Plan to Protect
What Matters Most

Our Blog

Surprising Ways Payable On Death Can Damage an Estate Plan

Naming a beneficiary with a Payable On Death on a non-retirement account can result in an unintended consequence—it can even topple an entire estate plan—reports The National Law Review in the article “Overuse of Beneficiary Designations: How They Can Derail a Client’s Estate Plan.” How is that possible?

In most cases, retirement accounts and life insurance policies pass to beneficiaries as a result of the beneficiary designation form that is completed when someone opens a retirement account or purchases a life insurance plan. Most people don’t even think about those designations again, until they embark on the estate planning process, when they are reviewed.

The beneficiary designations are carefully tailored to allow the asset to pass through to the heir, often via trusts that have been created to achieve a variety of benefits. The use of beneficiary designations also allows the asset to remain outside of the estate, avoiding probate after death.

Apart from the beneficiary designations on retirement accounts and life insurance policies, beneficiary designations are also available through checking and savings accounts, CDs, U.S. Savings Bonds or investment accounts. The problem occurs when these assets are not considered during the estate planning process, potentially defeating the tax planning and distribution plans created.

The most common way this happens, is when a well-meaning bank employee or financial advisor asks if the person would like to name a beneficiary with Payable On Death and explains to the account holder how it will help their heirs avoid probate. However, if the estate planning lawyer, whose goal is to plan for the entire estate, is not informed of these beneficiary designations, there could be repercussions. Some of the unintended consequences include:

Loss of tax saving strategies. If the estate plan uses funding formulas to optimize tax savings by way of a credit shelter trust, marital trust or generation-skipping trust, the assets are not available to fund the trusts and the tax planning strategy may not work as intended.

Unintentional beneficiary exclusion. If all or a large portion of the assets pass directly to the beneficiaries, there may not be enough assets to satisfy bequests to other individuals or trust funds created by the estate plan.

Loss of creditor protection/asset management. Many estate plans are created with trusts intended to protect assets against creditor claims or to provide asset management for a beneficiary. If the assets pass directly to heirs, any protection created by the estate plan is lost.

Estate administration issues. If a large portion of the assets pass to beneficiaries directly, the administration of the estate—that means taxes, debts, and expenses—may be complicated by a lack of funds under the control of the executor and/or the fiduciary. If estate tax is due, the beneficiary of an account may be held liable for p-aying the proportionate share of any taxes.

Before adding a beneficiary designation to a non-retirement account, or changing a bank account to a POD (Payable on Death), speak with your estate planning attorney to ensure that the plan you put into place will work if you make these changes. When you review your estate plan, review beneficiary designations. The wrong step here could have a major impact for your heirs.

Reference: The National Law Review (Feb. 28, 2020) “Overuse of Beneficiary Designations: How They Can Derail a Client’s Estate Plan”

 

Comments Off on Surprising Ways Payable On Death Can Damage an Estate Plan

C19 UPDATE: Tax Filing Deadline Extended to July 15

Tax Filing Deadline Extended to July 15 – There has been some confusion about the tax filing / tax payment deadline extensions. On Friday, March 20 we got clarity that both the filing and the payment deadlines have been extended from April 15 to July 15 giving all taxpayers and businesses additional time to file and make payments without interest or penalties.

If you are expecting a refund, however, the Treasury Department encourages you go ahead and file as soon as possible – the sooner you file, the sooner you will get your refund.

Resource: Tax filing deadline moved to July 15, the latest measure to battle coronavirus downturn, The Washington Post, March 30, 2020

 

Comments Off on C19 UPDATE: Tax Filing Deadline Extended to July 15

C19 UPDATE: Name Someone Your Medical Power of Attorney and Do It Now

If you have not yet named someone with Medical Power of Attorney, stop procrastinating and get this crucial planning in place now.

What is a Medical Power of Attorney?

A medical power of attorney is a legal document you use to give someone else authority to make medical decisions for you when you can no longer make them yourself.  This person, also known as an agent, can only exercise this power if your doctor says you are unable to make key decisions yourself.

Other Terms for Medical Power of Attorney

Depending on the state where you live, the medical power of attorney may be called something else. You may have seen this referred to as a health care power of attorney, an advance directive, advance health care directive, a durable power of attorney for health care, etc. There are many variations, but they all mean fundamentally the same thing.

Be aware that each state has their own laws about medical powers of attorney, so it’s important to work with a qualified estate planning attorney to ensure your decisions will be enforced through legally binding documents. Also, some states may not honor documents from other states, so even if you made these decisions and created documents in another state, it’s wise to review with an estate attorney to ensure they are legally valid in your state now.

What Can My Medical Agent Do for Me?

Just like there are many different terms for the medical power of attorney, there also are different terms for the medical agent – this person may be referred to as an attorney-in-fact, a health proxy, or surrogate.

Some of the things a medical POA authorizes your agent to decide for you:

  • Which doctors or facilities to work with and whether to change
  • Give consent for additional testing or treatment
  • How aggressively to treat
  • Whether to disconnect life support

We are ready to help walk you through these decisions, understand the ramifications of your choices, and memorialize your plans in binding legal documents. We are currently offering no-contact initial conferences remotely if you prefer. Book a call now and let us help you make the right choices for yourself and your loved ones.

 

Comments Off on C19 UPDATE: Name Someone Your Medical Power of Attorney and Do It Now

How Can I Fund A Special Needs Trust ?

TapInto’s recent article entitled “Ways to Fund Special Needs Trusts” says that when sitting down to plan a special needs trust, one of the most urgent questions is, “When it comes to funding the special needs trust , what are my options?”

There are four main ways to build up a third-party special needs trust. One way is to contribute personal assets, which in many cases come from immediate or extended family members. Another possible way to fund a such a trust, is with permanent life insurance. In addition, the proceeds from a settlement or lawsuit can also make up the foundation of the trust assets. Finally, an inheritance can provide the financial bulwark to start and fund the special trust.

Families choosing the personal asset route may put a few thousand dollars of cash or other assets into the trust to start, with the intention that the initial investment will be augmented by later contributions from grandparents, siblings, or other relatives. Those subsequent contributions can be willed to the trust, or the trust may be named as a beneficiary of a retirement or investment account. It is vital that families use the services of an elder law or special trusts lawyer. Special needs trusts are very complicated, and if set up incorrectly, it can mean the loss of government program benefits.

If a such a trust is started with life insurance, the trustor will name the trust as the beneficiary of the policy. When the trustor passes away, the policy’s death benefit is left, tax free, to the trust. When a lump-sum settlement or inheritance is invested within the trust, this can allow for the possibility of growth and compounding. With a worthy trustee in place, there is less chance of mismanagement, and the money may come out of the trust to support the beneficiary in a wise manner that doesn’t risk threatening government benefits.

In addition, a special needs trust can be funded with tangible, non-cash assets, such as real estate, securities, art or antiques. These assets (and others like them) can be left to the trustee of the special needs trust through a revocable living trust or will. Note that the objective of the trust is to provide the trust beneficiary with non-disqualifying cash and assets owned by the trust. As a result, these tangible assets will have to be sold or liquidated to meet that goal.

As mentioned above, you need to take care in the creation and administration of a special needs trust, which will entail the use of an experienced attorney who practices in this area and a trustee well-versed in the rules and regulations governing public assistance. Consequently, the resulting trust will be a product of close collaboration.

Reference: TapInto (February 2, 2020) “Ways to Fund Special Needs Trusts”

 

Comments Off on How Can I Fund A Special Needs Trust ?

What Is The Latest On The New York Legislation Concerning Medicaid Spousal Refusal?

The last five governors in New York targeted a maneuver called “spousal refusal” for repeal 28 times. Newsday’s recent article entitled “State considers end to ‘spousal refusal’ to pay for nursing home care” says that there are some who think that this practice is a scheme to benefit the wealthy. However, an increasing number of advocates for middle-class elderly New Yorkers strongly support it as an essential way to keep a “well” spouse from poverty, when health care costs are skyrocketing.

Currently, New York and Florida are the only states that permit this practice.

However, now the state Medicaid Redesign Team is looking at if they should stop the decades-old practice. Governor Andrew M. Cuomo appointed the group of health care leaders to cut $2.5 billion from Medicaid, and their recommendations are due by mid-March.

Eligibility for Medicaid is based on family income and wealth, but there can be exemptions and special circumstances. A married couple who are both 65 years old or older can have no more than about $38,000 in annual income, and assets of no more than about $120,000, if one spouse is to be covered by Medicaid for nursing home care or comparable home care. As a result, any income and assets above those thresholds must be used to help pay for this care, which averages more than $10,000 a month in the Empire State.

This spousal refusal option lets the “well” spouse—the one who is not in need of care— to collect more income and retain more of the couple’s assets under his or her name. This process is replete with loopholes and is also complicated by federal law designed to protect more assets to avoid “spousal impoverishment.”

With a mandate to trim $2.5 billion from Medicaid in New York, it’s not clear how much spousal refusal costs the state. In 2016, the price was estimated at $10 million. However, this didn’t consider the continuing annual costs of each refusal, or the increased costs of care as the spouse who entered a nursing home gets older.

Spousal refusal has an increasing number of supporters for maintaining the practice, who say that it helps middle class families deal with soaring health care costs, prevents couples from having to spend their savings and give away assets to qualify for Medicaid and makes it unnecessary to contemplate divorce only to protect assets.

There’s one additional benefit: a spouse could enter a nursing home more quickly because Medicaid payments will kick in immediately and would avoid the lengthy process of determining eligibility.

Reference: Newsday (February 23, 2020) “State considers end to ‘spousal refusal’ to pay for nursing home care”

 

Comments Off on What Is The Latest On The New York Legislation Concerning Medicaid Spousal Refusal?

Where in the World Do You Go to Retire If You Like The Snow?

There are many people who imagine playing golf in Arizona or lying on the beach in Florida during retirement. However, that is not everybody. There are some who would rather bundle up and enjoy the snow, says Investopedia in its recent article entitled “5 Best Countries to Retire to If You Love Winter.”

Let’s look at some of the snowy spots around the globe where retirees who like to ski, ice state, and make snowmen or snow angels can retire.

Italy. Most everyone knows about the art, food, and rich culture in Italy, but the country’s inland is a winter lover’s dream. Specifically, the Abruzzo region is a great place for retirees who like to ski. Retirees can apply for an elective residency visa with the Italian consulate. This permits a retiree to stay in Italy. However, this visa doesn’t allow you to work. In five years, you’re eligible to apply for a long-term resident visa.

France. You have certainly seen that this country is beautiful all year round. However, it’s fantastic during the winter when snow can be found in many regions. France has several spots where retirees can ski, including the Northern and Southern Alps, the Pyrenees and Massif Central—Europe’s largest volcanic site. Although the overall cost of living is a bit higher than in the U.S., the expense of renting an apartment or a home is quite affordable. Retirees can apply for a long-stay visitor visa through the French consulate. It’s valid for a year, and if you want to stay in France for a longer period of time, you’ll must apply for an extension. Similar to the Italian visa, the French visa doesn’t let you to work while you are there.

Switzerland. This country enjoys lower taxes and extremely good healthcare. These are two good reasons to consider retiring in Switzerland. Along with skiing, retirees can participate in curling, snowshoeing, and many other cold weather activities. Another advantage is Switzerland’s central European location which makes it ideal for winter breaks in Germany, France, or Italy. Like the other European countries mentioned, to retire in Switzerland, you’ll need to apply for a visa through the consulate.  Like in France and Italy, you’re not allowed to work there. It’s also important to know that Switzerland is not keen on foreign nationals applying for public benefits. As a result, it’s important that you have enough saved up to support yourself if you move.

Let’s now look at a few countries outside of Europe that promise plenty of fun during the winter:

New Zealand. This country has become an increasingly popular spot for expatriate retirees. The northern island has a warmer, more temperate climate. However, the southern island gets a good deal of snow in the winter. Remember: the seasons are reversed, so winter with the snow is between June and October. Unless you have children who live in the country, you’re required to apply for a temporary residency visa that’s renewable every two years. If you’re thinking of moving to New Zealand permanently, you’ll need to apply for a resident visa. It’s also important for retirees to know that the financial conditions in New Zealand may be difficult for the average retiree. That means it’s expensive!

Chile. A quick look at the map will tell you that Chile is geographically diverse. Running more than 2,600 miles, the southern region of the country is a skier’s paradise during the winter months. The Portillo Ski Resort is world-renowned. There are also almost two dozen skiing destinations sprinkled through the Andes. The Chilean government issues temporary visas for retirees that are good for a year. You can renew your visa for an additional year, but then you must apply for “definitive residence” or leave the country.

Retiring overseas is a big move, so be sure to calculate what retiring abroad will cost to determine whether it’s a good fit for you financially.

Reference: Investopedia (January 14, 2020) “5 Best Countries to Retire to If You Love Winter”

 

Comments Off on Where in the World Do You Go to Retire If You Like The Snow?
Should You Name a Trust as an IRA Beneficiary ?
Nest Egg

Should You Name a Trust as an IRA Beneficiary ?

An IRA may not be placed into a trust while the account owner is alive. An IRA also may not be owned by more than one person. The IRA owner can name a trust as an IRA Beneficiary . Just because you can do this, does not mean it is a good idea, says the article “Naming Your Trust as an IRA Beneficiary” from The Press of Atlantic City. The IRA owner could also take all of the funds and deposit them into a trust, but that would be another bad idea. Why? It is because all of the funds withdrawn would be subject to income tax.

Therefore, why would anyone want to name a trust as the beneficiary for an IRA?

  • If you want an heir, like a second spouse, to inherit the income but not the balance of the principal after you have died. This is done so the second spouse cannot name their children as the beneficiary, instead of the original account owner’s children.
  • If you are concerned with the ability of heirs to manage your IRA funds wisely, a trust can be the beneficiary and you can set the terms with which the heirs can have access to the funds.
  • Minor children cannot be direct beneficiaries of an IRA, and a disabled child may become ineligible for government benefits, if he or she receives an inheritance directly.
  • If you want your IRA funds to be inherited by grandchildren instead of children, a trust is the way to go.
  • If creditor protection is a concern under the laws of your state, a trust would keep the IRA funds from being tapped by claims of creditors.

Here is why you would NOT want to name a trust as the beneficiary of your IRA:

  • There are no tax benefits to having the trust inherit your IRA.
  • Trusts have expenses. Trustee fees and tax rates on funds left inside the trust, but not in the IRA, may be substantially higher than personal income tax rates, depending on the beneficiary.
  • The trust will have to keep going long after your own death. That means tax returns must be filed, fees paid, and the trustee must maintain the trust.
  • Some companies that hold IRAs do not allow trusts to be beneficiaries of IRAs. Before you get into figuring out if this is the right route for you, find out first if your custodian will permit it.

There are many other facts to consider before deciding to name a trust as the beneficiary of an IRA. Speak with your estate planning attorney to see if it is a suitable solution for you and your family.

Reference: The Press of Atlantic City (February 13, 2020) “Naming Your Trust as an IRA Beneficiary”

 

Comments Off on Should You Name a Trust as an IRA Beneficiary ?

Estate Planning uses a “Dynamic Document”

One of the most common mistakes people make about their estate plan is neglecting to coordinate all of the moving parts, reports the Dayton Business Journal’s article “Baird expert gives estate planning advice.” The second most common mistake is not thinking of your estate plan as a dynamic document. Many people believe that once their estate plan is done, it’s done forever. That creates a lot of problems for the families and their heirs.

In the last few years, we have seen three major federal tax law changes, including an increase in the federal estate tax exemption amount from $3,500,000 to an enormous $11,580,000. The estate tax exemption is also now portable. Most recently, the SECURE Act has changed how IRAs are distributed to heirs. All of these changes require a fresh look at estate plans. The same holds true for changes within families: births, deaths, marriages and divorces all call for a review of estate plans.

For younger adults in their 20s, an estate plan includes a last will and testament, financial power of attorney, healthcare power of attorney and a HIPAA authorization form. People in their 40s need a deeper dive into an estate plan, with discussions on planning for minor children, preparing to leave assets for children in trusts, ensuring that the family has the correct amount of life insurance in place, and planning for unexpected incapacitation. This is also the time when people have to start a plan for their parents, with discussions about challenging topics, like their wishes for end-of-life care and long-term care insurance.

In their 60s, estate plans need to reflect the goals of the couple, and expectations of what you both want to happen on your passing. Do you want to create a legacy of giving, and what tools will be best to accomplish this: a charitable remainder trust, or other estate planning tools? Ensuring that your assets are properly titled, that beneficiaries are properly named on assets like life insurance, investment accounts, etc., becomes more important as we age.

This is also the time to plan for how your assets will be passed to your children. Are your children prepared to manage an inheritance, or would they be better off having their inheritance be given to them over the course of several years via a trust? If that is the case, who should be the trustee?

Some additional pointers:

  • Revise your estate plan every three or five years with your estate planning attorney.
  • Evaluate solutions to provide tax advantages to your estate.
  • Review asset titling and beneficiary designations.
  • Make sure your charitable giving is done in a tax efficient way.
  • Plan for the potential tax challenges that may impact your estate

Regardless of your age and state, your estate planning attorney will be able to guide you through the process of creating and then reviewing your estate plan.

Reference: Dayton Business Journal (February 4, 2020) “Baird expert gives estate planning advice”

 

Comments Off on Estate Planning uses a “Dynamic Document”

Why Did VA Scrap Its Star Rating System?

Officials at the Department of Veterans Affairs recently announced that individual VA hospitals will not get star ratings anymore. Instead, the VA will provide measurements like wait times, patient satisfaction ratings and medical services, along with quality assessments on their individual websites.

This move will let vets compare VA facilities with nearby public and private medical centers, said Military Times’ recent article entitled “VA drops its star ratings system for hospitals.”

“Star ratings were developed as an Internal tool meant to compare one VA facility to another,” VA Secretary Robert Wilkie said in a statement. “These ratings do not provide insight as to how our hospitals stack up against nearby non-VA facilities and are therefore of little value in helping veterans make informed health care decisions.”

VA officials say the change to do away with the star rating system will improve transparency. The move was first made public in a series of articles in USA Today.

The Veterans Affairs Administration’s ratings were frequently “misinterpreted,” they said. The ratings compared VA facilities by ranking them across the department’s health care system, instead of by “geography, population characteristics or unique care offerings” of neighboring non-VA facilities.

Although the VA hospital ratings didn’t permit vets to compare VA facilities with local medical centers, they did provide patients with an idea of how their VA hospital compared with the others and if it was doing well or declining.

When the ratings were originally published in 2016, 10 medical facilities had a 1-star rating, while 90 had shown “significant improvement” over a set of baseline measures. By 2019, the number of medical facilities that received a 1-star rating was down to nine, including three that had been on the list since 2016: El Paso, Memphis, and Phoenix.

Former VA Secretary Dr. David Shulkin told USA Today that the ratings weren’t published as the VA didn’t want vets to think that if their hospital was awarded just a single one star, they wouldn’t receive quality care and would stop going.

While Shulkin had concerns about publishing the measures, by 2018, Secretary Robert Wilkie praised the results when they were made public. That year, the system showed improvements at 66% of VA medical centers. Only one location received a one-star rating.

“With closer monitoring and increased medical center leadership and support, we have seen solid improvements at most of our facilities,” Wilkie said at the time. “Even our highest performing facilities are getting better, and that is driving up our quality standards across the country.”

But in December, Wilkie commented that the new facility-based websites will “make it easier for veterans to choose the best possible care close to home, when and where they need it.”

Instead of the star system, the VA will still publish its Strategic Analytics for Improvement and Learning, or SAIL data, that provides an in-depth look of 14 metrics quality of care measures at all VA medical facilities.

Reference: Military Times (Jan. 2, 2020) “VA drops its star ratings system for hospitals”

 

Comments Off on Why Did VA Scrap Its Star Rating System?

What Do We Know about Early Onset Dementia ?

Rita Benezra Obeiter, 59, is a former pediatrician who was diagnosed several years ago with early onset dementia, a rare form of the disease. When this occurs in people under age 65, the conditions cause additional and unique issues because they are so unexpected and because most of the potentially helpful programs and services are designed for and targeted to older people.

One issue is that doctors typically don’t look for the disease in younger patients. As a result, it can be months or even years before the right diagnosis is made and proper treatment can start.

WLNY’s recent article entitled “Some Health Care Facilities Say They’re Seeing More Cases Of Early-Onset Dementia Than Ever Before” reports that her husband Robert Obeiter left his job two years ago to care for her. She attends an adult day care, and aides help at home at night.

If Dementia is a generic term for diseases characterized by a decline in memory, language, and other thinking skills required to perform everyday activities, Alzheimer’s is the most common. The National Institute of Health reports that there’s approximately 200,000 Americans in their 40s, 50s, and early 60s with early onset Alzheimer’s.

One conference discussed a rise in early dementia because of the processed foods and fertilizers or the other environmental hazards, and there are definitely some genes more associated with Alzheimer’s—more so with early onset.”

There is no clear answer, and most of the treatments help to slow down the progression.

There is some research showing the Mediterranean diet can be protective, as well as doing cognitive exercises like crossword puzzles and Sudoku.

It’s true that no one can predict the future of their health, but there are ways financially that families can prepare. It can cost $150,000 a year or more. That’s why you should think about purchasing long term care insurance starting at the age of 40.

Long-term health insurance can pay for an aide to come into your home, and it can pay for the cost of assisted living. And, remember that health insurance doesn’t cover long-term care, nor does Medicare. Plus, everyone over the age of 18 needs a healthcare power of attorney and a financial POA.

Reference: WLNY (Feb. 12, 2020) “Some Health Care Facilities Say They’re Seeing More Cases Of Early-Onset Dementia Than Ever Before”

 

Comments Off on What Do We Know about Early Onset Dementia ?