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Planning for long term care continued…

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Planning for long term care continued…

There are many tools that can be used to prepare for long term care: trusts, insurance, TODs, and gift transfers during a lifetime; however, you must choose the right tools for your specific situation and you must make sure those tools are prepared correctly or you may find yourself paying criminal consequences.  Currently, the medicare lookback period is 5 years; however, it is likely the government will extend it to 7 or 8 years in the near future.
From my experience, financial planners tend to encourage clients to create trusts to avoid medicare rules.  This can be great advice in certain situations; however, the client must keep in mind that if s/he would like to create a trust to avoid medicare, it must be an irrevocable trust and the trustee must be someone that is not a relative.  Essentially, the government requires that the client give up all control over his/her assets.  Many people, (especially those with significant assets) will not give up all control over the estate they spent their entire life building.  In some cases, they can’t afford to give up all control because they need to have access to the assets in the event that something happens.
Insurance is a decent option.  There does exist a particular type of insurance that will protect your assets in the event that you go into a nursing home.  For instance, if you purchase the coverage for $200,000, the plan will allow you to keep $200,000 in assets (meaning that you have to spend down any assets above that) and then it will cover all other costs of long term care.  This is a great option if you want to be able to maintain control over your assets.  Obviously, the cost will be the monthly premium.  If this is an option you are interested in exploring, please speak to your financial advisor.  If you don’t have one, I would be happy to refer you to one.
Another great way to reduce assets for long term care planning is to give away assets.  If you have family members that you trust, you can deed real estate to them, open bank accounts in their names, and make gifts of up to $13,000 per year (without tax conseqneces).  I am always hesitant to recommend that my clients do this.  If you give something away, you must realize that you are doing just that: giving it away.  Once you give away an asset, you must expect that the person will treat it as their own.  If they comply with your wishes then that is great but you should always expect that they won’t follow your wishes because legally, they don’t have to.  People have a difficult time controlling themselves when money is involved.
No matter which tools you decide to use in order to adequately plan for long term care, you must make sure that your financial advisor and your attorney communicate and work well together.  Neither will be able to adequately advise you if each is not aware of what the other is doing.

Planning for long term care

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Planning for long term care
As the baby boomer generation gets older, there is going to be an increased need for attorneys that specifically work in the area of estate planning for long term care.  If you or a loved one is getting to the age of 55 or older, it is time to start seriously considering an exit strategy. There are several questions you need to ask yourself:

1) Are you prepared in the event you need long term care?

2) Are you prepared in the event your spouse needs long term care? (Keeping in mind that medical facilities and nursing homes can come after you for the medical bills of your spouse- see blog posting from September 2, 2011.)

3) Do you have a succession plan for your business?

4) Will members of your family have the ability to pay off the family owned business if something were to happen to you?

5) If you don’t have a spouse, children, parents, siblings, or grandparents that are still alive, do you have a will in place that specifies who will be the executor and beneficiary of your estate?

6) Even if you do have the above family members, do you wish your estate to pass in a way different from the laws of intestacy? If so, do you have a will?

If you are unsure about the answers to any of these questions, or if you answered “no” to any of the above questions, I would be happy to discuss your specific needs in a free consultation.

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Top 10 Videos Of 2015: What happens if the executor of a will fails to perform his or her fiduciary duty?

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Top 10 Videos Of 2015 Probate Law: What happens if the executor of a will fails to perform his or her fiduciary duty?

In this video series, Tibbs Law Office is reviewing their top 10 videos of 2015, continuing with number 3, “What happens if the executor of a will fails to perform his or her fiduciary duty?”

For more online sources on this and similar topics, please visit our firm youtube channel at:

www.youtube.com/tibbslawoffice

www.youtube.com/tibbslawofficeKentucky

Tibbs Law Office, LLC
8845 Governors Hill Dr., Ste 450
Cincinnati, OH 45249
(513) 793-7544
www.tibbslawoffice.com

 

Transfer on Death and Probate

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I got into probate practice on accident.  It all started when I worked for my previous employer as a law clerk (after I had taken the bar but before I had received my results).  Our firm had received a telephone call from a client/investor.  Our client had an investment property and the person staying in the property had passed away.  Our client needed us to somehow get the property released from administration so that our client could re-rent the property without having to foreclose (actually, you have to open probate to foreclose but that is a long, complicated story.  He definitely did not want to foreclose if he could avoid it).

Since working on that case (and since receiving my license) I have worked on several similar cases, I have administered several estates and now my firm is expanding into estate planning.  A very common question that I am asked (usually from financial advisors) is about retirement accounts and probate.  People want to know the following: if they set up their retirement account to transfer on death to the designated beneficiaries, will the beneficiaries still have to pay “probate fees and taxes” on that money?

If a retirement account is set up to transfer on death, that money is still taken into consideration for federal and state estate tax purposes.  However, setting up the account so that it transfers on death, still keeps a considerable amount of money in the beneficiaries’ pockets.  Attorneys fees are generally calculated as a percentage of the probated and non-probated estate.  The percentage paid for non-probated property is much lower than for probated assets because the amount of legal work required to liquidate and distribute non-probated assets is much less.  In addition, the fiduciary of the estate gets paid according to a percentage of the probated and non-probated assets.  By keeping large accounts outside of probate, you are paying less to the attorneys and the fiduciary.

Transfer on death designations keep money in the family in other miscellaneous ways as well.  Less paperwork will be required for filing, which saves the family money because probate courts generally charge per page.  Also, if a bond is required, the bond will cost less.  Bonds are required to be secured for double the amount of the probated assets; the more in probated assets, the more the bond will cost.

Mother’s Day Gift- the gift of peace of mind

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Perhaps the best gift you can get your mother (and yourself) for Mother’s Day is an estate plan.  I tell my clients that it is their responsibility to make sure that their parents have estate plans.  Why?  Because when your parent dies, as the child, you (and your siblings) will have to organize and wrap up their affairs.  You can make your job much easier and you can save a lot of money by making sure that they have a well thought out estate plan. 
Estate planning does not just mean preparing a will.  A good estate attorney will not only prepare a will, but will also help you decide which property should pass outside of probate by way of transfer on death designations and can prepare a living will, power of attorney and health care power of attorney in the event that the testator becomes incompetent or incapacitated. 
Transfer on death designations are viewed as an easy way to save money and time because they give the beneficiaries immediate access to those assets rather than having to wait for a distribution through the probate court; however, transfer on death designations are not right for all people and all property and legal counsel should be sought before filling out any TOD paperwork.
Estate planning can keep family assets in the family in several ways.  You can express your wishes about how your assets should be divided after you are no longer able to make that determination by having a will prepared.  When the decedent’s wishes are expressed in a will, family members are less likely to fight over how the assets should be divided.  This will cut down on attorney’s fees and court costs that would arise if there were a dispute.  In addition, a testator can ask that the court waive a bond which can be costly depending on how large the estate is.  TOD designations are difficult to contest successfully and any assets transferred by TOD will go to the beneficiaries regardless of whether someone contests the testate or intestate distribution in probate court.
Estate planning will not only make your life easier if the worst should happen, but it will also give your parents peace of mind that they didn’t have before; something that every parent deserves.