Estate Planning

The Potential Cost of Wedded Bliss

When people marry for the second, third, or fourth (or more) time, losing assets to pay for their new spouse’s serious illness is probably the last thing on their minds when they say “I do.” But that could very well happen.

Current costs for long-term care facilities can run between $70,000 – $150,000 annually. Studies show that 70% of Americans will need that kind of care, perhaps for three years or longer, in their life.

If one spouse in a marriage becomes ill, the assets of both spouses are, by and large, required to be spent on the ill spouse’s care before Medicaid benefits become available. This could be a big problem, especially if money that the well spouse had saved for her children’s’ inheritances goes to pay for the ill new spouse’s care instead.

With careful planning, this can be avoided. Financial arrangements can be made to protect the estate of the well spouse and to ensure that the spouse who needs care will be responsible to pay his or her own way.

The benefits rules do provide that the spouse who does not need care yet may keep an allowance of a certain sum for that spouse’s benefit. This is known as the “Community Spouse Resource Allowance” (CSRA). But many find that the CSRA is too small to permit the well spouse to maintain their standard of living, pay for retirement, and still leave enough for the children to inherit.

Any planning or shifting of assets must be done very carefully and only after consulting with experienced professionals knowledgeable about Medicaid asset protection strategies.

The Medicaid rules heavily penalize transfers of assets made without receiving value in return. Gifts, in other words. Assets can be protected, though, by a number of strategies that are permitted by the Medicaid rules. Some or all of the well spouse’s assets could buy a Medicaid-compliant annuity. This would provide an income stream for the well spouse, without the assets being otherwise deemed available to pay for the ill spouse’s care.

In turn, the assets of the spouse needing care could be transferred to people whom that person especially trusts: a trustee, or an agent for financial affairs, or a family member or beneficiary. That kind of transfer would be subject to penalty, but planned-for, using the strategies permitted under the Medicaid rules. Some relief from penalties can be achieved using existing Medicaid rules.  

There are also insurance products available to provide for long-term care coverage, which any newly married couple—or everybody, really—ought to consider. Find advice on various insurance options here.

The best strategy of all, is to consult an experienced elder law attorney . The sooner the consult, the more options available and the more money that can be saved.

When we embark on the adventure of marriage, nobody can tell what the future has in store. But with thoughtful planning, assisted by qualified elder law attorneys, you can relax and let the nuptial celebrations begin.

If you would like to schedule a consultation to learn more and begin implementing planning to protect your assets and family, contact us at 718-979-7477.

How to Steer Clear of Probate Court

Many people have been told that it is important for people to “avoid probate.” However, just because people may have heard that term, doesn’t mean they know exactly what probate means, why it can be a problem or how to avoid it successfully.

What is Probate?

The term probate most literally means “to prove” a will. Today it covers the entire legal process necessary to settle a person’s estate after they die. The appointed representative (usually a family member) opens the probate case in court. With the court’s help, they will work through all of the financial business that the decedent left behind. For example, probate includes disposing of personal property, money, real property or anything else that the deceased owned at the time of their death. Probate also deals with any debts that were in existence at the time of death.

Why is Probate Such a Negative Thing?

Probate is not inherently evil. It is simply a system that was created to oversee the process of identifying and inventorying the deceased person's property and settlement of the estate. Here’s why you should avoid probate, if possible:

Lack of Privacy

Probate cases are filed in the court and are in the public record. If for any reason a person wants to maintain a sense of privacy after they die, it could be a good idea to avoid probating the estate in court. Famous people or other potentially controversial people usually don’t want their financial and family affairs dragged out into the open.

Probate Can Create Family Disagreements

One reason that wills and estates probate takes place in court is to allow interested persons the chance to represent their claim on the estate by challenging or contesting a will that does not favor them. For people with complicated family dynamics, unpopular second marriages or estranged loved ones, avoiding probate should be a top priority. When an estate is executed through non-probate channels, it becomes much less likely that the will is successfully challenged.

Probate is Slow

Like most things that end up in court, probate can be time-consuming. In more complex estates, the entire process can last months or years. Moreover, while the family waits for this time to pass, the decedent’s assets or property may be slowly losing value or be lost completely.

Probate is Costly

Probating an estate requires the help of a competent probate lawyer to facilitate the matter. Since the process requires court appearances and extensive paperwork, the legal fees can mount up quickly. You can avoid much or all of this cost with proper pre-planning.

How Can Families Prevent the Need for Probate?

Creating a smart estate plan is the best way to avoid probate. You and your attorney can work together to draft the proper legal documents and carefully time asset transfers. 

Trust Planning

A trust is an instrument which dictates the management or distribution of property. The property is transferred in title to the trust during the owner’s lifetime. The property owner also chooses someone to act as trustee, an appointed fiduciary who will manage the trust property and any distributions after the death of the trust’s creator.

With a trust in place, there is no need to involve the court in any way. There is nothing to file, and it does not require the probate court.

Joint Title

Another way to avoid probate hassles is by placing your assets into joint ownership with your future beneficiaries. This way, when you pass away, the ownership interest will automatically transfer to the joint owner.

Payable-On-Death and Transfer-On-Death

Payments on death accounts (POD) have a designation which names a person who will receive the assets in the account when the original account owner dies. At the same time, transfer on death (TOD) is a designation on the title or deed to a piece of real estate or a car which will automatically change ownership once the owner dies.

Don’t Be Tempted to Give Away Your Assets

Some people assume that the easiest way to avoid probate is to give everything away before you die. However, doing this could cause problems for seniors when they may need to qualify for assistance for long-term care.

Hopefully, these tips will help you and your family plan responsibly for the future.

Our firm specializes in trust planning and helping you avoid probate. Contact our office to learn more or to schedule your consultation.

The Senior Safe Act: Financial Protection for Elders

The Senior Safe Act, signed into law by President Trump in 2018, is designed to protect our elders from financial abuse from either within a family or support system, or by scam artists preying upon them. Tens of billions of dollars each year are illegally taken from US seniors and these numbers only reflect the crimes being reported.

Issue and Percentage of Cases Reported

  • Third-party abuse/exploitation: 27%

  • Account distributions: 26%

  • Family member, trustee or power of attorney taking advantage: 23%

  • Diminished capacity: 12%

  • Combined diminished capacity and third-party abuse: 12%

  • Fraud: 6.30%

  • Elder exploitation: 5.70%

  • Friend, housekeeper or caretaker taking advantage: <1%

  • Excessive withdrawals: <1%

SOURCE: North American Securities Administrators Association

Often a senior does not report financial abuse or identity theft because they are unaware, embarrassed, or worse, they think that someone will deem them mentally unfit and they might be “put away” as a consequence of having been exploited.  While these are real issues and fears experienced by elderly people, the scale of financial exploitation is so great it has to be addressed.  This is why the enacted Senior Safe Act, coupled with the Elder Abuse Prevention and Prosecution Act (signed into law October 2017), as well as two Financial Industry Regulatory Authority (FINRA) rule changes (which have already taken effect), will provide the legal protections and financial industry framework our senior population need and deserve. One of the most important aspects of the new FINRA rules is the ability for member firms to place a temporary hold on disbursement of funds or securities when there is a reasonable belief that a senior is experiencing financial exploitation, thus protecting assets before they are taken from the senior. This new rule, in conjunction with the Senior Safe Act, can help keep seniors’ assets from vanishing.

The Senior Safe Act, which was originally initiated by Rep. Bruce Poliquin of Maine, is based on the already existing program in that state with the same name. Similar to the Maine program, the federal legislation allows insurance and financial advisors to report incidence of suspected cases of financial fraud involving their senior clients to financial institutions, who in turn could pass the suspicions on to the proper authorities.  

As long as the insurance and financial institutions elevate concerns in good faith and their employees have received the proper training, the law will protect the institution and its workers from liability in a civil or administrative proceeding where information had been presented to authorities in the hopes of protecting a senior client from financial abuses or identity theft. The training includes a collaborative effort between state and federal regulators, financial firms and legal organizations, credit unions, broker-dealers, insurance companies and agencies, and investment advisers to educate employees on how to spot and report suspected elder financial abuse.

Seniors who are most active in communicating with a trusted professional third party about their finances are the least likely to fall victim to financial fraud. Counter-intuitively, most financial fraud happens to seniors who do not display signs of cognitive impairment. Senior participation with professional and properly trained employees of financial institutions is the back-story of this bill. All of the legal protections of the Senior Safe Act will achieve nothing if there is no participation by seniors.

It is advisable to find a trusted professional adviser to help protect against financial abuse and identity theft. The Senior Safe Act should make it much easier for seniors to find a properly trained individual who will monitor their financial accounts and be able to report signs of potential trouble to authorities. That trusted individual will be able to identify the warning signs of common scams and educate seniors as to how best to protect themselves; such as how often to check credit ratings for signs of identity theft, reviewing financial statements, identifying common phone and online scams, and more. The laws are in place to help seniors stay protected. Get protected by becoming more involved in your own personal financial world.

Contact our office to schedule an appointment to discuss how we can help you with your planning.

Happy 2019!

How to ensure your wishes are carried out, and how to plan for "when I die" and "when I live"

The importance of making end-of-life preparations cannot be stressed enough. Many put off making these plans thinking there is always time. The sad reality is that none of us are guaranteed time. Others may be bothered by the thought of death itself and allow this to paralyze them when it comes to making plans and getting their affairs in order for the end of life. However, most of these same people have wishes and thoughts about where and to whom their assets are distributed. Many of them also have ideas about what they do and do not wish to have happen when their life ends. Lack of preparation and planning means that these wishes likely will not be honored. Also, it causes additional strain and stress on the people who are left to sort out the affairs.

Those who do consider planning, do so to address the question, “what happens when I die?” Keep in mind that it is also important to consider, “what happens if I live?” Proper planning ensures that if you have assets when you die they are passed on in the manner you wish. It does not, however, guarantee that there will be anything left. Your assets could be nearly or completely depleted by illness or a hospital/nursing home stay, leaving your loved ones with nothing. 

If you or your loved one have not made end-of-life preparations, make time to do so as quickly as possible. An elder law attorney can help guide you in what you should be doing, and can make sure the proper documents are in place to carry out your wishes regarding your health, care you want (or don’t want) to receive, and who should receive your money and possessions.

The first key document to be sure you have is a will or a living trust. A will allows you to specify where your money and possessions should go upon your passing. It also allows you to choose an executor of the estate. The executor will take care of managing the estate, paying debts, and distributing property as specified. A will only takes effect upon your death.

A living trust does everything a will can do but also allows for you to choose someone to manage your assets if you become incapacitated because it is effective during your lifetime. A living trust also provides privacy, as it is not subject to court proceedings that become open to the public like a will is. There are numerous other advantages to a living trust that can be explored with the help of an attorney.

A living will and health care power of attorney are two additional documents that take effect while you are alive. A living will specifies your wishes for end-of-life medical care. For example, you can specify whether you want to be kept alive by artificial means if you are in a terminal state. A health care power of attorney provides for someone to make health care decisions for you, in case you aren’t able to make decisions yourself. Both of these documents outline your wishes about medical treatment and care when you can’t make them for yourself, so it’s important to seek legal guidance to make sure these documents are drafted properly.

A financial power of attorney should be in the plan as well. A financial power of attorney names an agent to handle your finances in the event you are no longer able to.  An agent can open and close bank accounts, write checks, and sell the property if you choose to allow them the authority to do so. Like the health care power of attorney, the financial power of attorney should be created with legal advice to make sure your wishes regarding your finances are properly documented.

If you wish to have a say in what happens to you and your assets, an estate plan is necessary. This type of planning also helps those you leave behind to carry out your wishes without delay or discourse and to do so effectively.

If you have any questions about something you have read or would like additional information, please feel free to contact us.