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Use This Time to Revisit The Parts of Your Estate Plan That Impact Your Children Most With all the considerations about your children’s wellbeing weighing on your mind from day to day, it can be easy to forget about some of the most important factors in keeping them well cared for and secure: naming a guardian in your estate plan. When was the last time you reflected on your selection of a guardian? If the answer is hard to pinpoint, it’s probably time to revisit this issue. Children change a lot from year to year as they mature from infants into their teenage years. Their care needs and who would make a good guardian can change over time as well. Is the person you previously appointed as their guardian still the best choice? Because your children’s lives are constantly evolving, something that worked even a few years ago may be out-of-date now. Back-to-school time is a perfect reminder to revisit your estate plan and guardianship designations. Here are the specific areas we’ll want to address: Review and refresh of guardianship nominations: Is the guardian you’ve chosen for your children in the event that something happens to you still the person you would want to fill that role? Are they still available to do so, and would your children be satisfied with this choice of guardian? Review and refresh intent letters: If you’ve used intent letters in your estate plan to provide additional meaning and context to your guardianship designations and other estate planning documents, it’s a great time to make sure those are reflective of your current goals and wishes as well. Review and refresh your estate plan: It’s always a good idea to keep your estate plan as up to date as possible. The addition of a new child to your family by birth or adoption may mean your plan requires substantial changes. This is also the case if one of your children has turned 18. If either of these events occurred since our last assessment of your plan, it is imperative that you don’t wait to make any necessary alterations to your plan. Review college savings plans and strategies: Do you have a child who is preparing to attend college in the coming years? We can explore various planning strategies to help financially plan for the cost of tuition and help your family make strategic choices about higher education planning. It’s never too early to begin researching scholarship opportunities if you have a child already in high school. There are also a variety of accounts, such as 529s, UTMA/UGMA, ESAs, and HEETs that can be used to reduce the financial toll of tuition. Back-to-school time means a flurry of activity for most parents. While shopping for supplies and attending school functions may dominate your to-do list, remember to set up an appointment with us to review your estate plan for any necessary updates that could impact your children’s wellbeing. We’re always here to help. Give us a call today. Read More

Important Estate Planning Tips You Should Act on Now Like all things, tax laws are constantly changing. Together, we need to respond quickly and strategically to the new developments in the tax law landscape. While you shouldn’t wait to review your estate plan in light of the passing of the Tax Cuts and Jobs Act (TCJA), making a knee-jerk reaction is rarely the best course of action, either. The best decisions are made when we carefully analyze all angles of your estate to come up with the best strategy for you and your family. The law’s benefits will accrue most for those who take a proactive approach rather than those who wait until the last minute. Here are several reasons the tax changes need to be top-of-mind: The increase in the standard deduction and reduction in individual tax rates means that you may now be taking home more of your weekly/month pay. Taking some of this money and investing it into your future may be a great action to take. The elimination of the personal exemption means that depending upon your marital status and number of dependants, you may not be able to lower your taxable income as much as you had in the past. For some people, this might mean a higher tax bill, in spite of the decreased individual rates. The limitations on deductions for state and local income taxes (SALT) means that for those in states or communities with high income taxes, your taxable income may not be reduced as much as it had been in past because you won’t be able to get credit for all of the other forms of income tax you have paid. However, if this is a concern for you, we may have some strategies (such as an Incomplete Non-Grantor Trusts) to help alleviate the new tax burden. With the increase in the unified credit to $10,000,000, indexed for inflation, there has been a reduction in the overall number of estates affected by the estate tax. If you had previous planning centered around saving estate tax, we need to re-evaluate to make sure that the plan still works for your long term objectives now that estate tax may not be a concern. You may also want to take advantage of the increase by making lifetime gifts, especially if you had previously used up your exemption in previous years. With the effective repeal of the individual mandate of the Affordable Care Act effective in 2019, you will now have the choice of whether or not to carry health insurance coverage without suffering the penalty of a fine. However, with no requirement for coverage, it is speculated that the cost of insurance in the marketplace could increase without the additional participants. As open enrollment occurs this fall, consider how you would cover medical expenses as you make coverage decisions. The new tax developments are especially pertinent to you if you’re a business owner. With the possible 20% income tax deduction for pass-through entities, you’ll want to review entity selection for your business operations as soon as possible. Now is also the time to consider gifting of interests to reduce the limitations inherent in the qualifying business income calculation and to utilize the increased gift tax exemption. If you have a “specified service business” as an attorney, doctor, dentist, or consultant, it may make sense to separate any “non-service” businesses out of your service business, such as real estate or clerical activity. Utilizing multiple trusts may also help you achieve a larger QBI (qualifying business income) deduction. Don’t Just Think About Taxes! The implications of the TCJA go much further than taxes alone. You will always need an estate plan that takes a thoughtful approach to asset protection, privacy, retaining control, avoiding issues like guardianship and probate, and ensuring that your loved ones are cared for in years to come. These aspects of estate and financial planning are constant regardless of fluctuations of tax reform. Collaboration will us, as your estate planners, is critical for long-term success. We’re ready to help you plan for whatever comes next. Give us a call to set up a chat today about how we can fully protect you and your family. Read More

Farming or ranching is more than a means of livelihood – it is about preserving a legacy and unique way of life. Unfortunately, many farmers and ranchers don’t fully protect their legacy with an up to date estate plan. An out of date or inadequate estate plan could result in a farm or ranch that has been passed down for generations ending up being sold and converted into non-agricultural use. Sadly, farmers and ranchers are not the only ones who avoid making or updating an estate plan – many others, including business owners and parents, also avoid planning, which can cut their legacy short. In this article you will learn about three common estate planning mistakes farmers, ranchers, and others make and how you can avoid them. Lesson #1 – Make a Plan and Keep it Up to Date Like farmers and ranchers, others have complex estate planning needs. For example, you may be a small business owner who has children who want to continue the business and children who do not, or you and your spouse may have a blended family or children with differing needs. This complexity can make it difficult for you to decide what to do, which may result in no estate plan being created at all. On the other hand, you may have taken the time to create an estate plan but failed to maintain and adjust the plan as your life and family have changed. Planning Tip #1: If you do not have an estate plan, you need to seek expert advice about your planning options and assurance that your goals can be achieved. You will need to work with a team of advisors (including attorneys, accountants, bankers, and insurance specialists) who can help you create a plan that will work for your current situation. If you already have an estate plan, you need to understand the importance of keeping your plan up to date as life events happen (births, deaths, marriages, divorces, illnesses, bankruptcies, lawsuits, jackpots) and laws are modified or repealed. As your personal and financial situations change, your team of advisors (including attorneys, accountants, bankers, and insurance specialists,) will help you update your plan so that it will work for your new situation. Lesson #2 – Don’t Rely on Joint Accounts and Beneficiary Designations Like many farmers and ranchers, you may believe that the easiest way to plan your estate and avoid probate is to own property in joint names with family members, establish payable on death (POD) or transfer on death (TOD) accounts, and name family members as beneficiaries of your life insurance policies and retirement accounts. Relying on joint accounts and beneficiary designations is a huge mistake on many fronts. First and foremost, you are giving up control of your real estate and other property by owning it jointly with others. In many cases, business entities (corporations, partnerships, and limited liability companies) or trusts are better options for maintaining flexibility, minimizing liability, and retaining control. While you may have taken the time to make an estate plan, the use of joint property with rights of survivorship, POD or TOD accounts, and individual beneficiary designations on life insurance policies and retirement accounts can frustrate the intent of your plan. This is because these assets pass outside of your will or trust. In addition, outright distributions by rights of survivorship will not be protected from creditors, predators, and lawsuits. Finally, although joint and beneficiary assets will avoid probate, these assets will still be included in your taxable estate. This may create an estate tax liability at the state and/or federal level without a well-planned means for payment since the assets will go directly into the hands of your beneficiaries. In turn, other property that passes through intestacy or a will or trust will be used to pay your estate tax bill, potentially creating unfair and unequal inheritances. Planning Tip #2: How property is titled dictates who inherits it. You need to coordinate assets held in business entities and trusts with assets that are jointly owned or pass under a beneficiary designation. Otherwise your intended heirs may end up with nothing and payment of your estate tax bill may cause unintended consequences. Lesson #3 – Don’t Overlook Liquidity Needs Incapacity and death are expensive. Aside from day-to-day family expenses and medical bills, attorneys, accountants, trustees, and other administration expenses need to be paid. To make matters even more challenging, federal estate taxes are due within nine months of death, and state death taxes are also typically due within this same time frame. Where will your family get the cash to pay these expenses? Like farms and ranches, a primary residence, vacation home, investment real estate, collectibles, and a family business are illiquid. Without properly planning for immediate and long-term cash needs, your family may be forced to quickly sell your real estate and other illiquid assets at a reduced rate. Planning Tip #3: You need to assess your liquidity needs and create a plan for managing debt and expenses upon your incapacity or death. Your financial advisor, insurance specialist, and banker can assist you with securing lines of credit and the proper amount of disability insurance, long-term care insurance, and life insurance. You should also consult with an experienced estate planning attorney to help you create a trust, business entities, and other liquidity strategies. Takeaways for Business Owners and Others Like farmers and ranchers, you may have unique circumstances that require specialized estate planning solutions. You need to assemble a team of professionals to help you create and maintain a plan that will preserve your legacy. We are experienced with helping farmers, ranchers, and others achieve their estate planning goals. Please call us if you have any questions and to arrange for a consultation. This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies. Read More

No one likes to think about the possibility of their own disability or the disability of a loved one. However, as we’ll see below, the statistics are clear that we should all plan for at least a temporary disability. This article examines the eye-opening statistics surrounding disability and some of the common disability planning options. Disability planning is one area where we can give each and every person and family we work with great comfort in knowing that, if the day comes for themselves or a loved one, they will be prepared. Most Individuals Will Face At Least a Temporary Disability Study after study confirms that nearly everyone will face at least a temporary disability sometime during their lifetime. More specifically, one in three Americans will face at least a 90-day disability before reaching age 65 and, as the following graph depicts, depending upon their ages, up to 44% of Americans will face a disability of up to 4.7 years. On the whole, Americans are up to 3.5 times more likely to become disabled than die in any given year. Planning Note: Many people fear what will happen to them if they become disabled. Discussing options and planning early (while capacity is not an issue) will help bring peace of mind and alleviate some of the fear surrounding this issue. Many Persons Will Face a Long-Term Disability Unfortunately, for many Americans the disability will not be short-lived. According to the 2000 National Home and Hospice Care Survey, conducted by the Centers for Disease Control’s National Center for Health Statistics, over 1.3 million Americans received long term home health care services during 2000 (the most recent year this information is available). Three-fourths of these patients received skilled care, the highest level of in-home care, and 51% needed help with at least one “activity of daily living” (such as eating, bathing, getting dressed, or the kind of care needed for a severe cognitive impairment like Alzheimer’s disease). The average length of service was 312 days, and 70% of in-home patients were 65 years of age or older. Patient age is particularly important as more Americans live past age 65. The U.S. Department of Health and Human Services Administration on Aging tells us that Americans over 65 are increasing at an impressive rate: The Department of Health and Human Services also estimates that 9 million Americans over age 65 will need long term care this year. That number is expected to increase to 12 million by 2020. The Department also estimates that 70% of all persons age 65 or older will need some type of long term care services during their lifetime. The Alzheimer’s Factor Alzheimer’s is growing at an alarming rate. Alzheimer’s increased by 46.1% as a cause of death between 2000 and 2006, while causes of death from prostate cancer, breast cancer, heart disease and HIV all declined during that time period. In 2010 The Alzheimer’s Association published a report titled, “Alzheimer’s Disease Facts and Figures” that explored different types of dementia, causes and risk factors, and the cost involved in providing health care, among other areas. In this report were some eye-opening statistics: An estimated 5.3 million Americans of all ages have Alzheimer’s disease. This figure includes 5.1 million people aged 65 and older and 200,000 individuals under age 65 who have younger-onset Alzheimer’s. One in eight people aged 65 and older (13%) have Alzheimer’s disease. Every 70 seconds, someone in America develops Alzheimer’s. By mid-century, someone will develop the disease every 33 seconds. The number of people aged 65 and older with Alzheimer’s disease is estimated to reach 7.7 million in 2030 – more than a 50% increase from the 5.1 million aged 65 and older currently affected. By 2050, the number of individuals aged 65 and older with Alzheimer’s is projected to number between 11 million and 16 million – unless medical breakthroughs identify ways to prevent or more effectively treat the disease. Planning Note: There is no treatment available to stop or slow the progression of Alzheimer’s. There are five drugs currently approved by the U.S. Food and Drug Administration that temporarily slow the worsening of symptoms for approximately six to twelve months in about half of the patients who take the drugs. Caregivers are at risk of developing health problems. There were approximately 10.9 million unpaid caregivers (family members and friends) providing care to persons with Alzheimer’s or dementia in 2009. According to the Alzheimer’s Association, those persons are at high risk of developing health problems, or worsening existing health issues. For example, family and other unpaid caregivers of people with Alzheimer’s or another dementia are more likely than non-caregivers to have high levels of stress hormones, reduced immune function, slow wound healing, new hypertension and new coronary heart disease. Spouses who are caregivers for the other spouse with Alzheimer’s or other dementia are at greater risk for emergency room visits due to their health deteriorating as the result of providing care. A study mentioned in the 2010 Alzheimer’s Association report found that caregivers of spouses who were hospitalized for dementia were more likely than caregivers of spouses who were hospitalized for other diseases to die in the following year. Receiving care. According to the National Nursing Home Survey 2004 Overview, the national average length of stay for nursing home residents is 835 days, with over 56% of nursing home residents staying at least one year. Significantly, only 19% are discharged in less than three months. Those residents who were married or living with a partner at the time of admission had a significantly shorter average stay than those who were widowed, divorced or never married. Likewise, those who lived with a family member prior to admission also had a shorter average stay than those who lived alone prior to admission. While a relatively small number (1.56 million) and percentage (4.5%) of the 65+ population lived in nursing homes in 2000, the percentage increased dramatically with age, ranging from 1.1% for persons 65-74 years to 4.7% for persons 75-84 years and 18.2% for persons 85+. According to the U.S. Census Bureau, in 2009, 68% of nursing home residents were women, and only 16% of all residents were under the age of 65. The median age of residents was 83 years. Planning Note: Many seniors or their loved ones will require significant in-home care lasting, on average, close to a year. For those requiring nursing home care, that care lasts, on average, nearly 2 1/2 years! Not surprising, the older the senior or loved one, the more likely he or she will need long term care – which is significant given that Americans are living longer. According to the MetLife 2010 Mature Market Institute, current estimates indicate that nearly 1 million people live in approximately 39,500 assisted living residences in the U.S. The average age of an assisted living resident is 86.9 years old, and the median length of stay in assisted living is 29.3 months. Long-Term Care Costs Can Be Staggering Not only will many individuals and families face prolonged long-term care, in-home care and nursing home costs continue to rise. According to the 2010 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs national averages for long term care costs are as follows: Monthly base rate (room and board, two meals per day, housekeeping and personal care assistance) for assisted living care is $3,293 or $39,516 annually, a 5.2% increase from 2009. Daily rate for a private room in a nursing home is $229, or $83,585 annually, a 4.6% increase over the 2009 rate. Daily rate for a semi-private room in a nursing home is $205, or $74,825 annually, a 3.5% increase over the 2009 rate. Hourly rate for home health aides is $21, unchanged from 2009. These costs vary significantly by region, and thus it is critical to know the costs where the individual will receive care. For example, the average cost for a private room in a nursing home is much higher in the Northeast ($381 per day, or $139,065 annually, in New York City) than in the Midwest (only $174 per day, or $63,510 annually, in Chicago) or the West ($238 per day, or $86,870 annually, in Los Angeles). Planning Note: Nursing home costs will consume many Americans’ assets. A recent Harvard University study indicates that 69% of single people and 34% of married couples would exhaust their assets after 13 weeks (i.e., 91 days) in a nursing home! Long-Term Care Insurance May Cover These Costs If a parent, their spouse, or family member needs long term care, the cost could easily deplete and/or extinguish the family’s hard-earned assets. Alternatively, seniors (or their families) can pay for long term care completely or in part through long term care insurance. Most long-term care insurance plans let the individual choose the amount of the coverage she wants, as well as how and where she can use her benefits. A comprehensive plan includes benefits for all levels of care, custodial to skilled. Clients can receive care in a variety of settings, including the person’s home, assisted living facilities, adult day care centers or hospice facilities. Planning in the Event Long Term Care Insurance is Unavailable or Insufficient Unfortunately, many older Americans will either be medically ineligible for long term care insurance or unable to afford the premiums. In that event, more aggressive planning should be considered as early as possible to make sure life savings are not depleted as a result of having to pay out-of-pocket for care. With the help of an elder law attorney, a plan can be created that will protect much of the assets of an individual or couple that would otherwise be at risk of being depleted. Planning Note: Elder law attorneys can assist individuals in creating a plan that will prevent the loss of one’s life savings to private health care costs. Often these plans involve the use of trusts (both revocable and irrevocable), expansive powers of attorney for financial and health care decisions, and other important legal documents. All Planning Should Thoroughly Address Disability When a person becomes disabled, he or she is often unable to make personal and/or financial decisions. If the disabled person cannot make these decisions, someone must have the legal authority to do so. Otherwise, the family must apply to the court for appointment of a guardian over the person or property, or both. Those who are old enough to remember the public guardianship proceedings for Groucho Marx recognize the need to avoid a guardianship proceeding if at all possible. At a minimum, seniors need broad powers of attorney that will allow agents to handle all of their property upon disability, as well as the appointment of a decision-maker for health care decisions (the name of the legal document varies by state, but all accomplish the same thing). Alternatively, a fully funded revocable trust can ensure that the senior’s person and property will be cared for as desired, pursuant to the highest duty under the law – that of a trustee. Planning Note: Seniors and their loved ones need properly drafted and well-thought-out planning documents that address both their property and their person in the event of disability. Conclusion The above discussion outlines the minimum planning clients should consider in preparation for a possible disability. It is imperative that clients work with a team of professional advisors (legal, medical and financial) to ensure that, in light of their unique goals and objectives, their planning addresses all aspects of a potential disability. Please contact us if you have any questions or would like to discuss any information in this newsletter further. To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances. Read More

When most people hear the term “dynasty trust,” they assume it’s something for only the wealthiest of families. However, dynasty trusts are not as out of reach as you might think, and can be used by many more families of a greater wealth spectrum than currently use them. Demystifying dynasty trusts Dynasty trusts keep your wealth within your family for a long time. When properly designed, they can last forever. Dynasty trusts are, however, irrevocable and are therefore perceived by some as inflexible. Since adjustments to this type of trust require a great deal more work than they do for a garden-variety revocable living trust you are probably more familiar with, we need to have an in-depth understanding of your needs and goals to create your family’s dynasty trust. But for many families, the benefits far outweigh the drawbacks of irrevocability and perceived lack of flexibility. While there are several types of laws affecting these trusts that vary state-to-state, dynasty trusts offer several benefits: They consolidate and build intergenerational wealth, allowing you to create long-term security for your family. They help avoid estate, gift, and generation-skipping transfer taxes. Although these taxes are unpopular with President Trump and Congressional Republicans, history tells us that tax policy can change after any election. Any comprehensive estate plan must consider this possibility. They protect your beneficiaries’ inheritance from creditors and divorce. When creatively designed, they can even incentivize desirable behavior from your trust beneficiaries. How is a dynasty trust different than other types of irrevocable trusts? Simply put, a dynasty trust is one that is designed to consolidate and build intergenerational wealth over a very long time. Other common types of irrevocable trusts you’ve heard about (like GRATs, ILITs, QPRTs, CRTs, etc.) are created to achieve a particular tax result. Dynasty trusts build on these planning strategies and are appealing because they allow you to take a long view of estate planning for your family. Why is now the time to explore this option? In today’s favorable tax and legal environment, dynasty trusts can make more sense than ever – especially if your family has significant life insurance policies, a small business, or other assets that might increase in value significantly (like founder’s stock or vacant land in a fast growing area). Families haven’t always had such wide opportunities to explore dynasty trusts. Many states have laws against perpetuity designed to prevent trusts from lasting many generations. While these laws still exist in some states, there is a trend toward less rigid application or even outright removal of these rules. Admittedly, one reason for the growth in popularity of these trusts is that financial institutions stand to benefit from management fees associated with them. But your family benefits as well because wealth that’s consolidated and managed (as in the case of a dynasty trust) tends to be more likely to be preserved and successfully pass from one generation to the next versus wealth that’s divided and distributed (as in the case of many garden-variety estate plans). Is a dynasty trust right for you and your family? Most people think of dynasty trusts as something only the highest net worth families would even consider. And while they do require the help of a skilled estate planning attorney who can navigate the complex interplay between state and federal laws, they can be an attractive option for your family. Dynasty trusts offer an excellent method to pass along lifelong financial security to your loved ones for generations to come. Give us a call today to talk about how we might build a dynasty trust that stays with your family through whatever the future may bring. We will make sure it complies with all applicable laws, provides maximum protection for your legacy and furthers your goals. Read More

There are often situations in which an older person needs the services of an attorney and medical professionals. A recent article in Bifocal, a publication of the American Bar Association, highlighted six scenarios in which such a collaboration would be beneficial to the older patient-client’s well-being, as well as the professionals. This article will summarize these situations. Decisional Capacity Issues When provided with adequate information, most older individuals retain sufficient cognitive and emotional ability to make autonomous, valid decisions about important aspects of their own lives. Sometimes, however, an older person’s capacity to make and express valid choices about personal (including medical or residential) or financial matters is questionable and/or questioned by others. Working Together The elder law attorney needs involvement from medical professionals to help recognize when decisional capacity may be compromised and to quantify the existence, degree and reversibility or alterability (for example, through medication management) of decisional impairment. The physician and other medical professionals could benefit by working with an elder law attorney who can identify and accurately describe the potential legal implications of the person’s decisional impairment. The attorney can then evaluate possible interventions such as guardianship, supported decision-making arrangements or reliance on previously created or implied advance directives or other instructions. Elder Mistreatment Many older individuals, especially those with cognitive decline, are at risk of physical, psychological and financial mistreatment at the hands of family members and others. In addition to abuse and exploitation, elder mistreatment may occur in the form of neglect, often occurring in the older person’s home or that of a relative with whom the older victim resides. Compounding the problem is the reluctance of many older persons to cooperate in reporting and investigating their own mistreatment. They may accept physical or emotional abuse, financial exploitation or neglect of basic needs like hygiene or medications by a family member out of fear that making a report might result in being removed from the home and placed in a nursing home. Working Together Medical professionals are generally the first to recognize, evaluate and medically treat signs and symptoms of elder neglect, exploitation or abuse. Their input is essential in considering and effecting legally permissible options or required actions. Health care professionals often have a responsibility to monitor the quality and safety of home care provided by family caregivers or others, and a duty to report instances of suspected abuse to authorities. An elder law attorney can help both the medical professionals and the older patient/client by providing legal advice pertaining to the professionals’ responsibilities to report, confidentiality considerations, legal ramifications of failing to report, and legal immunities attached to reporting or other interventions. Self-Neglect A significant percentage of older adults, mainly living alone, do not regularly attend to their own needs or well-being when it comes to health care, hygiene, nutrition and other matters. The majority of cases reported to Adult Protective Services (APS) by health and social service professionals and family members are triggered by suspected self-neglect, and the health care system expends considerable efforts trying to intervene in these situations to prevent increased rates of hospitalization, nursing home placement and even death. Working Together In these situations, the medical professional’s role is vital in determining the potential problem, nature and seriousness of the risk, and identifying viable intervention strategies. Decisional capacity issues (addressed above) almost always arise in these cases. An attorney can advise the medical professional about legal reporting requirements or options, as well as legal boundaries for interventions that can be designed and conducted in a way that best respects the older person’s dignity and autonomy while still protecting the person from foreseeable and preventable self-generated harm. Medical Payment Issues When attaining appropriate medical and rehabilitative care for older patients, it is imperative to make sure that payment for needed services will be available. For most people age 65 and over, this means working with not only Medicare but potentially with state-specific Medicaid programs and/or private insurance companies. One common problem concerns older patients who have entered hospitals through emergency departments and held for observation, instead of being admitted as in-patients, before being transferred to nursing facilities. This practice, as well as hospital discharge and readmission practices, may jeopardize coverage for subsequent rehabilitation services. Other issues may involve the interpretation and application of Medicare rehabilitation payment policy regarding the standard of need for services instead of continuing potential for benefit. There are also issues with coordinating benefits under Medicare with services covered concurrently in whole or in part by other third-party payers. Working Together The elder law attorney trying to obtain payment for the older patient’s medical care or rehabilitative care needs assistance from the patient’s medical professionals in order to document, clarify and argue questions about the older person’s medical condition, needs and prognosis. Conversely, the medical professional may need assistance from an elder law attorney to assert and advocate for the rights of the older person. Family Issues Families often act as caregivers, sometimes paid but more often as volunteers, for older relatives who are not fully independent. Family members may also be acting as surrogate decision makers for those with reduced decisional capacity, making choices on behalf of the older person, or as helpers to a person who is capable of making decisions with support. In cases of self-neglect, the family may find an older loved one who refuses to acknowledge mental decline and the need for help. And sometimes, families have interests that conflict with those of an older person and seek to put their own interests first, to the detriment of the vulnerable older person. Working Together Medical professionals are important in recognizing when the caregiver’s burden is at risk of endangering both the caregiver and the person dependent on their caring. An elder law attorney can inform all parties about public or private sources of financial and other support for family caregivers, including benefits under the federal Family and Medical Leave Act and state counterparts. For medical decision making, whether for surrogate decision makers when the person has reduced decisional capacity or for those who help the older person make decisions, medical professionals provide information, recommendations and support in the process. An elder law attorney may work with individuals who are currently capable of decision-making and their families in the advance health care planning process. The attorney may also clarify for medical professionals the legal authority of surrogate decision makers. The attorney and medical professionals may also work together to present cases to an ethics committee or consultant when there are serious disagreements among family members, or to act as a mediator and/or patient advocate when there are disagreements about the patient’s best interests. In cases of self-neglect, the attorney and medical professionals working together can often recommend options that will benefit both the family and the loved one. When a family is acting on its own interests to the detriment of the older person, a medical professional will usually be the one to notify the individual’s attorney of the conflict. The attorney may initiate or threaten legal action to protect the rights and welfare of the older person in a way that also protects the ethical and legal interests of the medical professional. Confidentiality Medical professionals and attorneys have concerns about the permissible handling of personal information they learn about a particular older patient/client solely as a result of the formal relationship between professional and patient/client. For example, a medical professional may wonder about the confidentiality ramifications of his/her suspicions that an older patient is being neglected, exploited or abused. Working Together A medical professional can educate the attorney about the health care information collected on an individual patient, how and where the information is documented and stored, how to interpret it, clinical uses to which it is applied, and who has access to the information. The attorney can educate and counsel the medical professional about legal parameters of information collection, maintenance and sharing under common law confidentiality principles, state statutes and regulations, the federal Health Insurance Portability and Accountability Act (HIPAA) and other legal provisions. The attorney can also explain different expectations and rules for protecting patient privacy as they apply to members of different professions. For example, a social worker employed as staff in an elder law office who suspects elder mistreatment may be subject to reporting requirements while the attorney is not. Inter-professional communication about confidentiality can also be beneficial to the older patient/client. Accurately informed medical professionals and attorneys are well-positioned to protect the autonomy and privacy interests of older persons to whom they owe fiduciary duties, while at the same time allowing the sharing of relevant information to authorized recipients so that services for the older person can be maximized. Conclusion There are, of course, other situations when it is advisable and beneficial for medical professionals and elder law attorneys to work together for the safety and well-being of their older patients/clients. For example, it might be necessary to manage a situation involving unsafe driving by an older person who resists voluntarily restricting personal use of an automobile. Generally speaking, elder law attorneys and the medical professionals who care for older patients/clients often have a genuine calling to work with the elderly. And when the professionals work together to serve their older patients/clients, everyone benefits. If you know of someone who could benefit from the advice of an elder law attorney, please contact us. We are ready to help. To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax advisor based on the taxpayer’s particular circumstances. Read More

Estate planning for couples in a second or later marriage can be tricky, particularly when one spouse is significantly wealthier than the other. One solution for allowing the well-to-do spouse to maintain control of his or her assets but keep the other spouse happy is the Lifetime QTIP Trust. In this article, you will learn what a Lifetime QTIP is, the multiple benefits this special type of trust can provide to married clients with lopsided estates, and how you might alter a client’s investment strategy when using it. The Basics of Creating a Lifetime QTIP Trust In the estate planning world a “QTIP Trust” has nothing to do with those handy cotton swabs used for cleaning ears, applying cosmetics, or making children’s crafts. Instead, QTIP refers to “Qualified Terminable Interest Property Trust,” which is a fancy term for a type of trust that allows a wealthier spouse to transfer an unrestricted amount of assets into trust for the benefit of a less wealthy spouse free from estate and gift taxes. Many married couples have estate plans that make use of a QTIP Trust after the death of one spouse using the so-called “AB Trust” strategy. After the first spouse dies, the “B Trust” holds an amount equal to the federal estate tax exemption ($5.43 million in 2015) and the “A Trust” holds the excess. Under this strategy the “A Trust” is in fact a “QTIP Trust” which qualifies for the unlimited marital deduction, meaning that property passing into the trust will not be subject to estate taxes until the surviving spouse dies. Here is an example: Fred and Susan have both had previous marriages. Fred has two children from his prior marriage and Susan has three, and their estates are disproportionate – Fred is worth $2 million and Sue is worth $10 million. With the AB Trust strategy, if Susan dies first, the B Trust is funded with $5.43 million and the A Trust is funded with $4.57 million. No estate tax will be due at Susan’s death since the B Trust uses up her federal estate tax exemption and the A Trust qualifies for the unlimited marital deduction. In addition, when Fred later dies, the A and B Trusts can be drafted so that what is left passes exclusively to Susan’s three children (or whomever else she chooses, much to the chagrin of Fred’s children). What if instead of creating and funding the QTIP Trust after Susan dies, she creates and funds the QTIP Trust for Fred’s benefit with tax free gifts while she is still alive? This is the “Lifetime QTIP Trust.” Planning Tip: QTIP Trusts created during life or after death must meet certain requirements to qualify for the unlimited marital deduction: The trust must be irrevocable. The Lifetime QTIP Trust must be created for the benefit of a spouse who is a U.S. citizen – there is no such thing as a “Lifetime QDOT.” The spouse must be entitled to receive all of the net income from the trust at least annually. The spouse must have the right to demand that non-income producing property be converted into income-producing property. The spouse must be the only one who has the power to appoint trust property. For Lifetime QTIP Trusts, a federal gift tax return (Form 709) must be timely filed. Form 709 is due on or before April 15 of the year following the year a gift is made to the trust. The spouse does not need to have a right to distributions of principal from the trust although they are permitted. A Lifetime QTIP Trust can provide that if the beneficiary spouse dies first, the grantor spouse can become the income and principal beneficiary and the trust assets will be excluded from the grantor spouse’s estate. (Yes, you read that correctly.) While at first glance QTIP Trusts may appear to be restrictive due to their multiple technical requirements, in reality they are quite flexible and will work well in a variety of situations. Planning With a Lifetime QTIP Trust Offers a Multitude of Benefits Outright gifts to a spouse during life or after death lead to total loss of control. For married couples with lopsided estates and families from prior marriages, the problem is exacerbated by the difference in wealth – while the well-to-do spouse will be just fine if the less wealthy spouse dies first, the opposite is not true. A Lifetime QTIP Trust offers the following benefits to this type of couple: The wealthy spouse can create and fund a Lifetime QTIP Trust without using any gift tax exemption. Unlike the estate tax exemption, the generation-skipping transfer tax exemption is not portable. A Lifetime QTIP Trust can provide an opportunity to make use of the less well-to-do spouse’s generation-skipping tax exemption. During the beneficiary spouse’s lifetime, he or she will receive all of the trust income and may be entitled to receive trust principal for limited purposes. When the beneficiary spouse dies the assets remaining in the lifetime QTIP trust will be included his or her estate, thereby making use of the less wealthy spouse’s otherwise unused federal estate tax exemption. If the beneficiary spouse dies first, the remaining trust property can continue in an asset-protected, lifetime trust for the grantor spouse’s benefit (subject to applicable state law) and the remainder will be excluded from the grantor spouse’s estate when he or she dies. After both spouses die, the balance of the trust will pass to the grantor spouse’s children and grandchildren or other beneficiaries chosen by the grantor spouse. Planning Tip: As with other types of estate planning, Lifetime QTIP Trusts are not “one size fits all” and must be specifically tailored to each client’s unique family dynamics and financial situation. In addition, only an attorney experienced in implementing advanced estate planning techniques should be drafting Lifetime QTIP Trusts for your clients. How You Might Adjust a Client’s Investment Strategy When Using a Lifetime QTIP In the estate strategy we have discussed, the Lifetime QTIP Trust differs from the conventional “A Trust” it might replace in that the surviving spouse has access to the Lifetime QTIP Trust’s investment income but not necessarily the principal (for example, the lifetime QTIP might permit distributions of principal under the HEMS standard only). So while any particular client’s own goals, risk tolerance, time horizon, tax bracket, etc. might change this, all else being equal, the investment strategy for the Lifetime QTIP Trust would focus more on generating income to offset the limited access to principal, assuming income is needed at the time. This might mean that your recommendations to your client among publicly traded securities would skew more toward high-dividend stocks, high yield corporate and muni bonds, mortgage real estate investment trusts (REITs), business development corporations (BDCs), and certain master limited partnerships (MLPs), as well as high-income exchange-traded funds (ETFs), closed-end funds (CEFs), and mutual funds. In the non-traded arena you might consider REITs, BDCs, or certain life settlement debt instruments. Or, if your client is an accredited investor, you might consider high quality private debt or equity, provided the income warranted the risk. For advisors who tend toward annuities for their strategy, because assets in annuities would forfeit the Lifetime QTIP Trust’s step-up in basis at the second death, a better location to use them might be the “B Trust” (bypass trust), where there is no such second-death step-up anyway. That being said, if your client thought the lost opportunity to use the Lifetime QTIP Trust’s step-up was less important, you might consider an annuity with a reasonably high guaranteed income coupled with an enhanced death benefit to replace the typical depletion of capital stemming from the combination of annuities’ fees and their distributions. Finally, a word for insurance agents. Due to the Lifetime QTIP Trust’s focus on income, all else being equal, this strategy possibly will impair the capital that would eventually be distributed to the remainder beneficiaries, at least when compared to what they might have received had the holdings been structured less for income and more for capital gains or capital preservation. Thus, agents might wish to evaluate whether the benefit to these heirs of a second-to-die life insurance policy in an irrevocable life insurance trust (ILIT) would warrant the total impact of sustained insurance premiums. Which of Your Clients Need a Lifetime QTIP Trust? If you have clients in a second or later marriage with uneven assets, please call our firm immediately. We will help you and your clients determine what will work best for them and their families. And, if you have any questions about Lifetime QTIPs or other estate planning techniques, we’re here for you. We’d be happy to answer your questions, helping you better serve your clients, place products, identify assets not yet under management, and support your relationship with your clients and their adult children. Read More

Planning with an Aim Towards Building Unity A will or trust contest can wreak havoc on families. The conflict can result in possibly irreparable resentment and loss of familial communication. Old rivalries and disputes can resurface during the trying time that occurs after the death of a loved one, especially a parent. But careful estate planning can help you substantially reduce the risk, or even avoid this problem entirely. Let’s take a look at a few of the ways you can build your estate plan to minimize family conflicts after you’re gone. Keep your plan up-to-date: An up-to-date estate plan can help you preserve family unity after death or in the event of incapacity. Even if you have put an estate plan in place in recent years, estate planning is an ongoing process and needs attention at regular intervals. An out-of-date plan can become misaligned with your goals, new laws, and policies, rendering it less effective and more likely to generate conflict (the last thing you want). Select key individuals in your plan: You can give certainty to your family and make your wishes easier to carry out by selecting the right people as your key players in carrying out your estate plan. Make sure that you’ve thoughtfully selected the right people to carry out your estate plan. A few of the key individuals you’ll have to select: Successor trustee – This person will manage your trust’s assets when you are unable to do so. Executor – This person is appointed in your will to manage your probate estate if one is needed. In many cases, you may select the same person as your successor trustee. However, if you don’t, remember that your executor must work closely with your successor trustee to ensure that everything is handled smoothly and in a timely fashion. Health care proxy – This person is authorized to communicate with your medical providers and make medical decisions if you are unable to do so. Financial agent – This person is authorized to make financial decisions on your behalf. They will likely need to work closely with your successor trustee, or you may designate the same person to serve in both roles. Share your wisdom: By sharing your stories and wisdom (through ethical wills, intent letters, personal stories, videos, etc.) you can help your family understand the legacy you want to leave so that the wealth you’re leaving doesn’t become a distraction or point of contention. Don’t try to DIY: While it might be tempting to cut corners and take your estate plan into your own hands, taking a do-it-yourself approach is never wise. This sets the stage for potentially inadequate planning, which increases the likelihood of will or trust contests and will likely mean your estate isn’t distributed how you’d like it to be in the end. Let your estate planning attorney do the heavy lifting — we’re always here to help. Be clear about your intentions: Are you planning on giving more of your total assets to one child than the others? Or are there other ways in which your estate planning goals may upset some of your beneficiaries (or those who aren’t beneficiaries)? It can be a very tricky subject to broach, but if you foresee hurt feelings, consider being as clear as possible about your wealth distribution plans with those individuals. This will limit the potential for confusion and disagreement down the road. It may – or may not – make sense to explain this to your family. But, it’s always incredibly important to let us know the reasons so we can develop a rock-solid legal strategy for your goals. Consider discretionary trusts: If you have a child or other potential beneficiary who struggles with addiction, mental health problems, or other conditions that could hinder their ability to use their inheritance in a healthy way, you might want to consider a discretionary trust. With this type of trust, you can control the disbursements based on your beneficiary meeting certain requirements — such as attending a treatment program or enrolling in higher education. This can help you treat each child fairly by taking into consideration what is best for each child’s unique situation. Will or trust contests can tear a family apart, and can also be time-consuming, costly, and embarrassing for the family that remains. If someone who feels slighted by your estate plan can convince the court that your will or trust is invalid, chaos can break loose and your intended beneficiaries can lose their inheritances. Typical reasons a family member might use to say your estate plan is invalid are that it wasn’t signed, you didn’t have the capacity to make the estate planning decisions you made, the documents were fraudulent, or that you were pressured or influenced to sign documents. Let us help you make sure that none of these events unfold. We’re here to guide you every step of the way through creating and maintaining a timely, robust, and strategic estate plan. Give us a call today to make sure your plan is current and includes all the necessary provisions to keep a contest from occurring in the future. Read More