May 7, 2018
Planning for the future can sometimes be difficult. Creating an estate plan can give you the peace of mind you need, while also making it easier for your loved ones to handle your affairs when you die. We often find that while our clients understand the basics of certain estate planning documents, they are often surprised to see that many of these documents are multifaceted and serve multiple purposes.
A Last Will and Testament is a legal document memorializing your wishes on how you, the testator or creator of the Will, want your estate to be distributed after you die. If you die without a Will, your assets will be distributed according to state statute, also known as the laws of intestacy. For example, in New York State, if you die with a surviving spouse and children, your spouse will receive the first $50,000 of your estate and then one-half of the balance. The remainder will be distributed equally amongst your children. This is not ideal for someone who wants all their assets to go to their surviving spouse.
Instead of being bound by the laws of intestacy, one can create a Will that specifies to whom they want their assets to go and how they want their assets to be distributed. Under the scenario above, a Will would allow the Testator to distribute their assets to their surviving spouse. Only if the spouse predeceases the Testator should the assets be distributed to their children.
The Will has functions other than just listing the distribution of assets upon death. For parents with young children, a Will allows a guardian to be named for minor children. Also, if there are beneficiaries that are minors or incapacitated, the will can provide that the assets be distributed in trusts on behalf of those beneficiaries. Many clients will choose to leave assets to beneficiaries in trusts in other circumstances, such as for creditor protection or to delay the age by which they can have full access to the funds. A Will can also create a Supplemental Needs Trust for beneficiaries who currently receive, or may be in need of, means-tested government benefits.
Another advantage of executing a Will is that it allows the creator to waive any bond that the executor would otherwise have to pay in order to administer the estate. A bond is often required by the court to protect the interests of the distributees and beneficiaries of one’s estate. Depending on the size of the estate, the bond may have a large annual premium which will be paid out of the assets of the estate. A Will can also provide for the decedent’s wishes regarding funeral arrangements and cremation.
It is important to have a Will even for individuals who hold all accounts jointly with another person. While the joint assets will go directly to the co-owner, the terms of the Will can be used to administer any assets that are held outside of the joint accounts. An estate account will have to be opened to cash any checks delivered after death that are made payable to the decedent, including tax refunds or a return of other funds. Having a Will ensures that these funds are distributed to the appropriate persons.
Creating a Last Will and Testament can help avoid many of the pitfalls that occur when a person dies without any estate plan in place. We strongly recommend seeking a Trust and Estates, and Elder Law professional to help determine the right estate plan for you.
The following is an informative article from the American Council on Aging concerning Medicaid look back periods.
When a senior applies for long-term care Medicaid, whether that be services in one’s home, an assisted living residence, or a nursing home, there is an asset (resource) limit. To be eligible for Medicaid, one cannot have assets greater than the limit. Medicaid’s Look-Back Period is meant to prevent Medicaid applicants from gifting assets, including selling them under fair market value, to meet Medicaid’s asset limit.
All asset transfers within the Look-Back Period are reviewed by the Medicaid agency. This includes transfers made by an applicant’s spouse. If the Look-Back Rule has been violated, a Penalty Period of Medicaid ineligibility will be established. This is because had the assets not been outright gifted or sold under their fair market value, they could have been used to pay for the elderly individual’s long-term care. Note that assets transferred prior to the Look-Back Period are not penalized.
The Look-Back Period begins the date of one’s Medicaid application for long-term care. Generally speaking, the “look back” is 60-months (5 years). As an example, a Florida resident applies for Medicaid on Jan. 1, 2023; their Look-Back Period extends back to Dec. 31, 2017. All financial transactions between these dates are subject to review.
Examples of transactions that violate the Look-Back Period and could result in penalization include the following: Money gifted to a granddaughter for her high school graduation, a house transferred to a nephew, collectors’ coins sold for half their value, and a vehicle donated to a local charity. Additionally, payments made to a personal care assistant without a formal Personal Care Agreement can violate the Look-Back Period.
Even after the “initial” Look-Back Period, if a Medicaid beneficiary comes into some money, say for example, via an inheritance, and gives all (or some) of the money away, they are in violation of the Look-Back Rule. This means that despite an initial determination that one has not violated the 60-month Look-Back Period and is receiving long-term care Medicaid, they can violate this rule, and hence, be disqualified from Medicaid benefits.
The following is an article from Merrill Lynch discussing the role of Trusts.
As with wealth planning in general, many people think trusts are appropriate only for the very affluent. But personal trusts are a powerful planning tool that can deliver benefits for a wide range of people across the wealth spectrum.
Are trusts an appropriate planning tool for you? It depends, of course, on your unique financial situation, family needs and goals. But trusts are growing in popularity precisely because they are so flexible and able to address a variety of objectives, from the simple to the complex. Some of the ways trusts might benefit you include:
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Title: The Pros and Cons of a Revocable Trust
A revocable trust, also known as a living trust, is a legal entity created to hold ownership of an individual's assets during their lifetime, and to distribute those assets after their death. The primary advantage of a revocable trust is that it allows the trust maker to maintain control over their assets while providing for an orderly transfer upon death. However, like any financial planning tool, revocable trusts come with their own set of pros and cons.
Pros of a Revocable Trust:
Avoidance of Probate: One of the key advantages of a revocable trust is that it allows your assets to avoid the lengthy and often costly probate process. Assets held in a revocable trust transfer directly to the beneficiaries without needing court approval, which can expedite the distribution of assets after death.
Flexibility: As the name suggests, revocable trusts are changeable during the lifetime of the grantor (the person who establishes the trust). This means you can modify the trust terms, add or remove assets, and even dissolve the trust entirely if your circumstances or wishes change.
Privacy: Unlike a will, which becomes public record once it is submitted to probate court, a revocable trust is a private document. The distribution of your assets remains a private matter between the trustee and the beneficiaries.
Continuity of Management: In the event of incapacity, a successor trustee that you've appointed can step in and manage your affairs without court intervention, which can provide peace of mind and prevent a potentially burdensome guardianship or conservatorship proceeding.
Cons of a Revocable Trust:
Cost and Complexity: Establishing a revocable trust involves more upfront costs and complexity compared to drafting a simple will. It requires the transfer of assets into the trust, which can be a time-consuming process.
No Tax Benefits: Unlike certain types of irrevocable trusts, a revocable trust does not provide any specific tax advantages. The assets in the trust are still considered part of the grantor's taxable estate, which means they could be subject to estate taxes upon death.
No Creditor Protection: Because the grantor maintains control over the assets in a revocable trust, those assets are not protected from creditors. This means if the grantor incurs significant debt, the assets in the trust could be used to satisfy those debts.
Potential for Misunderstanding: Some people mistakenly believe that having a revocable trust avoids the need for a will. However, a will is still necessary to designate guardians for minor children and to handle any assets not included in the trust.
While a revocable trust can provide a range of benefits, including privacy and avoidance of probate, it's not the right solution for everyone. It's important to weigh the pros and cons carefully, and consult with a financial advisor to determine whether a revocable trust fits your personal financial goals and estate planning needs.
The Relevance of a Medicaid Trust
The Medicaid Trust, a vital element in comprehensive estate planning, has gained relevance in the current socio-economic landscape. It is an irrevocable type of trust specifically designed to protect assets from being counted as personal resources in determining Medicaid eligibility. As the aging population continues to expand, and long-term care costs rise, the need for Medicaid Trusts is becoming increasingly evident.
To qualify for Medicaid, one's financial assets and income must be under certain limits. However, the costs of long-term care such as nursing homes, assisted living facilities, or home health care can deplete a family's wealth rapidly. Medicaid Trusts have emerged as a powerful tool to safeguard family assets, while still allowing individuals to qualify for Medicaid support.
Here's how it works: When assets are transferred into a Medicaid Trust, they are no longer counted as the individual’s personal resources. This enables people to meet Medicaid's strict income and asset requirements, potentially qualifying for benefits that cover long-term care costs. Crucially, this can be accomplished while still ensuring that assets are effectively managed and preserved for future generations.
However, there's a key point to note: the five-year look-back period. Transfers into Medicaid Trusts within five years before applying for Medicaid can be penalized, meaning potential ineligibility for Medicaid for a specific period. Hence, early planning is crucial. The five-year look-back period underlines the relevance of Medicaid Trusts not just for those immediately needing Medicaid, but also for those planning for potential future needs.
Medicaid Trusts also offer tax advantages. They are typically structured as grantor trusts for income tax purposes, meaning the individual who transfers assets into the trust continues to pay income taxes on the trust income, thereby not increasing the tax burden on the beneficiaries.
The relevance of a Medicaid Trust extends beyond mere financial planning. It is a tool of compassion that can ensure a dignified life for seniors needing long-term care, without putting undue financial strain on the family. It also provides peace of mind to the younger generation, knowing that their inheritance is secure, and that their parents' care is well-provided for.
In conclusion, the increasing relevance of Medicaid Trusts can be attributed to their role in protecting assets, planning for long-term care, and offering a humane approach to the financial challenges of aging. Despite its many advantages, creating a Medicaid Trust is a complex process that requires careful planning and legal expertise. Consulting with an experienced elder law attorney is recommended to navigate this process effectively and to create a Medicaid Trust that best meets individual and family needs.
Below is an article published by the Record-Courier from 2022
In Nevada, a deed upon death that allows real property to pass to a beneficiary upon the death of the original owner is relatively easy to execute and it becomes effective upon execution and recording.
The revocation of a deed upon death is not difficult either, but the statutory requirements have to be followed.
The grantor, so the original real property owner, can revoke the deed upon death at any time during his or her lifetime. The deed upon death can be revoked either by executing a revocation document or by executing another deed upon death. Both documents have to be signed, notarized, and recorded.
When the deed upon death is executed by two or more joint tenants, the revocation is effective either when all joint tenants sign the revocation or when it is executed by the last surviving joint tenant. If the real property is owned by tenants in common and they all executed the deed upon death together, the revocation is effective with respect to the share of real property owned by each tenant in common who executed the revocation document.
Importantly, a deed upon death cannot be revoked by execution of a last will and testament.
On the other hand, the transfer of title to the real property after the grantor’s death is much more complicated, especially since the latest legislative updates were implemented.
First, the beneficiary needs to record a Death of Grantor Affidavit and a certified copy of the death certificate in the county recorder’s office where the real property is located.
Next, a Notice to Creditors must be executed by the beneficiary and mailed to: (1) the personal representative of the grantor’s estate, if known, (2) all known creditors, and (3) the Department of Health and Human Services (Medicaid). Additionally, the Notice to Creditors must be published in a newspaper of general circulation.
Any person or institution having a claim against the grantor of the grantor’s estate must file a claim with the beneficiary within ninety days of the mailing or the first publication of the Notice to Creditors. Claims not filed within the prescribed period are barred forever. Any filed claims must be appropriately accepted or rejected by the beneficiary. If the claim is rejected, the claimant may file suit to pursue the claim.
Further, within forty-five days of the Notice to Creditors being mailed to Medicaid, Medicaid must either provide a waiver of claim confirming that no Medicaid assistance was received by the grantor or, if the grantor had received assistance, Medicaid can impose a lien on the real property. Failure to provide notice to Medicaid results in the real property remaining subject to the Medicaid’s right to recover even after the transfer to the beneficiary.
Once the time for creditors to file their claims has run out, all the creditors are satisfied, if needed, and when the Medicaid waiver is received, the real property can be distributed pursuant to the terms of the deed upon death without any personal liability attaching to the beneficiary for the debts of the grantor.
Notably, a beneficiary may disclaim his or her interest in the real property by recording the disclaimer in the county recorder’s office where the real property is located.
The transfer of real property to a beneficiary via deed upon death can be costly and lengthy. Typically, passing the real property to a beneficiary via trust instrument is more efficient.