Recent Successes And News:   Month: September 2022

How frequently you should review your estate plan depends on how old you are and whether there has been a significant change in your circumstances. If you are over age 60 and you have not updated your estate plan in many decades, it is almost certain that you need to update your documents. After that, you should review your plan every five years or so. But if you are younger, you do not need to do so nearly as often.

Age

Here are a few age ranges and what they mean in terms of estate planning:

18–30   Everyone needs a basic will, a durable power of attorney, and a health care proxy so that they have people they choose to step in and make decisions for them in the event of incapacity. And if you have children, you need a trust for property management for those children up to a mandatory age of distribution. 

30–40   Once you begin accumulating assets, get married, and have children, it is important to create an estate plan to care for your loved ones in the event of your death. It also cannot hurt to update your will, durable power of attorney, and health care proxy, since the people you may have appointed at 18 (your parents?) may not be the people you want in these roles at 35.

40–60   Unless there has been a change in your circumstances, and assuming you have set a good plan in place during your 30s, you probably do not need to review your estate plan during your 40s and 50s. (Unless you are notified of a change in the laws that may impact you.) 

60–70+   Once you reached 60, it is time to start regularly reviewing your estate plan. Your children are probably grown. You may have grandchildren. And, hopefully, you have accumulated some wealth and may need estate tax planning. The people you appointed to step in in the event of incapacity when you were 35 may not be in a position to assist when you are 65. You may have retired or are contemplating doing so. And, unfortunately, the chances of disability or death increase with every year and asset preservation planning may now be appropriate.

Change in Circumstances

While the timeline above outlines when you should review and perhaps update your estate plan, it needs to be supplemented by the following potential changes in circumstances that would warrant a review of your plan to see if it still meets your goals and needs:

• Marriage. You are likely to want your assets to go to your spouse and to name him or her to be your agent in the event of incapacity.
• Divorce. Likewise, if you get divorced, you probably will not want your assets to go to your ex-spouse or to rely upon him or her to step in if you were to become incapacitated.
• Children. Once you have children, you’ll want to provide for them by means of a trust with distribution at a mandatory age (i.e. 25, 30) and to name someone to step in as guardian in the event of your death or incapacity and that of their other parent, if any. Generally, once you have a plan in place you do not have to update it if you have more children.
• Disability. If you or someone who would inherit from you becomes disabled, you will need to plan to protect and manage your assets, whether for yourself or for your beneficiaries.
• Wealth. If you accumulate sufficient assets to exceed the thresholds for state and federal estate taxes — $12.06 million federally — you may want to plan to reduce or eliminate such taxes.
• Moving. If you move to a new state or country, it will be important to have your estate plan reviewed to make sure it works in the new jurisdiction.

In short, if you have no estate plan you should consider one. If you have an estate plan and have not reviewed or updated it in many years, contact the Estate Planning Attorneys at Kommer Bave & Ciccone LLP and we will help you through the process.

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Creating and executing estate planning documents is just the first step. Once you have completed the documents, you need to know what to do with them. 

All estate plans should include, at minimum, two important planning instruments: a durable power of attorney and a will. A trust can also be useful to avoid probate and to manage your estate both during your life and after you are gone. In addition, medical directives allow you to appoint someone to make medical decisions on your behalf. Once you have all these essential estate planning documents, you need to make sure they are stored properly and get to the right people. 

Store the Documents Properly
Your estate planning documents should be stored in a safe, secure location that is accessible to your personal representative (also called an executor), the person you appoint to handle your estate’s affairs after your passing. Some law firms will store your original signed documents for you. If you want to keep them at home, you should use a water- and fire-proof safe or filing cabinet. Many people use a safe deposit box in a bank, but these can be hard for your representative to access. If you do use a safe deposit box, you may want to have a joint owner on the account. 

Spread the Word
It is critical that you tell your personal representative where the documents are located so that he or she can easily access them when needed. If the documents are locked away, your representative needs to know the combination or where the key is located. 

You should also talk to other people who might be affected — such as your agent under a power of attorney or a health care proxy — about what you want if you are unable to communicate your wishes yourself. Doing this ahead of time will help them execute your wishes when the time comes. You may want to give family members copies of your documents. 

Avoid Confusion
Make sure you destroy any old estate planning documents that are no longer valid. Old documents can cause confusion among family members and could lead to litigation. 

In addition, do not write on your current documents. If you want to make a change, contact your estate planning attorney to formally change the document. Handwritten additions are usually not valid and could raise questions about the document. 

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It is an unfortunate reality that with the increasing number of natural disasters across the country, including fires, floods, and hurricanes, the chance that you could lose your house and possessions has become more likely. In the event of such a calamity, it is important that your estate planning and other important documents are beyond reach and easily retrievable. 

If your home is destroyed by a natural disaster or another event, you will want to be able to access important information quickly. First, you need to assemble all your crucial documents and information, including the following: 

• Account numbers and passwords. Keep a list of your bank and e-mail accounts and securely store your passwords.  
• Contact information. Make sure you know how to contact your attorney, advisors, and insurance company. 
• Legal documents. You should have copies of all your legal documents, including your will, trust, power of attorney, and health care proxy. You also need to know where any deeds and insurance contracts are kept. 
• Tax returns. It is recommended that you have three years’ worth of tax returns stored. 
• Medical information. You need to keep track of any prescription medicine and health insurance information.

 

Once you have all your documents and information, you need to store them in a safe and secure location that will survive a natural disaster. A fireproof and floodproof safe in your house is one way to safeguard documents; a safe deposit box at a bank is also an option (but a joint owner should be named for ease of access). Your attorney may be able to store your legal documents for you. Many firms offer secure storage of documents.

Another option is online storage. There are online cloud storage systems that ensure your documents are available to you just by logging on. If you use online storage, make sure you know your passwords. If your information is on a hard drive or thumb drive, store the drives in a secure location, not just in a desk drawer.   

Regardless of which storage option you use, be sure your loved ones know where the information is and how to access it. 

To make certain you have all the pieces of your estate plan in place and stored properly, contact the attorneys at Kommer Bave & Ciccone LLP.

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Parents want their children to be taken care of after they die. But children with disabilities have increased financial and care needs, so ensuring their long-term welfare can be tricky. Proper planning by parents is necessary to benefit the child with a disability, including an adult child, as well as assist any siblings who may be left with the caretaking responsibility.

Special Needs Trusts
The best and most comprehensive option to protect a loved one is to set up a special needs trust (also called a supplemental needs trust). These trusts allow beneficiaries to receive inheritances, gifts, lawsuit settlements, or other funds and yet not lose their eligibility for certain government programs, such as Medicaid and Supplemental Security Income (SSI). The trusts are drafted so that the funds will not be considered available to the beneficiaries in determining their eligibility for public benefits.

There are three main types of special needs trusts:

• A first-party trust is designed to hold a beneficiary’s own assets. While the beneficiary is living, the funds in the trust are used for the beneficiary’s benefit, and when the beneficiary dies, any assets remaining in the trust are used to reimburse the government for the cost of medical care. These trusts are especially useful for beneficiaries who are receiving Medicaid, SSI or other needs-based benefits and come into large amounts of money, because the trust allows the beneficiaries to retain their benefits while still being able to use their own funds when necessary.
• The third-party special needs trust is most often used by parents and other family members to assist a person with special needs. These trusts can hold any kind of asset imaginable belonging to the family member or other individual, including a house, stocks and bonds, and other types of investments. The third-party trust functions like a first-party special needs trust in that the assets held in the trust do not affect a beneficiary’s access to benefits and the funds can be used to pay for the beneficiary’s supplemental needs beyond those covered by government benefits. But a third-party special needs trust does not contain the “payback” provision found in first-party trusts. This means that when the beneficiary with special needs dies, any funds remaining in the trust can pass to other family members, or to charity, without having to be used to reimburse the government.
• A pooled trust is an alternative to the first-party special needs trust.  Essentially, a charity sets up these trusts that allow beneficiaries to pool their resources with those of other trust beneficiaries for investment purposes, while still maintaining separate accounts for each beneficiary’s needs. When the beneficiary dies, the funds remaining in the account reimburse the government for care, but a portion also goes towards the non-profit organization responsible for managing the trust.

Life Insurance
Not everyone has a large chunk of money that can be left to a special needs trust, so life insurance can be an essential tool. If you’ve established a special needs trust, a life insurance policy can pay directly into it, and it does not have to go through probate or be subject to estate tax. Be sure to review the beneficiary designation to make sure it names the trust, not the child. You should make sure you have enough insurance to pay for your child’s care long after you are gone. Without proper funding, the burden of care may fall on siblings or other family members. Using a life insurance policy will also guarantee future funding for the trust while keeping the parents’ estate intact for other family members. When looking for life insurance, consider a second-to-die policy. This type of policy only pays out after the second parent dies, and it has the benefit of lower premiums than regular life insurance policies. 

ABLE Account
An Achieving a Better Life Experience (ABLE) account allows people with disabilities who became disabled before they turned 26 to set aside up to $15,000 a year in tax-free savings accounts without affecting their eligibility for government benefits. This money can come from the individual with the disability or anyone else who may wish to give him money.

Created by Congress in 2014 and modeled on 529 savings plans for higher education, these accounts can be used to pay for qualifying expenses of the account beneficiary, such as the costs of treating the disability or for education, housing and health care, among other things. ABLE account programs have been rolling out on a state-by-state basis, but even if your state does not yet have its own program, many state programs allow out-of-state beneficiaries to open accounts. 

Although it may be easy to set up an ABLE account, there are many hidden pitfalls associated with spending the funds in the accounts, both for the beneficiary and for her family members. In addition, ABLE accounts cannot hold more than $100,000 without jeopardizing government benefits like Medicaid and SSI. If there are funds remaining in an ABLE account upon the death of the account beneficiary, they must be first used to reimburse the government for Medicaid benefits received by the beneficiary, and then the remaining funds will have to pass through probate in order to be transferred to the beneficiary’s heirs.  

Get Help With Your Plan
However you decide to provide for a child with special needs, proper planning is essential. Talk to our Special Needs Planning Attorneys to determine the best plan for your family. 

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How can you ensure that your special needs child will remain well cared for and secure once others assume the role of guardian or caregiver? While creating a financial plan and establishing a specialized trust are central to preparing for your child’s future, special needs planners also advise families to write down their intentions and expectations in a document referred to as a Memorandum of Intent, also known as a “Letter of Intent.”

The Memorandum is not legally binding and, when directions conflict, those in wills, trusts and other legal documents take precedence. But for “non-legal” matters, it will serve as the primary source of information about your child, providing a roadmap for the courts, guardians, caregivers and others involved in your child’s life. That can be critical in easing your child’s transition, ensuring continuity of care and treatment, as well as appropriate decision making regarding living arrangements and other lifestyle choices.

Topics that can be included in a Memorandum, include the following:

• Individuals and organizations that should be contacted upon your death or incapacity
• Your child’s health care and therapeutic needs
• Contact information for doctors, therapists and teachers
• The location of medical records and other important documents
• Your child’s personal history, degree of independence or mobility, behavioral issues, and need for assistive technologies
• Your child’s interests and personality traits
• Your preferences for education, religion, and childrearing practices.

While writing a Memorandum of Intent can be time-consuming and emotionally taxing, it’s very important not to postpone this task. Once the Memorandum is complete, place the original in a secure location and distribute copies to others involved in your child’s life. You may also make sure that your Estate Planning Attorney has a copy in his or her file. Then, mark your calendar, setting aside time to revise the Memorandum at least once a year so it will continue to reflect your child’s current life stage and situation.

If you have a child with special needs, ask our Special Needs Planning Attorneys about including a Memorandum of Intent in your child’s care plan.

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Buy enough life insurance. A parent is irreplaceable, but someone will have to fill in if the worst happens. It may be siblings or other relatives. In all likelihood, that family will have to pay for at least some services the parent or parents had provided when able. If the estate is not large enough for this purpose, it can be made large enough through life insurance proceeds. Premiums for second-to-die insurance (which pays off only when the second of two parents passes away) can be surprisingly low.

Set up a trust. Any funds left for a child with special needs, whether from an estate or the proceeds of a life insurance policy, should be held in trust for his or her benefit. Leaving money for anyone with a special need outright jeopardizes public benefits. Many people with special needs cannot manage funds — especially large amounts. Some families disinherit children with special needs, relying on their siblings to care for them. This approach is fraught with potential problems. Siblings can be sued, get divorced, disagree on their responsibilities, or run off with the funds. It can also cause tax problems for the siblings. The best approach is a trust fund set aside for the child with special needs.

Create a will and appoint a guardian. While a will and the appointment of a guardian is important for anyone with minor children, it is doubly so if the child has special needs. Finding the right guardian can be difficult. In some cases, the care needs of the child may be so demanding that he or she will need a different guardian from his or her siblings. The parents need to make these determinations while they can. The will is the vehicle for the appointment of a guardian.

An adult child may also require a guardian when the parent can no longer serve in this role. A good plan of action is to make the transition to a new guardian while the parent is able to assist in the process. This can be in the form of a co-guardianship, or passing the baton to a successor guardian.

Memorandum of Intent. All parents caring for children with special needs are advised to create a Memorandum of Intent. This is a written care plan that memorializes in writing what any successor caregiver would need to know about what the parent’s wishes are for the child’s care. Should the child be in a group home, live with a parent, be on his or her own? Usually, the parent knows best, but needs to pass on the information. The written care plan can be kept in the attorney’s files with the parent’s estate plan.

Coordinate with other family members. Even a carefully developed plan can be sabotaged by a well-meaning relative who leaves money directly to the child with a special need. If a trust is created for the benefit of the child, grandparents and other family members should be told about it so that they can direct any bequest they may like to leave to that child through the trust.

For more legal information and assistance for those with special needs, call our Special Needs Planning Attorneys. 

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