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WHAT IN THE WORLD

IS

ESTATE PLANNING ?
 

Updated July 14, 2016

The purpose of this letter is to give you a very brief idea of what is involved in the Estate Planning process and what you should expect from a law office that plans your estate.

As you can imagine, every law office handles Estate Planning differently, depending upon the level of sophistication of the attorney you are working with and the philosophy of the office. In some firms or law centers with several lawyers, you may not get the personal attention from the lawyer that originally attracted you to that firm to assist you in planning your estate. You might be attracted by a certain lawyer's presentation at a seminar, in a TV, radio or newspaper commercial or ad,  or their experience on the firm's website, only to find out that you really won't be working or meeting with that attorney, but will be working with a less experienced attorney or even a paralegal. You should really find out exactly what lawyer you will be working with, their background, experience, areas of practice and professional memberships.  

In order to advise you properly in planning your estate, an attorney must be knowledgeable in the following areas of law:

  1. Federal Estate Tax
  2. Federal Gift Tax
  3. Federal Income Tax
  4. Federal Medicaid Law
  5. Federal Social Security Law
  6. New York State Estate, Wills and Trust Law
  7. New York State Estate Tax Law
  8. New York State Income Tax Law
  9. New York State Medicaid Law
  10. New York State Real Estate Law

An elder law attorney doesn't dabble in these areas of law, but concentrates his or her practice in what has become known as the area of practice of Elder Law, which involves advising clients with regard to all of the above areas of law.

You should be very careful in your selection of the law office that assists you with Estate Planning to ensure that you will truly receive a thorough Estate Plan which addresses all of your financial, tax and personal estate planning needs, goals and objectives that you may have for your future and the future of your family.

What you should avoid is a "one size fits all" approach to Estate Planning. You should also understand that you are not purchasing a set of "canned" documents, but an individual Estate Plan that is tailored to your personal needs and those of your children and grandchildren that will allow you to plan for your financial future and that of your family. You should also know exactly what options you have, the pluses and minuses of each option, the potential tax consequences including tax savings, tax costs and asset protection aspects, as well as the legal fees associated with each option. Costs will vary depending upon what options you choose such as: probate avoidance, medicaid planning, the use or non use of trusts, the needs of your children and grandchildren, your health and the health of your spouse, your children, grandchildren, etc. It amazes me how often clients are not even made aware of the income, gift and estate tax ramifications of a transfer of their assets. Obviously if your attorney is not knowledgeable in the tax law, you and your children can get some very unpleasant surprises. You should understand that the ultimate legal fee you pay will depend upon what options you choose or don't choose.
 

 

1. THESE ARE JUST SOME OF THE QUESTIONS YOU MAY WANT TO ASK YOUR LAWYER AT YOUR FIRST MEETING:

          WHO WOULD MANAGE MY FINANCES AND MAKE HEALTH CARE DECISIONS FOR ME IF I GET SICK?

          SHOULD I HAVE A POWER OF ATTORNEY AND IF SO WHY? 

          SHOULD I HAVE A STATUTORY GIFT RIDER AND IF SO WHY? 

          WHAT PROVISIONS SHOULD A POWER OF ATTORNEY CONTAIN AND WHY?

          WHO SHOULD BE MY POWERS OF ATTORNEY AND IN WHAT ORDER OF SUCCESSION?  

          SHOULD I HAVE A HEALTH CARE PROXY AND WHY?

          WHAT PROVISIONS SHOULD A HEALTH CARE PROXY CONTAIN AND WHY?

          WHO SHOULD BE MY HEALTH CARE PROXY AND IN WHAT ORDER OF SUCCESSION?  

          SHOULD I HAVE A LIVING WILL AND WHY?

          WHAT PROVISIONS SHOULD A LIVING WILL CONTAIN AND WHY?

          COULD YOU EXPLAIN WHAT PROBATE IS?

          WHAT ARE THE PROBATE CONSEQUENCES IF I DIE OWNING OUT OF STATE REAL ESTATE?  

          COULD YOU EXPLAIN THE COSTS, EXPENSES AND DELAYS OF THE PROBATE PROCESS?  

          SHOULD I AVOID PROBATE AND WHY?

          HOW DO YOU SUGGEST THAT I AVOID THE PROBATE PROCESS?

          ARE MY (TOD), (POD), (ITF) BANK AND SECURITIES AND MUTUAL ACCOUNTS PROTECTED FROM PROBATE?

          ARE THOSE ACCOUNTS PROTECTED FROM MEDICAL BILLS, NURSING HOME COSTS & MEDICAID LIENS?  

          HOW DO I PROTECT MY ASSETS IF MY CHILDREN GET DIVORCED?

          HOW DO I PROTECT MY ASSETS IF MY CHILDREN GO BANKRUPT?

          HOW DO I PROTECT MY ASSETS IF MY CHILDREN GET JUDGEMENTS AGAINST THEM?

          HOW DO I PROTECT MY ASSETS IF MY CHILDREN RUN UP BIG MEDICAL BILLS OR GO ON MEDICAID?

          HOW DO I PROTECT MY GRANDCHILDREN FROM THOSE SAME SITUATIONS?

          HOW DO I PROTECT MY CHILDREN'S/GRANDCHILDREN'S SSI OR MEDICAID BENEFITS THEY ARE GETTING? 

          SHOULD I USE A REVOCABLE TRUST? IF SO WHY?

          SHOULD I USE AN IRREVOCABLE TRUST? IF SO WHY?

          SHOULD I TRANSFER ASSETS TO A REVOCABLE OR IRREVOCABLE NOW AND IF SO WHY?

          HOW DO I PROTECT MY ASSETS FROM NURSING HOME COSTS AND UNCOVERED MEDICAL EXPENSES?

          WHAT ARE THE MEDICAID ASSET AND INCOME ELIGIBILITY RULES IF I GO INTO A NURSING HOME?

          WHAT IS A MEDICAID LOOK BACK PERIOD?

          WHAT MEDICAID PLANNING ASSET PROTECTION STRATEGIES AVAILABLE TO ME NOW?

          WHAT ARE THE MEDICAID ASSET/INCOME ELIGIBILITY RULES IF I WANT TO STAY IN MY HOME?

          HOW DO I PAY FOR HOME HEALTH CARE AND MEDICAL EXPENSES IF I WANT TO STAY IN MY HOME?

          WHAT ASSETS WOULD I LOSE TO NURSING HOME COSTS IF I HAD TO GO TO A NURSING HOME NOW?

          WHAT STEPS DO YOU SUGGEST I TAKE NOW TO PROTECT MY ASSETS FROM NURSING HOME COSTS?

          WHAT STEPS WOULD BE NEEDED IN THE FUTURE TO PROTECT MY ASSETS FROM NURSING HOME COSTS?

          WHAT ARE THE TAX CONSEQUENCES OF EACH STEP THAT YOU SUGGEST?

          WHAT ARE THE PLUSES AND MINUSES OF EACH STEP THAT YOU SUGGEST?

          IF I STEP UP A REVOCABLE OR IRREVOCABLE TRUST, CAN I AMEND IT TO CHANGE THE BENEFICIARIES?

          CAN I GET THE INCOME OR PRINCIPAL FROM A REVOCABLE OR IRREVOCABLE TRUST? 

          WHAT ARE THE TAX CONSEQUENCES IF I SELL MY HOUSE DURING MY LIFETIME? 

          CAN I SELL MY HOUSE TAX FREE IF I TRANSFER MY HOUSE TO MY CHILDREN?

          CAN I SELL MY HOUSE TAX FREE IF I TRANSFER MY HOUSE TO A TRUST?

          IF I TRANSFER MY HOUSE TO A TRUST CAN I SELL IT AND BUY ANOTHER HOUSE?

          WHAT ARE THE MEDICAID IMPLICATIONS IF I THEN SELL MY HOUSE AND BUY ANOTHER HOUSE?

          HOW DO I PROTECT MY IRA? 401(k)? 403 (B), 457 PLAN AND DEFERRED COMPENSATION PLAN?

          HOW DO I AVOID PROBATE ON MY IRAS, 401 (k),  403 (B), 457 PLAN AND DEFERRED COMPENSATION PLAN?

          SHOULD I USE A TRUST AS A BENEFICIARY OF MY IRA AND IF SO WHY?

          WHAT ARE THE TAX CONSEQUENCES TO MY SPOUSE & CHILDREN AS BENEFICIARIES  OF MY IRA? 

          WHAT CREDITOR PROTECTION IS THERE FOR MY CHILDREN IF THEY ARE THE BENEFICIARIES  OF MY IRA? 

          HOW DO I PROTECT MY PRE 2 8 2006 NON QUALIFIED ANNUITIES FROM NURSING HOME COSTS? 

          HOW DO I PROTECT MY POST 2 8 2006 NON QUALIFIED ANNUITIES FROM NURSING HOME COSTS?

          HOW DO I PROTECT MY ANNUITIES FROM PROBATE?

          HOW DO I PROTECT MY LIFE INSURANCE FROM NURSING HOME COSTS AND PROBATE?

          WHAT ARE THE COSTS IN LEGAL FEES AND DISBURSEMENTS FOR EACH OPTION THAT YOU SUGGEST?

          ARE YOU THE ATTORNEY I WILL BE WORKING WITH EXCLUSIVELY WITH IN PLANNING MY ESTATE?   

          You must then evaluate the answers your attorney gives you to the above questions to determine if you have a comfort level that your attorney has the familiarity, background, training and experience to easily and clearly answer your questions and communicate with you in a way that you are comfortable with. If not, they may not be the person you choose to work with.

 

 

2. REVIEW OF YOUR EXISTING ESTATE PLAN

The very first thing that your attorney should do is to help you compile a very detailed and complete list of all of your assets, liabilities, income, and expenses.

This information is absolutely critical in determining the assets that you will need to maintain your current life style for the rest of your life, your potential Federal and New York State Estate Tax liabilities, potential probate costs and expenses, the assets you would lose if you or your spouse had to enter a nursing home, what income that would have to be paid to a nursing home even if you qualified for Medicaid and how much income would be left for the healthy spouse to live on if the other spouse entered a nursing home. This information will also help you to determine if it is desirable or possible to transfer any of your assets to protect them from being wiped out to pay for nursing home costs or uncovered medical expenses.

Your attorney should also review your existing wills, trusts, powers of attorney, health care proxies, living wills, deeds, pension and 401 (k) plans, life insurance, annuities, IRA's and the primary and secondary or contingent beneficiary designations under those assets.

The secondary or contingent beneficiaries under your pension and 401 (k) plans, life insurance, annuities, IRA's, etc., are critically important in avoiding probate on these non probate assets, because if your primary beneficiary dies before you die, these non probate assets can end up going through probate which can result in these non probate assets being subject to the costs, expenses and delays of probate, the negative tax consequences of probate and being lost to creditor's claims, Medicaid liens, etc. and to establish who gets these assets because your primary beneficiary passed away before you.   

Upon completion of this review, your attorney should be able to evaluate your existing situation and make specific recommendations as to how you would be able to:

  1. Maintain your current life style for the rest of your life.
  2. Protect your assets from nursing home costs and uncovered medical expenses.
  3. Avoid probate.
  4. Reduce or eliminate estate and gift taxes, both Federal and New York State.
  5. Reduce income taxes both Federal and State for you and your family.
  6. Avoid a legal guardianship and have someone of your own choosing manage your assets and make health care decisions in the event that you become disabled or unable to manage your assets during your life instead of going through a very expensive Article 81 Guardianship and having a Court appoint a lawyer to handle your finances and health care decisions. 

The bottom line is that the best Estate Plan you can have is one that accomplishes the above 6 goals, yet doesn't change your current life style or jeopardize your future life style.


 

 

3. PREPARING AN ESTATE PLAN

After your attorney has carefully reviewed your financial, personal and health related information and your spouse, childrens' and grandchildrens' information, he or she is prepared to make specific recommendations with regard to the documents you should consider executing, transfers that you should consider making and any steps that should be taken in rearranging the form of ownership of your property such as real estate, bank accounts, brokerage accounts, life insurance, etc.

You should know that designing an Estate Plan definitely takes more than one or two meetings. Depending upon the nature of your assets, it may takes two to four months of regular meetings to develop and implement an effective Estate Plan. .

Thereafter, you can expect to review your estate plan depending upon your individual needs or any change in circumstances related to either health, finances or changes in the law.

If you are only meeting two or three times with your attorney or a paralegal, it may possibly mean that some very important issues are being over looked.

I have been practicing law for over 39 years and can assure you that the advice and analysis that you receive or don't receive can vary dramatically based upon the education, background, and experience of the person planning your estate. Please do not assume that you will receive the same level of expertise or personal attention from every law office regardless of how much you are paying for your Estate Plan.  


4. THE DOCUMENTS

The following documents should be discussed as part of your Estate Plan:

A. Durable Power Of Attorney. A Durable Power Of Attorney names at least three people, usually but not always your children, to act on your behalf to handle your financial affairs and if cannot act on your own behalf due to sickness or disability. You should appoint more than one person as your Power of Attorney because you may outlive your Power of Attorney. Not every Power of Attorney is alike and not every office will offer you a specially drafted Durable Power of Attorney that is designed with Asset Protection in mind. Many law offices will provide you with a Statutory Short Form Power of Attorney, if they provide you with one at all. The Short Form is clearly inadequate to deal with your Estate Planning needs, because it fails to contain the broad estate planning powers that will be needed to protect your assets from nursing home costs, uncovered medical expenses, probate court costs, probate legal fees, as well as enable income, estate and gift tax planning to reduce or eliminate those taxes.

I have conducted continuing legal education classes for lawyers on how to use a Power of Attorney for estate planning purposes. I have drafted my own Durable Power of Attorney which contains language based upon my own experience and recommended materials supplied by the National Academy of Elder Law Attorneys, the Elder Law and Trusts and Estates Sections of the New York State Bar Association. You should never sign a Power of Attorney without the advice of your attorney, because it is a very powerful document. The decision of who is to have your Power of Attorney and what powers you will give them is one that should be discussed thoroughly with your legal counsel, because after you have become disabled, you may not be able to execute another Power of Attorney. 

 

B. Health Care Proxy. A Health Care Proxy is an extremely important document which designates someone to make health care decisions for you if you are not able to make them for yourself.

A hospital or nursing home doesn't have to allow your family to make health care decisions for you if you are disabled to the point of legal incompetence and can force your family to go to court to have a court appointed legal guardian put in charge of your health care decisions. The guardian may not even be a member of your family. I recently had a case where a nursing home refused to release a mother's medical records to her son and refused to release the mother from the nursing home to her son who had lived with her for 20 years because the nursing home didn't want to get sued by the mother's other children. Mom didn't have a health care proxy appointing the son as the person to make her health care decisions. The mother died alone in the nursing home, before the son could get appointed as a health care proxy by a court. You should have a Health Care Proxy. 

Your Health Care Proxy should contain language that waives your rights to privacy under the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), 42 USC 1320d and 418CFR 160-164. This will allow your Health Care Proxies, usually your children, to obtain copies of your medical records from  your Doctors, Hospitals, Nursing Homes, Insurance Companies and other health care service providers. Without this HIPAA waiver, your children may have to get appointed by a court to get access to your medical records, which is extremely expensive. I have never seen a short form Health Care Proxy provided by a hospital contain this extremely important HIPAA waiver clause.   

C. Living Will. A Living Will is a document that says that in the event you are permanently unconscious or in an irreversible physical condition with no hope of recovery, that you don't want to be hooked up to a machine and kept alive by artificial means such as artificial respiration, tube feeding, etc. to simply prolong your dying.

Many of my clients desire this document for six main reasons:

​          a. First, if they are going to die, they want to die with dignity.

​          b. Second, they don't want to run up astronomical hospital and medical bills and wipe out their family's financial resources if they are
​             permanently  unconscious  and have no hope of recovery.

          c. Third, they want to spare their family the emotional pain of seeing them permanently unconscious and hanging on month after month or even year after
​              year  knowing there is no hope of recovery.

​          d. Fourth, they don't want their loved ones to be burdened by making a life and death decision, but prefer to let their loved ones know that they are merely 
            carrying out their mom's or dad's wishes.

D. Wills. Don't be under the mistaken impression that all wills are alike. There are many different types of wills that can be used to reduce Federal and New York State Estate Taxes and manage assets for your spouse and children long after you are gone. The type of will that is the best for you will depend upon many factors, including but not limited to, the size and nature of your assets, as well as your personal family situation. For example, you may have a child or grandchild with special needs, a spouse, child or grandchild that can't handle their own money or children by a previous marriage. You may be concerned about whether your children may get divorced or pass away before you do and what will happen to assets you leave your children if they get divorced, pass away, get disabled, get sued, have judgments or liens against them, or go bankrupt.

E. Trusts.  The subject of Trusts is very important so I have created two brief articles on this website for Revocable Trusts and Irrevocable Trusts. I hope you find them informative. 


I have tried to take some of the mystery out of the Estate Planning process in this short letter, but if you or your parents are New York State residents and would like some more information, I am pleased to offer you an office conference to discuss the entire Estate Planning process and how to plan your estate.

Please feel free to give me a call.

Warmest personal regards

Dick

D. Victor Pellegrino Esq.

 

CAUTION: WARNING AND DISCLAIMER

THE MATERIALS AND DISCUSSIONS PRESENTED IN THIS COURSE ARE INTENDED FOR EDUCATIONAL PURPOSES ONLY AND ARE NOT INTENDED TO CREATE AN ATTORNEY CLIENT RELATIONSHIP OR CONSITUTE LEGAL ADVICE.

PRIOR TO DOING ANY ESTATE PLANNING OR ATTEMPTING TO IMPLEMENT ANY OF THE STRATEGIES OR TECHNIQUES COVERED AND DISCUSSED IN THIS COURSE, YOU ARE STRONGLY CAUTIONED TO SEEK THE ADVICE OF YOUR OWN COMPETENT ELDER LAW ATTORNEY ADMITTED TO PRACTICE LAW IN THE STATE OF NEW YORK, WHOSE PRACTICE IS CONCENTRATED IN THE AREA OF ELDER  LAW.

 

CLASS HAND OUT FOR WHAT IN THE WORLD IS ESTATE PLANNING?



 

FACTS ABOUT ALZHEIMER’S DISEASE

<> Approximately 5.2 million Americans have Alzheimer's disease.

<> In Central New York there are approximately 45,200 people with Alzheimer's disease

<> An estimated 16 million Americans will have Alzheimer's disease by 2050 unless a cure or  

      prevention is found.

<> One in 8 persons over 65 and nearly one half of those over 85 have Alzheimer’s disease.

<> A person can live up to 20 years from onset of symptoms of Alzheimer's disease.

<> Alzheimer’s disease eventually renders a person totally incapable of caring for themselves.

<> Approximately one out of two seniors over 65 spends some time in a nursing home, which can     

      cost approximately $9,000 - $11,000 a month.

<> One in three seniors dies with Alzheimer's or other dementia.

THESE STATISTICS DON’T INCLUDE:

                - STROKES

                - FALL DOWNS CAUSING BROKEN OR FRACTURED HIPS

                - LOU GEHRIG'S DISEASE

                - PARKINSON’S DISEASE

                - HEART AND LUNG DISEASES

                - BLINDNESS

                - OTHER DISEASES THAT MAKE IT UNSAFE FOR A SENIOR TO LIVE ALONE

 

ARTICLE 81 GUARDIANSHIP PROCEEDING

IF THERE IS NO POWER OF ATTORNEY OR NO ASSET PROTECTION POWERS IN AN EXISTING POA

<> YOUR FAMILY MUST HIRE AN ATTORNEY TO PETITION A COURT UNDER ARTICLE 81

<> TO APPOINT SOMEONE LEGAL GUARDIAN TO HANDLE YOUR FINANCIAL AFFAIRS L

<> COURT APPOINTS A SECOND ATTORNEY TO REPRESENT YOU 

<> COURT APPOINTS A THIRD ATTORNEY AS A COURT EVALUATOR

<> TO ADVISE THE JUDGE IF YOU REALLY NEED A GUARDIAN L

<> COURT CAN APPOINT A FOURTH ATTORNEY TO BE YOUR GUARDIAN

<> WHO THEN WOULD HANDLE YOUR FINANCIAL AFFAIRS

<> COURT DOESN'T HAVE TO APPOINT YOUR SPOUSE OR CHILDREN AS GUARDIANS. L

<> YOU PAY FOR ALL FOUR ATTORNEYS L

       I HAVE SEEN THE 3 ATTORNEYS FEES AMOUNT TO OVER $40,000. L

-------------------------------------------------------------------------------------------------------------

THE ANSWER IS A DURABLE POWER OF ATTORNEY WITH A STATUTORY GIFT RIDER:

                <> APPPOINTS SPOUSE/CHILDREN TO HANDLE YOUR FINANCIAL AFFAIRS IF YOU BECOME ILL

                             - PAYMENT OF BILLS

                             - INVESTMENT OF ASSETS

                <> AVOIDS ARTICLE 81 GUARDIANSHIP PROCEEDING*

                <> IF DRAFTED CORRECTLY IT GIVES YOUR SPOUSE, CHILDREN THE POWER TO DO:

                                     - MEDICAID & ASSET PROTECTION PLANING

                                     - INCOME AND ESTATE TAX PLANNING

                                     - PROBATE AVOIDANCE PLANNING           

NOTES:

 

HEALTH CARE PROXY WITH HIPAA WAIVER

        <> NEEDED IF YOU CAN'T MAKE YOUR OWN HEALTH CARE DECISIONS

         <> ALWAYS REQUESTED BY HOSPITAL AND NURSING HOME UPON ADMISSION

         <> A PROBLEM IF YOU CAN’T SIGN:

         <> YOU APPOINT SOMEONE TO MAKE HEALTH CARE DECISIONS  FOR YOU 

         <> AUTHORIZES DRS., HOSPITALS, NURSING HOMES, INSURANCE COMPANIES TO:

         <> SPEAK WITH SPOUSE, CHILDREN AND OTHERS YOU APPOINT.

         <> AVOIDS  ARTICLE 81 PROCEEDING 

         <>  USUALLY SPOUSE AND CHILDREN ARE APPOINTED

         <>  YOU CAN CHANGE ANY TIME

         <>  SHOULD CONTAIN A HIPAA PRIVACY WAIVER

         <>  SHOULD BE FILED WITH HOSPITALS AND ALL OF YOUR DOCTORS  AND SPECIALISTS.

NOTES:

 

 

LIVING WILL:

         <> ALWAYS REQUESTED BY HOSPITAL AND NURSING HOME UPON ADMISSION

         <> A PROBLEM IF YOU CANT SIGN

          <> STATES YOUR WISHES IF YOU ARE PERMANENTLY UNCONCIOUS

          <> IN AN INCURABLE OR IRREVERSIBLE MENTAL OR PHYSICAL CONDITION

          <> IN A PERSISTANT  VEGETATIVE STATE

          <> WITHOUT A REASONABLE EXPECTATION OF RECOVERY

          <> AND YOU STOP BREATHING.

          <> AVOIDS FEEDING TUBE AND PLACING YOU ON A VENTILATOR

          <> AND KEEPING YOU ALIVE INDEFINATELY AS A VEGETABLE

          <> CONSENTS TO A DO NOT RESUSITATE ORDER

           <> IF THERE IS NO REASONABLE EXPECTATION OF RECOVERY

          <> YOU CAN CHANGE AT ANYTIME

          <> BURDON OF MAKING THESE DECISIONS OFF SPOUSE & CHILDREN.

          <> AVOIDS SUBSTANTIAL COSTS OF KEEPING YOU ALIVE ON MACHINE

NOTES:
 

 

DR. I WANT YOU TO DELIVER MY BABY BUT:

I KNOW YOU’RE A FOOT DOCTOR AND DON’T SPECIALIZE IN DELIVERING BABIES, BUT I DON’T MIND THAT. AFTER ALL DELIVERING A BABY CAN’T BE THAT DIFFICULT. MY WIFE IS GOING TO DO MOST OF THE WORK.

I WANT YOU TO KEEP IT SIMPLE. I WANT THE SIMPLEST AND CHEAPEST DELIVERY POSSIBLE.

I DON’T WANT YOU TO CONSIDER WHAT PROBLEMS YOU MIGHT RUN INTO DURING THE DELIVERY.

I FEEL LUCKY, I’LL ROLL THE DICE AND TAKE MY CHANCES.

I WAS GOING TO DOWNLOAD HOW TO DELIVER MY BABY FROM THE INTERNET AND I STILL MAY SO WHAT DO YOU SAY? 75 BUCKS? DO WE HAVE A DEAL?   J

THAT WOULD HAVE BEEN A MISTAKE ON MY PART. MY WIFE NEEDED A C SECTION!!!

 

WOULD YOU SAY THE FOLLOWING TO YOUR LAWYER?

I WANT YOU TO DO MY WILL AND I DON’T WANT ANY OF THAT FANCY OR COMPLICATED ESTATE PLANNING STUFF. DON’T NEED IT, DON’T UNDERSTAND IT, DON’T WANT IT!

I KNOW YOU MAINLY DO DIVORCES AND CRIMINAL LAW AND TRAFFIC TICKETS AND DWI’S AND NEGLIGENCE AND MEDICAL MALPRACTICE AND FAMILY COURT OR A LITTLE BIT OF EVERYTHING AND DON’T SPECIALIZE IN ESTATE PLANNING, WHATEVER THAT IS, OR MEDICAID PLANNING, BUT I DON’T MIND THAT. BESIDES I’M NOT WEALTHY, I DON’T HAVE MUCH AND I DON’T MIND IF I LOSE EVERYTHING I HAVE. THAT’S OK.

AFTER ALL DOING AN ESTATE PLAN CAN’T BE THAT DIFFICULT.

I WANT YOU TO KEEP IT SIMPLE. I DON’T WANT ANYTHING COMPLICATED.

I WANT THE SIMPLEST AND CHEAPEST PLAN POSSIBLE.

I DON’T WANT YOU TO CONSIDER WHAT PROBLEMS OR EXPENSES MY SPOUSE OR KIDS MIGHT RUN INTO IF I GET SICK OR HOW I CAN AVOID THOSE PROBLEMS OR EXPENSES. I REALLY DON’T CARE.

I DON’T CARE HOW MUCH MY SPOUSE OR KIDS LOSE TO NURSING HOME COSTS OR UNPAID MEDICAL BILLS.

I FEEL LUCKY, I’LL ROLL THE DICE AND TAKE MY CHANCES.

I WAS GOING TO DOWNLOAD HOW TO PLAN MY OWN ESTATE FROM THE INTERNET AND I STILL MAY DO THAT, SO WHAT DO YOU SAY? 75 BUCKS? DO WE HAVE A DEAL.   J

IF THAT IS WHAT YOU TELL YOUR LAWYER, THAT MIGHT BE A MISTAKE ON YOUR PART. J

 

THE TYPICAL I LOVE YOU WILL

HUSBAND TO WIFE         WIFE TO HUSBAND

OUTRIGHT TO CHILDREN ON DEATH IF LIVING

 IF NOT LIVING OUTRIGHT TO GRANDCHILDREN

 SO WHAT COULD POSSIBLY GO WRONG???? J

 

ONE SPOUSE HAS                                                                OTHER SPOUSE IS HEALTHY

ALZHEIMER'S DISEASE                                                    CAN HAVE $ 74,820 

OR OTHER SERIOUS ILLNESS                                                                                         

OR IS IN NURSING HOME                                                                                            

CAN HAVE $14,850 L

WHAT IF HEALTHY SPOUSE DIES????

JOINTLY OWNED ASSETS

PASS TO THE SPOUSE WITH ALZHEIMER’S OR OTHER SERIOUS ILLNESS OR IN A NURSING HOME AND ARE LOST TO NURSING HOME :(

HOUSE

BANK ACCOUNTS

SAVINGS BONDS

STOCK

MUTUAL FUNDS

LIFE INSURANCE

ANNUITIES

IRAS

 

 

IF A SINGLE PERSON HAS ALZHEIMER'S DISEASE

OR OTHER SERIOUS ILLNESS

OR IS IN NURSING HOME

ASSETS AT RISK ARE:

 HOUSE

BANK ACCOUNTS

SAVINGS BONDS

STOCK

MUTUAL FUNDS

LIFE INSURANCE

ANNUITIES

IRAS

A SINGLE PERSON CAN ONLY HAVE $ 14,850 OF ASSETS FOR MEDICAID ELIGILIBILTY AND ALL OTHER ASSETS ARE LOST TO NURSING HOMEL

 

NOTES:

 

TYPICAL PLANNING IF ONE SPOUSE IS SICK AND OTHER SPOUSE IS HEALTHY

SPOUSE HAS                                                               HEALTHY SPOUSE                                                                            
ALZHEIMER'S DISEASE                                          Can have $74,820 in assets                                        

OR OTHER SERIOUS ILLNESS
OR IS IN NURSING HOME   

set up a                                                                           balance of assets
bank account $14,850,                                                  are placed into REVOCABLE TRUST

                                                                                        on death of healthy spouse

                                                                                        REVOCABLE TRUST

                                                                                        pours over into IRREVOCABLE TRUST

                                                                                        tCHILDREN, IF LIVING

                                                                                        IF NOT LIVING TO GRANDCHILDREN

 

 

IF BOTH SPOUSES ARE HEALTHY

H WILL ->   REVOCABLE  TRUST   <-W WILL                          
on death of the last to die
pours over into
              
IRREVOCABLE  TRUST(S)
on death of last spouse outright to
CHILDREN
IF LIVING, IF NOT
IN TRUST   
FOR
GRANDCHILDREN

NOTES:
 

 

IF YOU ARE SINGLE AND HEALTHY

WILL -> REVOCABLE  TRUST                          

                on your death this trust pours over into
              
IRREVOCABLE TRUST(S)

on your death this trust passes outright to

CHILDREN
IF LIVING, IF NOT

IN TRUST   
FOR
GRANDCHILDREN

 

NOTES:

 

WHAT IS A REVOCABLE TRUST:


       <>  YOU ARE GRANTOR, TRUSTEE, BENEFICIARY
       <>   HOLDS, CASH, STOCKS, BONDS, MUTUAL FUNDS
       <>   CONTAINS ASSETS YOU ARE GOING TO LIVE ON                             
       <>   YOU HAVE COMPLETE CONTROL OVER ASSETS
       <>   YOU HAVE UNLIMITED ACCESS TO ALL ASSETS
       <>   YOU CAN ADD OR TAKE OUT ASSETS AT ANYTIME
       <>   YOU CAN AMEND REVOCABLE TRUST ANYTIME
       <>   CHILDREN ARE CO OR SUCCESSOR TRUSTEES
       <>   CHILDREN CAN PAY BILLS IF YOU GET SICK
       <>   NOT PROTECTED FROM NURSING HOME
       <>   AVOIDS PROBATE
       <>   POURS OVER TO IRREVOCABLE TRUST ON DEATH OF GRANTOR(S)

NOTES: 

 

WHAT IS AN IRREVOCABLE TRUST:

       <>  YOU ARE THE GRANTOR(S)

       <>  CHILDREN ARE TRUSTEES AND BENEFICIARIES

       <>  HOLDS HOUSE AND OTHER REAL ESTATE

       <>  CAN HOLD CASH, STOCKS, BONDS, MUTUAL FUNDS
       <>  CONTAINS ASSETS YOU DON’T NEED TO LIVE ON                              
       <>  TRUSTEES HAVE CONTROL OVER THESE ASSETS

       <>  YOU HAVE NO DIRECT ACCESS TO THESE ASSETS

       <>  YOU CAN DISINHERIT CHILDREN/GRANDCHILDREN

       <> YOU CAN CHANGE PERCENTAGES TO EACH BENEFICIARY

       <>  CAN AMEND W/ WRITTEN CONSENT OF CHILDREN

       <>  YOU CAN ADD ASSETS AT ANYTIME      

       <>  PROTECTED FROM NURSING HOME AFTER 5 YEARS
       
<>  AVOIDS PROBATE

       <>  TO CHILDREN ON YOUR DEATH, IF LIVING, IF NOT TO GRANDCHILDREN

       <>  INCOME CAN BE DISTRIBUTED TO GRANTOR(S), ACCUMULATED OR

       <>  INCOME  CAN BE DISTRIBUTED TO THE CHILDREN      

       <>  DEED TO IRREVOCABLE TRUST

       <>  YOU RETAIN RIGHT TO EXCLUSIVE USE, POSSESSION OF HOUSE

       <>  YOU KEEP STAR, VETERAN’S AND SENIOR EXEMPTION

       <>  TAX BILLS STILL COME TO YOU

       <>  YOU PAY FOR ALL REAL ESTATE TAXES, INSURANCE AND REPAIRS

       <>  IF ONE SPOUSE GOES INTO A NH WITHIN 5 YEARS

       <> THE HOUSE CAN BE TRANSFERRED BACK TO HEALTHY SPOUSE &

       <>  PROTECTED UNTIL SPOUSE IN NH IS ON MEDICAID

       <> THEN HOUSE CAN BE PLACED BACK INTO THE TRUST

       <>  HOUSE CAN STILL BE SOLD TAX FREE WHILE GRATOR(S) ARE ALIVE &

       <>  A NEW HOUSE PURCHASED

NOTES:         

 

WHY USE AN IRREVOCABLE LIFE INSURANCE TRUST?

ASSUME SPOUSE HAS

$100,000 LIFE INSURANCE POLICY

ON DEATH OF SPOUSE

$100,000 INSURANCE ------------------------------------> IS PAID TO SURVIVING SPOUSE

PROBLEM:                                                                      SURVIVING SPOUSE IS IN NH

                                                                                            $100,000 INS PROCEEDS

                                                                                            $ -14,850 EXEMPTION

                                                                                            $  85,150 EXCESS ASSETS

                                                                                            LOST TO NURSING HOME L

WHY USE AN IRREVOCABLE LIFE INSURANCE TRUST?

ASSUME SPOUSE HAS

$100,000 LIFE INSURANCE POLICY

SPOUSE MAKE INSURANCE TRUST OWNER AND BENEFICIARY

ON DEATH OF SPOUSE

$100,000 INSURANCE  ------------------------------------> IS PAID TO INSURANCE TRUST

SOLUTION:                                                                       SURVIVING SPOUSE IN NH

                                                                                             $100,000 INS PROCEEDS

                                                                                             IS  IN THE LIFE INSURANCE TRUST                                                                      

                                                                                             TOTALLY PROTECTED

                                                                                             $ 0 EXCESS ASSETS

                                                                                             NOTHING LOST TO                        

                                                                                             NURSING HOME J

NOTES:

 

 

LIFE INSURANCE TRUST:


   <> YOU ARE THE GRANTOR

   <> SPOUSE IF YOU ARE MARRIED AND/OR CHILDREN ARE CO-TRUSTEES

   <> SPOUSE AND CHILDREN ARE BENEFICIARIES
   <> TRUST OWNS LIFE INSURANCE NOT YOU

   <>  INCOME CAN GO TO WIFE, BE ACCUMULATED, OR SPRINKLED

   <>  EXCLUDES LIFE INSURANCE FROM ESTATE TAX                               
   <>  SPOUSE AND CHILDREN HAVE CONTROL

   <>  POURS OVER INTO IRT ON DEATH OF GRANTOR OR SPOUSE 

   <> CAN DISINHERIT CHILDREN OR GRANDCHILDREN

   <>  YOU HAVE NO DIRECT ACCESS TO THESE ASSETS
   <>  PROTECTED FROM NURSING HOME COSTS AFTER 5 YEARS

   <>  AVOIDS PROBATE
   <>  TO CHILDREN ON SPOUSE’S DEATH, IF LIVING

   <>  IF NOT LIVING, IN TRUST FOR GRANDCHILDREN

 

NOTES:

 

IRREVOCABLE IRA TRUST

PROBLEM:

    <>  YOUR CHILD WOULD CASH IN YOUR IRA ON YOUR DEATH

    <>  PAYING A LARGE PERCENTAGE OF YOUR IRA IN TAXES

    <>  LOSING THE INCOME TAX BENEFITS OF A BENEFICIARY IRA

    <>  SPEND YOUR ENTIRE IRA AS SOON AS DIE

    <>  THAT TOOK YOU YOUR ADULT YEARS TO ACCUMULATE

    <>  LEAVING THEM WITHOUT SUFFICIENT FUNDS FOR THEIR SUPPORT

    <>  LEAVING YOUR GRANDCHILDREN WITHOUT THOSE FUNDS

    <>  FOR THEIR SUPPORT IF YOUR CHILD PASSED AWAY AT AN EARLY AGE.

    <>  IRA NOT PROTECTED FROM YOUR CHILD’S CREDITORS.  

SOLUTION:    

    <> YOU CREATE AN IRREVOCABLE IRA TRUST FOR YOUR CHILD.

    <>  YOU NAME THE IRA TRUST AS BENEFICIARY OF YOUR IRA.

    <>  YOU NAME A FINANCIALLY RESPONSIBLE CHILD AS TRUSTEE

    <>  YOU NAME A FINANCIALLY IRRESPONSIBLE CHILD BENEFICIARY        

    <>  YOU STILL CONTROL THE IRA UNTIL YOU AND YOUR SPOUSE DIE.

    <>  ON YOUR DEATH, OR DEATH OF SPOUSE, TRUSTEE(S) ELECT TAX DEFERRAL

    <>  IRA PROCEEDS ARE PAID OVER YOUR CHILD’S LIFE, PLUS

    <>  TRUSTEE HAS POWER TO DISTRIBUTE MORE MONEY IF NEEDED 

    <>  THE BALANCE OF IRA REMAINS INTACT & CONTINUES TAX DEFERRED.

    <>  ON THE DEATH OF CHILD IRA PROCEEDS DISTRIBUTED TO GRANDCHILDREN

    <>  OR TO OTHER CHILDREN, IF LIVING, OR GRANDCHILDREN.

    <>  CAN BE PROTECTED FROM YOUR CHILD’S CREDITORS.

NOTES:

 

SUPPLEMENTAL NEEDS TRUST FOR CHILDREN WITH SPECIAL NEEDS:

       <>  YOU ARE THE GRANTOR

       <>  HEALTHY CHILDREN ARE CO-TRUSTEES

       <>  CHILD WITH SPECIAL NEEDS IS THE BENEFICIARY
       <>  FUNDED DURING YOUR LIFE OR AT DEATH

       <>  USED TO PAY EXPENSES NOT PAID BY GOVERNMENT 

       <>  CHILD DOESN’T LOSE SSI OR MEDICAID BENEFITS                              
       <>  HEALTHY CHILDREN HAVE CONTROL AS TRUSTEES

       <>  YOU HAVE NO ACCESS ONCE FUNDED
       <>  YOU CAN DISINHERIT REMAINDER CHILDREN

       <>  PROTECTED FROM NURSING HOME COSTS

       <>  AVOIDS PROBATE
       <>  DISTRIBUTED TO OTHER CHILDREN ON SPECIAL NEEDS CHILD’S DEATH

       <>  IF NOT LIVING, IN TRUST FOR GRANDCHILDREN

NOTES: 

 

SUPPLEMENTAL NEEDS TRUSTS FOR CHILDREN WITH SPECIAL NEEDS.


THERE ARE 2 KINDS OF SNTS:

                1. THIRD PARTY SNTS: 


                <> SET UP BY PARENT, GRANT PARENT OR COURT WITH
                      PARENT’S FUNDS.
                <> WONT AFFECT CHILD’S SSI OR MEDICAID BENEFITS.
                <> IF SET UP MORE THAN 5 YEARS PRIOR TO YOU GOING INTO
                      NURSING HOME. ASSETS ARE PROTECTED WITHOUT IT
                      BEING A “SOLELY FOR THE BENEFIT TRUST.”
                <> IF SET UP LESS THAN 5 YEARS PRIOR TO YOUR GOING ITO
                      NURSING HOME, MUST BE A “SOLELY FOR THE BENEFIT
                      TRUST,” MUST BE PAID TO THE CHILD’S ESTATE ON CHILD’S   
                      DEATH, GOES THROUGH PROBATE, IS SUBJECT TO
                      MEDICAID//DSS ESTATE RECOVERY LIEN.

                 <> HAVING THE SNT SET UP BY A COURT IS THE MOST EXPENSIVE OPTION

                 <> REQUIRES EXPENSIVE COURT SUPERVISION AND RESTRICTIONS

         2. SELF SETTLED SNTS:


                <> SET UP BY COURT WITH CHILD’S FUNDS, MUST BE PAID TO                   
                      THE CHILD’S ESTATE ON THE CHILD’S DEATH, GOES
                      THROUGH PROBATE, IS SUBJECT TO MEDICAID//DSS
                      ESTATE RECOVERY LIEN.

NOTES:

 

  TRADITIONAL LONG TERM CARE INSURANCE   

   DECISIONS

     a.  Daily Benefit

                i.  Desire to maximize and fully insure was common

      b.  Elimination Period

            i.  100 days was common

      c.  Inflation protection

            i.  Habit to select 5% compound methodology

      d. Benefit period

                i. Maximum duration of benefits.  3 - 5 - 6 years or lifetime.

      e. Cost- the result of your above decisions

 

LONG TERM CARE INSURANCE

REASONS PEOPLE DON’T BUY LONG TERM CARE INSURANCE:

¨     ONLY 60% OF PEOPLE GO INTO A NURSING HOME AND I FEEL LUCKY J

¨       WHAT IF I DON’T GO INTO A NURSING HOME, I’VE LOST THE PREMIUMS

¨       IT COSTS TOO MUCH

¨       I CAN’T AFFORD IT

¨       THEY MAY RAISE MY PREMIUMS

¨        MY SPOUSE WILL TAKE CARE OF ME IF I GET SICK

¨        I’LL GO LIVE WITH MY CHILDREN IF I GET SICK

¨        I HAVE A GREAT ELDER LAW ATTORNEY AND HE OR SHE WILL GET ME ON MEDICAID J

 

WHAT IS HAPPENING TO TRADITIONAL

LONG TERM CARE INSURANCE?

     a. INCORRECT ACTURIAL ASSUMPTIONS

     b. LOW INTEREST RATES ON PREMIUMS INS. CO COLLECTED

     c. HIGH RETENTION RATES BY POLICY HOLDERS (98%)

     d. BAD UNDERWRITING

RESULT: PREMIUM INCREASED IN NYS ABOUT 12%

RESULT: PEOPLE ARE VERY WARY OF PURCHASING LTC.

RESULT: SUBSTANTIAL ASSETS ARE LOST IF NOT ON MEDICAID

RESULT: SUBSTANTIAL INCOME MAY BE LOST EVEN IF YOU ARE ON  MEDICAID

 

RECENT TRENDS IN LONG TERM CARE INSURANCE

       a. DIFFERENT CHOICES

               I.  POLICIES THAT COMBINE LTC INS WITH LIFE INS

                      EX LINCOLN LIFE

               II. USE OF ROBERT WOODS JOHNSON POLICIES

       b. PURCHASING POLICIES AT YOUNGER AGES.

       c. DESIRE TO PARTIALLY INSURE

       d. USE OF LIFE INSURANCE TO REPLACE ASSETS

             



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Last Updated: June 29th, 2016
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