempt from debt payment:

Money in a 401(k) or IRA with a designated beneficiary goes directly to the beneficiary and is exempt from any debt repayment.
Life insurance death benefits go directly to the named beneficiary and go directly to the beneficiaries.

If a loved one has died and they had credit cards, stop using any of their cards, even if you are an authorized user or joint owner. Review the deceased’s credit report to learn what accounts are open in their name and the balance on each account. Notify credit card issuers and alert credit bureaus—Equifax, Experian, and TransUnion. You may need to submit a written notification, a copy of the death certificate and proof of your being an authorized person to act on behalf of the estate.

Talk with an estate planning attorney to find out how your state’s laws treat the outstanding debt of a deceased person, as these laws vary by state.

Reference: yahoo! finance (Nov. 9, 2023) “What happens to credit card debt when you die?”

Should You Gift Kids Inheritance Now, or After You’ve Passed?

This is a genuine dilemma facing millions of parents and grandparents as they prepare to pass an enormous amount of wealth—$73 trillion—to the next generation. There are pros and cons to both approaches, according to the article, “Give the Kids Their Inheritance Now or Make Them Wait? 3 Things to Keep in Mind,” from Barron’s.

Giving too much too early could put parents in an economic bind in their later years. Therefore, this needs to be considered in light of today’s longer life spans. However, if you can afford to make a generous gift and your children could use the money now for a good purpose, it’s hard to justify making them wait.

How much to give is as critical as when to make the gift. The predominant concern is if you give your children too much, they won’t be motivated to earn their own wealth, or other family members will resent the gift. Estate planning attorneys and financial advisors routinely speak with families about these issues. These conversations always consider the values they want to instill in their children.

In some cases, parental support can help a child while working at an entry-level (i.e., low paying) job in their dream career. Covering the cost of rent for a few years can offer young adults a support net until they achieve financial stability.

This is very different than paying the expenses of a young adult with no career goal whose primary focus is a robust social life.

Anyone can make a yearly gift to any other person of up to $17,000 tax-free, or $34,000 per couple, but there are ways to make gifts without triggering gift taxes. Direct tuition payments to schools are tax-free. Unlike putting money into a 529 account, there is no limit to how much can be paid directly to a college or university. Parents and grandparents could also help with a downpayment on a child’s home without paying gift taxes.

Gifts don’t have to be large to have an impact. Some parents and grandparents give their children or grandchildren a small amount to start saving for retirement. A gift of a few thousand dollars during their 20s can grow into a nice sum over many decades. If the recipient has earned income, you can contribute to their IRA or Roth IRA accounts.

If assets are limited, consider giving personal possessions, such as jewelry or family heirlooms, to younger generations. You’ll get to see them enjoy their gifts, without putting your own financial situation at risk.

Whenever the decision is made to make these gifts, families should talk about their values and intentions around money.

If there are concerns about children losing an incentive to work because of the family’s wealth, a spendthrift trust might pass wealth along while controlling its distribution.

Remember that today’s generous federal estate tax rules are set to expire in 2026. Currently, individuals can gift up to about $13 million ($26 million for couples) tax-free in their estate plans. If the exemptions expire, this amount will be cut by approximately half.

Reference: Barron’s (Nov. 4, 2023) “Give the Kids Their Inheritance Now or Make Them Wait? 3 Things to Keep in Mind”

Why You Should Put Your House in a Trust

Putting a home into a trust has several benefits, from avoiding the lengthy probate process to providing potential tax advantages. This article discusses some of the intricacies of trusts and the importance of consulting with an experienced estate planning attorney.

What Is a Trust and Why Is It Important?

A trust is a legal arrangement where one person (the grantor) transfers ownership of their assets, like a house, to a trustee. The trustee holds and manages these assets on behalf of the named beneficiaries. One main benefit of putting property in a trust is to avoid probate, which can be a time-consuming and expensive legal process. The trust allows assets to be transferred to beneficiaries without the intervention of a probate court.

What Role Does the Trustee Have?

With a revocable living trust, you, as the original homeowner, will usually name yourself as the trustee, so you have control of the trust and the property. However, the original owner can name someone else as the trustee. This can be helpful in case the original owner dies and the real estate is distributed to the grantor’s beneficiaries according to the terms of the trust agreement. The trustee manages the property for the benefit of the grantor and any named beneficiaries of the grantor’s estate.

Benefits of Putting Your Home in a Trust

Avoiding the Cost and Time of Probate

By transferring ownership of your home into a trust, you can ensure that it passes directly to your chosen beneficiaries upon your death without the need to go through probate. Probate costs are borne by the estate and, thus, the beneficiaries. Probate also takes time, and while probate is in process, homes need maintenance, taxes need to be paid and costs add up. If the house is sitting empty, it can become a target for thieves and property scammers. If the trust is an irrevocable trust, it can also help protect assets from potential creditors and may even provide estate tax advantages.

Keeping the Transfer of the Home Private

If the house goes through probate, the transfer of property becomes part of the court and public record, and anyone will be able to see who inherited the home. When family dynamics are complicated, this can create long-lasting family battles.

Making the Process Simpler for Your Executor

If you have multiple real properties or homes in different states, the properties would be subject to the probate process in the state where located. Thus, if you have a vacation home in Arizona but live in Michigan, your executor will have to navigate probate in both states.

Revocable Trust vs. Irrevocable Trust: Which One Is Right for You?

There are primarily two types of trusts: revocable and irrevocable. A revocable trust, often called a revocable living trust or a living trust, can be altered or revoked entirely by the grantor while they’re alive. It allows homeowners the flexibility to make changes to the trust terms or named beneficiaries. A revocable trust lets a grantor control the property and make changes to the trust during their lifetime. The grantor retains the right to modify or dissolve the trust. The grantor can act as a trustee, manage the property, or appoint someone else. Upon the grantor’s death, the revocable trust becomes irrevocable, meaning no further changes can be made.

On the other hand, an irrevocable trust, once established, cannot be easily altered or terminated. Assets in an irrevocable trust are considered outside of the grantor’s estate, providing protection against creditors and potential tax advantages.

Working with an Estate Planning Attorney to Set Up Your Trust

Creating a trust starts when you engage an experienced estate planning attorney to help you decide the type of trust that best suits your needs for protecting your real and other property. It is essential to work closely with your attorney to complete each step so the home ownership is properly transferred to the trust.

Make a list of possible beneficiaries and trustees who you will include in the trust and gather their contact information.
Work with the estate planning attorney to transfer the title of your property to the trust. This involves drawing up a new property deed that names the trust as the property owner and getting it notarized in front of a notary public.
Record the deed and title to the property with the office that holds local property records.
Regularly review and update the trust, especially after major life events, to ensure that it remains aligned with your wishes.

The Role of an Estate Planning Attorney in Putting Your Home in a Trust

Working with an experienced estate planning attorney is essential when setting up a trust. They can provide guidance on the most suitable type of trust for your situation and ensure that all legal formalities are correctly observed. An attorney can help draft the trust document, ensuring that it aligns with state laws, and provide advice on transferring assets into the trust. Moreover, they can act as a valuable resource for questions or concerns, ensuring that the trust serves its intended purpose effectively.

In Conclusion

Putting your house into a trust is a strategic move for estate planning and avoiding probate. Furthermore, if the trust is irrevocable, it may help protect assets from potential creditors and provide estate tax advantages. Whether you opt for a revocable or irrevocable trust, it’s imperative to consult with an experienced estate planning attorney to ensure that your assets, wishes and beneficiaries are well-protected. Remember, a well-structured trust is more than just a legal document; it’s a legacy planning tool.

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