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Thoughts shared here do NOT constitute legal advice.
Choosing the people who will handle your affairs while you are seriously ill or when you are deceased is a deeply personal decision. You need to decide whom you trust to honor your wishes, determine what medical treatments you will or will not have, take care of your money and, possibly, your children. And you need to review and update these decisions periodically.
We tend to focus a lot on the documents in the estate plan as if those documents are the end of the story. Often they are. However, there is a human element that cannot be ignored. If you have not reviewed your documents in several years, you should verify that they still meet your goals, but you should also verify that the people you have chosen to carry out those goals are willing to accept the responsibility.
Deciding to accept the responsibility to handle someone else’s medical and financial affairs is an equally personal decision. Often clients will create an estate plan and think their job is over. If their preferences do not change, then their estate plan probably does not need to change, right? However, the people designated to be fiduciaries (Power of Attorney, Trustee, Guardian, etc.) may have changed their preferences. Continuing to have frank conversations with the people who will handle your life affairs, if you are incapacitated, or estate or trust once you are deceased about whether they are willing to do so is as important as creating the documents appointing those people.
Recently a woman called me from the Northern California bay area. Her father, who is in his nineties and lives in San Diego County, had gone into a coma and the hospital notified his designated health care power of attorney of the situation. The designated health care power of attorney declined the appointment and sent a copy of the advance health care directive down the line until it came to the woman on the phone. Our conversation went something like this:
Her: “I live in the bay area. I can’t get down there to see him or make decisions. I’m in my 70s myself and I live on a fixed income. My husband is in his 80s. I can’t take care of this stuff.”
Me: “Well who is next on the list?”
Her: “I’m the last one.”
We talked some more about what other estate planning documents had been passed to her, what her responsibilities could be, and about the fact that, ultimately, she did not have to accept the responsibility if she really did not want to. Unfortunately, she really didn’t. While I could feel her grappling with her responsibility to her parent, she clearly had her own issues going on in her own life over 500 miles away from where her parent was being hospitalized. She said, “I never even knew this document existed. He never warned me.”
Although in this case the client was never warned at all, it is often true that a potential fiduciary is asked to serve as a power of attorney or trustee and then moves or has his or her own children or makes any number of changes that prevent him from being willing or able to actually accept the appointment. This is, of course, part of why we choose alternate agents from the outset. But as years or especially decades go by from the creation of the original document, it is important to communicate with your potential fiduciaries to make sure that they remember they are appointed and that they are willing to act if the time comes.
Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things…
FREE REPORT: This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order, and includes the following articles
Happy Valentine’s Day to you and your loved ones! Valentine’s Day was created to remind us to cherish our loved ones, and to spend a lot of money on cards, flowers, and stuffed animals. For our purposes, though, we will focus on the former. We are all familiar with the old grade-school rhyme:
First Comes Love. Then Comes Marriage.
Getting married is a major decision that, especially in California, impacts your financial situation in some occasionally unexpected ways. Keeping in mind what assets are community assets and what assets, if properly protected, are separate assets is a key element in your estate plan. Depending on your situation, characterizing your assets as belonging to the “community” may be beneficial for estate tax and other types of planning. On the other hand, keeping your separate property separate may be more beneficial, especially in second marriages. Keeping the characterization of your property in mind when you complete an estate plan and, indeed, when you pay your bills and complete other ordinary tasks within your marriage requires careful consideration and good advice! Remember, it’s called “making it legal” for a reason.
Then Comes the Baby in the Baby Carriage.
When you have children, the nature of your estate plan will generally change. Your plan often changes from supporting yourself to passing on assets. Additionally, providing for college educations, preventing premature dispositions to teenagers and designating a suitable guardian to care for your children and manage their assets are all new considerations to consider.
Additionally, it is one of the most important times to keep your estate plan up to date. Although it would be difficult to disinherit your unborn children accidentally by making a change after the birth of a child without naming the new child, it is important to keep in mind that as your children grow older, various changes may be necessary. You may find that your children are more responsible than you planned and need not be burdened with long, drawn-out trust administration. Conversely, you may find that you feel more comfortable with your children receiving smaller distributions over time. Making these alterations as your children grow older can save a lot of future headaches.
That’s Not All! That’s Not All!
Finally, you will grow older (10/4 aging) and, perhaps have grandchildren. Determining how many generations you to which you would like to extend your estate may be a matter of the size of your estate, the number of children and grandchildren you have, or the closeness of your family as it grows. Over time, any of these factors may change significantly.
Planning for your old age will also become an increasingly important priority. As you move from what, in financial strategy parlance, is the “wealth creation” phase to the “wealth preservation” phase, verifying your incapacity documents, and your Medi-Cal or V.A. benefit planning documents will ensure that years of financial savvy is not wasted on large medical bills and conservatorship proceedings.
I often stress the importance of reviewing your estate planning documents regularly. Knowing what is in your documents and whether it continues to meet your needs and goals may be the best Valentine’s gift you can give to show your family how much you love them. By keeping your documents up to date your passing can be relatively free of legal stresses so that they have time to grieve.
Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things…
FREE REPORT: This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order, and includes the following articles
In the ongoing effort to balance the state’s budget amid the economic downturn, the State of California decided late last year to cut Medi-Cal reimbursement rates by 10%. In the ongoing effort to preserve their fees, various professional organizations including the California Hospital Association sued.
Last week U.S. District Judge Christina A. Snyder gave a temporary ruling stopping the cuts to Medi-Cal reimbursement rates. It is actually the second similar decision made in this case. The issue in the case is whether AB 97, the law authorizing the cuts, is allowed by various other federal and state laws governing healthcare. Although that decision has not yet been made, the court has determined that Californians could face difficulty accessing health care in the time between when AB 97 was passed and when the court makes a decision about whether AB 97 is legal.
So what does all this legal mumbo-jumbo mean to you? The argument is that if cuts to Medi-Cal reimbursements are allowed to happen, many California doctors, skilled nursing facilities, and other care providers will not be able to afford to continue providing medical care to Medi-Cal patients. This would limit the options available to many low-income and elderly residents of the state and provide less income to the health care professionals who continue in the system.
So far, Judge Christina A. Snyder agrees that the potential of limiting Californians’ access to certain health care providers because of cost cuts is a big enough deal that she will not allow the cost cuts to go into effect. We will have to see what is ultimately decided in the case to know whether the cost cuts can ever go into effect. For now, the lesson to be learned is Plan Plan Plan for the days when your health care may become an issue for your family.
I often recommend planning for Medicaid and Medi-Cal eligibility for certain clients and this type of planning remains important. However, your whole health care plan is literally of vital importance. Have you decided who will make medical decisions for you if you can’t? If not, you should make sure you do as quickly as possible through an Advance Health Care Directive. If you are hospitalized or incapacitated, who will make sure your bills get paid? A Financial Power of Attorney authorizes a person you designate to access your finances and make certain financial decisions for you.
If you find yourself in need of long-term care, how will you and your family pay for it? Finding out now what programs you can qualify for, how much insurance you need, and other important considerations can save your family from dealing with bill collectors before and after your illness or death.
Have you created all of these documents and gotten everything in order “years ago?” I’m sure I don’t have to be the one to tell you, but things have changed in the last few years. Not only are planning documents from a decade ago often insufficient, but even just in the last few years the laws have evolved.
When I create an estate plan, I want to make one that will grow with you, but I have to plan as if you could die the next day. I have to apply the law and your preferences as they stand on the day we create your documents. If your estate planning documents have not been reviewed for several years, you should have them reviewed as soon as possible.
Nearly 49% of all marriages in the United States contained a remarried spouse and for the state of California it is believed to be even higher. It’s important that estate planning documents are updated and beneficiary designations on accounts such as annuities, life insurance policies and retirement plans are changed accordingly.
If a person creates a Will or a Trust in California and then gets married after signing that document, that person’s new spouse automatically becomes a beneficiary by law. Many times people mistakenly believe that if their spouse is not mentioned in their existing estate plan, the spouse will not receive anything after death. While this may be exactly what the parties intended, the law states otherwise. The law is referred to as “omitted spouse.” It assumes that if a Trust or Will is made before marriage and never changed to reflect the new marriage, then the person forgot to update it for the new spouse. Consequently, the new spouse will get his or her share of the estate.
It is amazing just how easy it is to avoid this result. All it takes is simply updating the estate plan to reflect the new marriage. It the intent is to disinherit the spouse, then that should be clearly indicated in the document. And this is another reason why it is so vitally important for people to have their estate planning documents and situation reviewed every few years. We often have clients of ours question why they need to come in to review their documents, after all, nothing has changed. Then we sit down with them and find out they just go remarried. Without the review, the remarriage problem would have never been discovered until the client died. Further, on these reviews, we often find that not only do the estate planning documents need to be updated but the life insurance beneficiary designations need to be changed
If avoiding the omitted spouse law is so easy, then why are attorneys called upon to litigate so many omitted spouse cases? Primarily it’s because the law of omitted spouse is not widely known. In fact, it’s usually a huge surprise to the beneficiaries after a parent dies. The blood related beneficiaries believe that since the spouse is not mentioned in the estate plan, he or she should receive nothing from the estate. They are often shocked and hurt when they find out how the omitted spouse law automatically opens the door for the new spouse to claim beneficiary status in the estate.
Beginning last month veterans who qualified for V.A. Aid and Attendance Non Service Connected Pension finally saw an increase in their checks. Although most people feel the cost of living has certainly been rising since 2009, V.A. Aid and Attendance benefits were stagnant. Well, no more! The Congressional Budget Office recommended standard of living increases, which have resulted in an increase of up to $71 each month in added benefits.
So how would your family use the extra money? Maybe you will use it on something very practical, like paying your electric bill each month. Maybe you will use it for something a little more extravagant. The one thing I do know is that these days, some extra money in your family’s budget each month is never a bad thing. The maximum V.A. Aid and Attendance benefits for 2012 are:
Single Veteran: $1,704
Married Veteran: $2,020
Surviving Spouse: $1,094
For those veterans who are currently receiving V.A. Aid and Attendance Non Service Connected Pension, this increase is a welcome change after years of receiving the exact same check every month. For those who have not yet qualified, now is the time to apply. You have earned it through your honorable service to this country. Obtaining the benefits owed to you or ensuring that you will qualify to receive them when you need them is an integral part of your estate plan. Now is the time to ensure that your spouse and children are taken care of, especially while they are taking care of you.
This year’s rate increase corresponds with an increase in Social Security payments beginning January 2012 as well. As a result, many elderly veterans will receive both, although higher Medicare premiums could offset some or all of the Social Security increase.
Additionally, the President in his State of the Union address last week pledged more spending for the V.A. and veteran care. Hopefully, it will mean a restoration of annual increases to programs such as V.A. Aid and Attendance and Social Security. As rates increase this year and in the future, the burden of poor health can be eased even more substantially for you and your loved ones.
Eligible veterans generally include wartime veterans who are 65 or older. There are net worth and income requirements that you may meet already, or in some cases, it may be worth planning ahead to meet. To determine your eligibility, you should make sure you consult with a V.A. accredited attorney to ensure that your attorney is well-versed in the qualifications and requirements. Although there is no “lookback” period with VA Aid & Attendance as there is with Medi-Cal, you still should meet with an attorney several years in advance. Failure to do so can cause problems if a stroke occurs and the estate planning documents have not taken Veterans Benefits into account.
As an aside, speaking of changes to monetary limits in 2012, California has finally updated the level at which your estate must be in order to require a full probate. The law as it now stands states that if you own real property valued at greater than $150,000 or if your entire estate is valued above $150,000, your heirs will be required to probate your will. Again, proper planning will avoid the need for the probate process.
Last June we talked about California stepping up and strengthening it’s laws against elder abuse. As we’ve also discussed before, the bulk of the U.S. population lies with the baby boomers and the baby boomers are aging. The latest U.S. Census Bureau brief on data from the 2010 Census shows seniors increasing faster than the younger population, raising the nation’s median age from 35.3 in 2000 to 37.2 in 2010, with seven states having a median age of 40 or older. The point is that as the population ages elder abuse is probably going to increase as there will be more elderly citizens and more opportunities for fraud. Plan carefully and be aware of the standards for elder abuse in case you or a loved one find yourself in a possible abusive situation.
There are three different ways in which financial abuse may arise. Under California law Financial Elder Abuse occurs when property of an elder is taken for wrongful use, or with intent to defraud, or by way of undue influence. In other words, elder abuse can be established when undue influence is used regarding an elderly person’s Will or Trust.
Consider the story of Tom, the unscrupulous trustee, and Wendy, the elderly widow. Tom convinces Wendy to change her Trust and cut out her son because Tom feels the son, Sam, doesn’t deserve it. Of course, the change in the Trust also leaves something to Tom. And, just for flavor, we’ll add that, in reality, Sam has been a loving and caring son. After enough pressuring, Wendy succumbs to Tom’s bad intentions and makes the change. Now, after Sam finds out he has been disinherited, he sues Tom for elder abuse and undue influence of Wendy. This situation is the focus of the law.
What about the Veterans benefit situation in which the estate plan is changed to help qualify Mary, the Mom, for the Veterans Aid & Attendance Non Service Connected Disability Pension. This was the idea of Dolores, the daughter. To qualify for the Aid & Attendance benefit, it is necessary for Mary to bring her net worth way down. To accomplish this, she gives most of her bank account to Dolores. Bob, her son has ignored her for many years so Mary does not feel bad about this change. Dolores qualifies and receives the Aid & Attendance benefit of almost $1100 per month for the rest of her life. A few years go by and she dies. Dolores already has the money. Unfortunately, Bob, who was to receive half of her estate under her Living Trust, now gets nothing. Bob is upset. Is this Financial Elder Abuse? Assuming that this transaction was handled by an attorney who represented Mary, it is highly unlikely. But if it wasn’t, Dolores could be in for some problems.
Justice can be an expensive thing. It is the process of presenting evidence in Court and having the court decide in your favor, i.e. receiving a court judgment. A court judgment is a public acknowledgment that you are right and the other side is wrong. This then usually results in your receiving a just reward against the other side, typically in the form of money damages.
Most people would agree that the best thing to do with a lawsuit is to avoid it.. And the best way to avoid a potential inheritance dispute for your loved ones is by planning appropriately and making sure everything is up to date in the form of a properly executed will or living trust. Take a look at my Frequently Asked Questions page for more on this.
Now, don’t get me wrong, proper estate planning isn’t necessarily going to prevent every possible inheritance lawsuit imaginable. But it does go a long way in making sure you define what you own, who is to receive what you own, how they are to receive it and when they are to receive it . I like to say that that will take care of half the problem. The other half is keeping it up to date. Periodically having it reviewed tends to take care of the second half.
Those who ignore this concept are really courting disaster for their family. Keep in mind that an issue with the concept of justice is it can oftentimes be very expensive. Will you receive more from the lawsuit financially than you put into it? For example, if you spend $25,000 on a lawsuit, you want to receive a lot more than $25,000 out of that suit to compensate you for your risk. Justice pays no attention to the financial costs of a case. If a person wants justice they must be willing to spend as much time, emotion and money as necessary to achieve that result, which can often be an unfair result from a financial viewpoint. And don’t forget, just because a case goes to trial does not mean that you will win. There’s always two sides (or more) to every story and event. That’s one of the risks of fighting for justice, you could lose not just money but all the time, energy and effort spent throughout the process. Bottom line, try to avoid the lawsuit in the first place.
When someone’s health declines to the point that care assistance is needed either in the home or in a facility, it quickly becomes apparent that the cost of this care is quite expensive. Many folks contact our office for information about and assistance with applying for public benefits for the payment of long term care . Understanding how to proceed is a good place to start because many factors are often involved in the process.
Two of the key public benefit healthcare programs that are important but not widely understood are the Aid & Attendance Non Service Connected Disabililty program from the federal Department of Veterans Affairs (VA) and the Medi-Cal program (Medicaid in other states). In previous entries, we have discussed important events surrounding Medicare and Medicare basics in addition to the Medi-Cal program. In other entries, we have discussed various aspects of the VA Aid & Attendance Non Service Connected Pension program in relation to assisted living.
Sometimes a question we get is which program is best for us? The answer can be complicated. However, here are some basic considerations. The VA pension program is not available for everyone. Only certain wartime veterans and their surviving spouses can qualify for these benefits. The spouses of living veterans (although not technically correct) can also qualify in a manner of speaking.
Both the VA Aid & Attendance program and Medi-Cal cover in-home care assistance. Medi-Cal’s is very limited. The VA Aid & Attendance benefit can help pay for a skilled nursing facility, assisted living facility or in-home care. One qualifies for the Aid & Attendance benefit if they are in need of the aid and attendance of another for the basic activities of daily living (ADL’s) or are “housebound.” There are some limited exceptions to this ADL requirement. ADLs would include ambulation, feeding oneself, toileting, bathing, transferring from a bed to upright, etc. Medi-Cal has several in home programs under the general name of In-Home Supportive Services, or IHSS. Here’s another take on the IHSS program from a non-government source.
Keep in mind that the Aid & Attendance program does not pay for the services, it just provides a fixed amount to you each month that you then can use toward paying for the service. As to the IHSS program, your capability of being approved depends on whether the county offers this specific program and whether they have enough money available to take another person. In other words, there ususally is a waiting list. Also, remember that while the VA Aid & Attendance Non Service Connected pension is an award, not a loan; many (but not all) Medi-Cal benefits are the exact opposite as it is a loan, not an award. That means that (for the Medi-Cal programs that allow this) Medi-Cal can come after your assets after you die. In other words, it is paid back from the inheritance that you expected to go to your children. Proper planning can avoid this disaster through the use of various techniques including a special QMap Trust.
I hope everyone had a happy and healthy New Years Holiday!
Just recently we discussed what it means to fund a living trust. It involves transferring the title of your assets from your name to the name of your living trust. For example, a married couple’s bank account might say John & Jane Smith, joint account holders. To transfer it to a living trust John & Jane Smith will need to go to the bank with their Trust Documents and have that particular bank switch the title to John & Jane Smith, Trustees of The Smith Living Trust.
Let’s say John & Jane Smith were responsible enough to create a living trust but did not properly go to their bank to have the title to their account changed to the living trust. In most cases the estate planning attorney created a “general property assignment” (or something similar. This is nothing more than a document which states that the trust creators (John & Jane Smith) intended to fund everything into their living trust even if the trust does not specifically identify every asset they own within the document itself. Well if they die without changing that bank account to the living trust the Probate Court will allow an attorney to go to court on behalf of The Smith Living Trust to file what is called a Heggstad Petition. This petition requests that the court declare this bank account to be part of the trust. If the court grants the request, then the asset becomes part of The Smith Living Trust and avoids probate. Otherwise the asset would require a full probate by itself (if it’s over $150,000) and be subject to the statutory probate fees in addition to the costs of administering The Smith Living Trust.
Well so what’s the big deal if I have a Living Trust and forget to change title to my assets? There are two problems, one is more of a minor problem, the other can be a MAJOR problem. In the example above, even though a Heggstad Petition will allow John & Jane Smith’s forgotten bank account to be distributed under the terms of the trust, it still creates an extra cost burden for hiring an attorney to go to court and file it as well as a delay in distributing the trust. The major problem can be the real property.
Remember how we said earlier that a “general property assignment” clause will get the bank account to the trust with a Heggstad Petition? Well this works for personal property but it will NOT work with any real property UNLESS the real property is particularly identified in the trust document itself. This means that if John & Jane Smith do not change the title of the house with the county recorder into the name of their living trust, and their trust document itself does not specifically describe the house (such as at least the address), then the house will have to go through a full probate and be subject to full probate fees on the GROSS value of the house, not the equity in the house. Keep in mind this is in addition to the costs of distributing the assets that are properly held in trust. This can create undue delay and more importantly tens of thousands of extra dollars in fees and costs. Bottom line is if you have real property and a living trust, that property needs to be described specifically in your living trust.
And what about QMap and QVap trusts, i.e. trusts that are used for Medi-Cal or Veterans Aid & Attendance Non Service Connected Disability benefits ? Here a foul up could mean not only the difference between Probate or not, but could mean the loss of tens of thousands of dollars while the person is alive. The moral, check and recheck that everything is properly titled. That’s why we like to get together with our clients every 2-3 years to review things.
http://www.aboutlivingtrusts.com/VA/NonServiceConnectedDisability.htm
One thing I’ve noticed over the years of practice is that most people for whom a living trust is appropriate know they probably need a living trust. They don’t always know why or what the purpose of the living trust is, but the word is out there enough that people have a pretty good idea that a living trust can help protect their families. (See my Frequently Asked Questions for background.) We’ve talked about the new tax law and the living trust recently, so today we’re going to talk about what you do once you have one.
Many people have a common misunderstanding that after they’ve signed their living trust they’re done. Unfortunately that is a huge mistake. Typically, the only way for a trust to be effective is to fund it…otherwise you’re left with a useless stack of expensive papers. This is one of the many pitfalls with do-it-yourself planning. So, what is “funding?” When you set up a living trust, you need to transfer assets from your name to the name of your trust. (Typically, you will control the trust yourself.) The transfer might be from “John and Jane Smith, husband and wife” to “John and Jane Smith, trustees of The Smith Living Trust dated January 1, 2011.” One of the chief reasons that the living trust should own all of your assets is for the avoidance of Probate Court Proceedings (“Probate”) when you die. If you die owning the asset there could well be a Probate to transfer title to the assets to those who are entitled by your Will or, if none, by the law of the state. However, the Office of the Trustee is considered to never die. So even if the individual Trustee dies, the law takes the position that the office is still “alive” and just needs to be filled. The assets are then transferred by whomever becomes the Trustee (usually specified in the Living Trust document) to those entitled under the Living Trust. Therefore, no Probate is necessary to transfer the title A similar situation occurs if one loses mental competence. So with a Living Trust no conservatorship/guardianship is necessary while without a Living Trust one would probably be required.
Estate planning is a process, not an event. Think about it, wouldn’t you agree it’s virtually impossible to create a plan one time to cover your family for all of time? Once your assets have been properly funded, you still need to make sure your estate plan is up to speed with changes in your life and in the law. I’ve heard some of my colleagues say that creating and funding the Living Trust is half the battle; the other half is keeping it up to date. I agree.
The approach we take in our office is really three fold: First, we keep our clients up to date with a monthly newsletter. Second, if the client sees something in the newspaper or on TV, we want the perosn to call us to ask. But since no system can by perfect, we encourage our clients to come in every 2-3 years to review their situation. Not only does the law change frequently, but more importantly so do family dynamics. That periodic review allows us to take a look at changes in the client’s life and family and, at the same time, see how changes in the law may affect the existing documents.
If you had your estate plan done more than 5, 10, 15+ years ago the odds are high that either your family, your assets or both have undergone changes. It is important to review with your estate planning attorney what those changes are and what may need to be done to your estate plan to account for these changes. And by all means, make sure to fund your living trust and keep it up to date!
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