Category: Trusts

What will life be like for the child or beneficiary to whom you are planning to leave gifts through your Will or Trust? It is sometimes an uneasy discussion. Your Attorney is being realistic, however, not morbid.

Costs Of Medical Care For A Child Or Beneficiary Is An Important Topic

The CDC data from the last several years points to more than half of young adults ages 18 to 34 already having at least one chronic condition. By ages 45 to 54, over half of adults manage multiple chronic conditions, such as obesity, heart issues, arthritis and others. In many situations, these can be managed; but these can often result in the need for substantial care and treatment. The science is catching up. But the cost of medicines, treatments, inpatient care and caregivers is substantial, as we often see with family and friends.

Planning for your own eligibility for Medicaid or other long-term payment sources is essential to protect your life savings and assets from being exhausted by the high costs of long-term care. Planning for the potential long-term needs of your children or other beneficiaries is equally important.

Medicaid and other programs have strict income and asset requirements, and after you are gone the gifts that you leave to a child or beneficiary may affect their eligibility and may require that they use up the inheritance before qualifying. Waiting until after the gift is made can be a poor planning decision.

Debt Issues Facing A Child Or Other Beneficiary Are Equally Important

Often overlooked in the Estate Planning discussion is the potential that a child or other beneficiary may be facing a serious debt issue at the time that they inherit property or assets from you.

Consider that creating a Transfer On Death Instrument (TODI) or identifying the child as a beneficiary for a life insurance policy, an account or in a land trust creates an immediate right and interest in that child or other beneficiary at the time you pass.

If the beneficiary is then dealing with a judgment or potential claim against them (for example, an uninsured claim, or a debt arising from their spending habits or the loss of a job, or other circumstances, whether or not requiring bankruptcy assistance), the judgment creditor or bankruptcy trustee has a direct line to the inheritance. This is obviously NOT a part of your plan.

A frequent misconception about inheriting retirement accounts often avoids discussion, as well. Know that being the beneficiary of an IRA or 401k is NOT going to protect those assets, much to the disappointment of clients who have saved their entire lives to leave a child or other beneficiary the balance of their retirement savings. Since 2014 federal law and most state laws do not protect an inherited IRA or 401k, whether a traditional or Roth product, and whether inherited by a child or other beneficiary, because the proceeds in that person’s hands are not considered ‘retirement funds’.

Today, your retirement accounts may be the largest source of your funds available for the objects of your bounty, But they are rarely part of the discussion when planning for or updating your Estate Planning.

For non-retirement assets, the situation is the same. The tools used to bypass probate court administration and expense do not protect the assets from the reach of a beneficiary’s creditors.

Some clients boast about relying on jointly owned property with right of survivorship, so that when they pass away their beneficiary automatically receives full ownership. Some clients commonly rely on payable-on-death (POD) accounts and beneficiary designations for bank or investment accounts, where named beneficiaries directly receive the property or funds when they pass. Life insurance proceeds are also typically structured so that they are paid directly to the designated beneficiary.

Literature available to the public and social media praise efficiency and probate avoidance as the stated goal. Yet forgetting that these tools are not a shield from the beneficiary’s creditors is forgetting to address an important consideration.

Planning To Fail Or Failing To Plan?

Leaving the consideration of these important topics to your beneficiaries is not a plan. Reducing family stress with reasonable planning to relieve family members of the burden of managing these issues during a critical time is an important consideration.

The thought that a child or beneficiary may face significant life issues at the time they inherit your property and assets is unpleasant. But it is very real, and very important to consider. Asset Protection is a valuable topic both for yourself and for your children and other beneficiaries.

Start the conversation with your Estate Planning Attorney or, if you don’t have one or if you want a second opinion, reach out to Marc Sherman or Maureen Meersman for that discussion. https://mshermanlaw.com/contact/

Most of us need only basic estate planning. Those with larger estates or unique assets or situations usually need to focus not only on the basic tools, but also on integrating steps in and out of the estate planning documents.

This article is not intended to review all estate planning tools that can be helpful. Instead, it is a call to action — a call to the all-important first meeting or updating review with an Attorney who is experienced in this important area. There is indeed value in discussion, and paying a small fee for attorney consultation can pay dividends!

The basics almost always focus on Powers of Attorney, a Last Will and Testament, and the interplay between life insurance and your accounts that you wish to keep as they are, and a focus on avoiding probate court time and expense. This is fine, but still worth the attorney-client consultation. Add a few other considerations in to the mix, and the discussion may blossom into why a simple, but effective living trust, and other considerations for planning, provide advantages.

These considerations include:

>   The amount of money in your estate when you pass (think: estate tax considerations, how the beneficiaries will receive the value and your desire to control how they receive your bequest);

>   Issues that you may experience now (consider long-term care needs for yourself or your significant other, asset protection needs arising from your business or other activities);

>   Concerns for your beneficiaries, now and later (think: beneficiary special needs due to illness, beneficiary asset protection because of judgments, divorce expected, or other concerns);

>   How your traditional IRA and other plans are treated after you have passed away (consider that IRAs and other plans are protected from creditors in most cases during your life, but inherited IRAs and other plans do not afford your beneficiary the same protection after you have passed away); and

>   Having real estate interests in more than one State or in another country (consider the need to possibly have a probate court case opened in more than one jurisdiction, and how trust planning or other tools can avoid this concern and expense; and consider that some countries do not recognize U.S. estate planning documents).

These are just a few of the considerations. Every person and every situation is slightly different. Creating a plan is smart planning!

Your financial planner and your accountant are important persons to offer their input. But if they are not also attorneys, then blindly following the recommendations made to you, no matter how well-intentioned, is not smart.

If you would like to have an attorney review your current documents and discuss your personal considerations and expectations, reach out to the Attorneys at Marc D Sherman & Colleagues, PC here: https://mshermanlaw.com/contact/

You have created your Living Trust. If you are like most people, you put the documents in a reasonably safe place and after some of the initial changes to your accounts there was no further follow up. Most of us don’t think that there are many changes possibly affecting our trust assets. But that’s typically not true. In any two-year period there are often changes worth discussing with your Attorney.

It’s so important to review your trust funding. Only through your own diligence will the trust and your other Estate Planning tools work the way that you intended.

Real Estate Interests:

Have your real property interests been transferred into the living trust? This would be done by deed in most instances. Changes to your prior real estate investments, or additions to your portfolio, may suggest a review with your Attorney. Has your prior residence now been changed to investment real estate? Did you previously use a transfer on death instrument (TODI) that should be reviewed?

Changes to your beneficiaries, changes to your plans for holding or distributing the real estate currently and after you have passed away, and changes affecting children and others who may inherit your real estate are important considerations.

Important situations that should trigger a discussion: Death or disability of a joint owner or beneficiary, and changes to the property or your expectations and plans for the property and its use, and changes to your residence/domicile, to name a few.

Business Interests, Including S-Corps and LLCs:

Have changes taken place with your Business activities? Are there new Members who have joined your LLC or new persons involved in your subchapter-S or other corporation? Will there be plans soon to consider succession of the business interests?

Changes in management, operations, and participants’ expectations can trigger important discussions about your living trust and estate plans. This may include modifications to the Operating Agreement for the LLC or amendments to the ByLaws for the corporation.

Changes In Accounts, Including IRA and 401k Accounts:

For living trusts and estate planning generally, there are useful considerations prompted by two areas of change, in particular.

Significant change in the health or other activities affecting your beneficiaries? Consideration of protections for your beneficiaries in these circumstances may involve the Account and the plan beneficiaries in order to avoid having your inherited IRA and 401k funds reachable by a beneficiary’s creditors, or affecting eligibility of beneficiaries for medical or other programs. In many instances, the timing of your trust and other estate planning may be key to putting important protections into place.

Changes to your accounts of all types, including financial investment accounts, Bank and CD accounts, and others, may have been made without consideration of whether those accounts should be titled in the name of your estate planning living trust. If you have not reviewed your accounts since creation of your living trust, or you have made changes to your accounts or recently opened new accounts, engage your Attorney for a follow-up review so that simple, worthwhile changes can be made.

You invested in your living trust and in your updates to your Will and Powers of Attorney for your estate planning purposes. Don’t miss out on the opportunity to accomplish an important review to make sure that your expectations will be followed and your assets are properly covered.

The Attorneys at Marc D Sherman & Colleagues PC can assist you with your review. Reach out to make an appointment: https://mshermanlaw.com/contact/