The Estate of The Union Season 3|Episode 8 is out now! We all accumulate stuff as we go through life. When someone dies, what to do with all the stuff the deceased owned can be complex and exhausting.
It can also create fights over Who Gets What. In this edition of The Estate of the Union, Brad Wiewel interviews Ann Lumley, the Director of After Life Care at Texas Trust Law. Ann has seen just about everything that can happen with an estate where stuff (otherwise known as heirlooms and collectibles) can be an issue. Ann helps dissect the problems and highlights some strategies to help avoid collisions that often occur.
In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insights into the confusing world of estate planning, making an often daunting subject easier to understand. It is Estate Planning Made Simple! The Estate of The Union Season 3|Episode 8 is out now! The episode can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. If you would prefer to watch the video version, please visit our YouTube page. Please click on the links to listen to or watch the new installment of The Estate of The Union podcast. We hope you enjoy it.
Texas Trust Law focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. We provide estate planning services, asset protection planning, business planning, and retirement exit strategies.
The numbers are clear: 70% of Americans expect to need long-term care at some point in their retirement. Many people aren’t aware of the importance of long-term care until they are uninsurable because of health conditions or can’t afford the premiums. How can you plan? A Medicaid Asset Protection Trust can help with long term care costs.
Depending upon where you live and the type of care needed, long-term care costs anywhere from $50,000 to $100,000 per year. With an average stay of two to five years, it’s a hefty financial burden without long-term care insurance, a MAPT, and good planning.
Creating a Medicaid Asset Protection Trust requires the help of an experienced estate planning attorney to be sure you obtain all of the benefits of such a trust. Long-term care costs are one of the biggest financial worries for retirees, as noted in a recent article, “This Trust Can Protect Your Assets From Long-Term Care Costs,” from Kiplinger.
The Medicaid Asset Protection Trust (MAPT) moves money out of your estate into a trust, so it becomes uncountable for Medicaid means-testing purposes. It has to be created and funded at least five years before the applicant can be deemed eligible for Medicaid funding, known as the “Medicaid look-back.”
The trust needs to be set up by an experienced estate planning attorney because there are many fine points to consider. The MAPT won’t serve its intended purpose if it’s not set up correctly.
The MAPT must be an irrevocable trust, meaning the grantor (who set up the trust) no longer has access to those assets. This can be a little unnerving. You’ll also want to speak with your estate planning attorney about your plans for the near and distant future. How will you access funds if you’re putting funds into the trust? Who will be able to access them?
This trust will also benefit families with assets closer to the old estate tax levels. In 2024, the gift and estate tax exemptions are still very high—$13.61 million. However, if the law sunsets without Congress acting, the estate tax could revert to around $5 million or lower if the federal government decides more wealth needs to be taxed. Assets in a trust are not part of the taxable estate, so having a trust also protects assets from federal and state estate taxes.
Trusts are also powerful means of controlling asset distribution. Your MAPT could distribute a set amount of money to a beneficiary throughout their lifetime, or a minor grandchild could be given a certain amount after they’ve completed four years of college or achieved a particular goal.
Consult an estate planning attorney to learn how a Medicaid Asset Protection Trust can help with long term care costs, if they’re right for you, and how to get started. If you would like to learn more about managing assets for long term care, please visit our previous posts.
Naming guardians for your minor children is one of the most critical estate planning decisions for parents. It ensures that someone you trust will care for your children in the manner you prefer if you are no longer able to do so. Failing to choose a guardian can make your passing even harder on your children.
An insightful article from Slate tells of an unplanned guardianship situation. As the story goes, a couple in their 60s had decided not to have children but found themselves as the only available guardians for a great-nephew. The child’s mother passed away, his father was in prison and no one else was available. This forced the couple to fill the needs of a grieving 10-year-old from a different socioeconomic background. While they told of doing their best, it was hard for them and their great-nephew. This story emphasizes the unpredictability of life and the critical nature of having a guardianship plan in place.
An article from Forbes highlights a range of considerations for choosing a guardian. You must consider not just who loves your children but also who can handle the responsibility. Consider their lifestyle, location, values, and the potential guardian’s family dynamics. Are they prepared to take on the emotional and financial responsibility of raising children?
Who would be the first to step in and care for your children in an emergency? Sometimes, the best choice for a guardian might not be immediate family but a close friend or someone who has always been part of your children’s lives.
If your child is old enough, their opinion might be helpful. Asking them could provide insights into who they would be comfortable living with should anything happen to you.
Without a will specifying a guardian for minor children, the courts will decide who will care for your children. This situation can lead to outcomes you might never have intended. By choosing a guardian yourself, you control the process and ensure that your children’s future is in the hands of someone you trust.
Absolutely. Your decision today isn’t set in stone. People’s circumstances and relationships change, and your estate plan, including guardianship decisions, should be reviewed and can be revised as needed.
Becoming a guardian on short notice can be overwhelming. It’s crucial to consider the emotional and psychological support the child will need, such as counseling, and the practical aspects, like schooling and healthcare. Understanding the child’s background and needs will help smooth their transition into your family.
It’s never too early to plan for the future of your minor children. Naming guardians for your minor children is critical for parents, and requires thoughtful consideration and difficult conversations. If you would like to learn more about guardianship, please visit our previous posts.
Retirement is a time to relax and enjoy life after years of hard work. However, parents of children with special needs will need to handle this transition with care. Planning for retirement with a special needs child is critical to your child’s long-term care and your own financial future.
Beginning your retirement planning early is crucial. Likewise, this process should be an extension of your existing financial planning. Starting early allows you to anticipate state and federal benefits changes and adjust your strategies accordingly.
For instance, Medicaid waivers and other support systems can be unpredictable. Just because these benefits systems can supplement your needs today doesn’t mean they’ll be able to do so tomorrow. Flexible, far-sighted financial preparation can help you absorb changes in benefits programs.
Open communication between both parents is vital. It’s common for parents to prioritize their child’s needs over their own retirement savings. However, finding a balance is key. Both parents should be on the same page regarding their goals for retirement and their child’s future. Involving a financial planner and a special needs attorney can help align these goals and create a comprehensive plan.
Two professionals with Special Needs Alliance weighed in on planning for retirement with a special needs child. One, Jeff Yussman, emphasizes the importance of honest discussions about assets, liabilities, and the desired retirement lifestyle.
Another advisor, Emily Kile, highlights the need to leave an advocate for their child in advance. It may be smart to move a child with special needs to a future housing option while parents are still alive. This can reduce the pain and uncertainty of making such moves when the parents pass away.
The first step is reviewing the titles on your accounts, beneficiary designations and estate plans. Ensuring that the chosen trustees and agents align with the goals for your child with special needs is critical. You should consider the financial security available through life insurance policies, such as second-to-die life insurance.
Parents must also plan for the long-term care of their child with special needs. This includes preparing for the potential loss of private health insurance and understanding the longevity of their financial plans. It is important to have regular estate planning meetings that account for these factors.
While well-intentioned family members might offer to care for your child, their circumstances can change. Marriages, divorces, and other life events can impact their ability to provide consistent care. Plan for these variables to ensure your child’s stability.
Planning for retirement with a special needs child can be challenging. However, you don’t have to do it alone. If you would like to learn more about special needs planning, please visit our previous posts.
When planning, especially under the umbrella of elder law and Medicaid, one tool often considered is the irrevocable trust. While reviewing the advantages and challenges of integrating an irrevocable trust into Medicaid planning, it’s important to consider the broader implications of asset management for elder care. This article helps to clarify how these trusts work, their benefits and their limitations.
An irrevocable trust serves a strategic role in Medicaid planning. By transferring assets into an irrevocable trust, these assets are generally not counted as personal assets for Medicaid eligibility purposes. This arrangement allows individuals to qualify for Medicaid, while preserving their wealth for future beneficiaries. This aspect of asset protection is paramount, as the trust shields the assets from creditors and legal claims, ensuring that the beneficiaries’ inheritance remains intact and secure.
Medicaid Asset Protection Trusts (MAPTs) are one type of irrevocable trust specifically designed to safeguard a Medicaid applicant’s assets from being counted towards Medicaid eligibility, as explained by Very Well Health. This is crucial for those whose assets would otherwise disqualify them from receiving Medicaid benefits for long-term care, which is often necessary for custodial care in nursing homes or at home.
Very Well Health notes that Irrevocable Funeral Trusts and Medicaid Compliant Annuities are also used to shield assets to enable seniors to become eligible for Medicaid benefits.
The primary advantage of using an irrevocable trust in Medicaid planning lies in its ability to protect and preserve assets. Since the assets placed in the trust are no longer under the direct control of the individual, they are effectively shielded from many forms of legal recovery efforts, including those from creditors and lawsuits. This protective measure ensures that the assets can be passed on to loved ones without being depleted by external claims or excessive taxation.
Despite their benefits, irrevocable trusts are not without their drawbacks. The most significant of these is the loss of control over the assets. Once assets are placed into an irrevocable trust, the terms of the trust cannot be easily changed, nor can the grantor retrieve the assets. This lack of flexibility can pose a problem if the financial situation of the grantor changes unexpectedly. The Medicaid five-year “look-back” period also applies, meaning that any assets transferred into the trust within five years before applying for Medicaid can incur penalties, potentially affecting Medicaid eligibility.
Setting up and maintaining an irrevocable trust involves navigating complex legal and financial planning landscapes. The trust must be structured correctly to comply with Medicaid regulations and to align with personal estate planning goals. This often requires sophisticated legal and financial advice to ensure that all aspects of the trust serve the intended purpose without unintended consequences.
Key Takeaways:
Asset Protection: Irrevocable trusts, including MAPTs, protect assets from being counted towards Medicaid eligibility, allowing individuals to qualify while preserving wealth for beneficiaries.
Benefits of Irrevocable Trusts: Assets placed in an irrevocable trust are protected from creditors and lawsuits, ensuring that the beneficiary’s inheritance remains secure.
Disadvantages of Irrevocable Trusts: Once assets are transferred into an irrevocable trust, the grantor cannot alter the trust terms or retrieve the assets, reducing flexibility. Transferring assets into a trust less than five years before applying for Medicaid can incur penalties due to the look-back period, potentially affecting eligibility.
Complex Setup Requires Legal Guidance: Establishing and maintaining an irrevocable trust requires careful legal and financial planning to ensure compliance with Medicaid rules and alignment with personal goals.
If you have the goal of integrating an irrevocable living trust into Medicaid planning, work closely with your estate planning and elder law attorneys to ensure you have covered all of the complexities of this law. If you would like to learn more about Medicaid planning, please visit our previous posts.
Even if it was never an issue in the past, managing a big age gap in your estate planning can present challenges. When one partner is ten or more years younger than the other, assets need to last longer, and the impact of poor planning or mistakes can be far more complex. The article in Barron’s “Big Age Gap With Your Spouse? What You Need to Know” explains several vital issues.
Examine healthcare coverage and income needs. Health insurance can become a significant issue, especially if one partner is old enough for Medicare and the other does not yet qualify. How will the couple ensure health insurance if the older partner retires and the younger depends on the older partner for healthcare? The younger partner must buy independent healthcare coverage, which can be a budget-buster.
Be strategic about Social Security. Experts advise having the older spouse delay taking Social Security benefits if they are the higher-income partner. If the older spouse passes, the younger spouse can get the bigger of the two Social Security benefits. Delaying benefits means the benefits will be higher.
Planning for RMDs—Required Minimum Distributions. Roth conversions may be a great option for couples with a significant age gap. Large traditional tax-deferred individual IRAs come with large RMDs. When one spouse dies, the surviving spouse is taxed as a single person, which means they’ll hit high tax brackets sooner. However, if the couple converted their IRAs to Roths, the surviving spouse could withdraw without taxes.
Estate planning becomes trickier with a significant age gap, especially if the spouses have been married before. Provisions in their estate plan need to be made for both the surviving spouse and children from prior marriages. An estate planning attorney should be consulted to discuss how trusts can protect the surviving spouse, so no one is disinherited. Beneficiary accounts also need to be checked for beneficiary designations.
Couples with a significant age gap need to address their own mortality. A younger partner who is financially dependent on an older partner needs to be involved in estate and finance planning, so they know what assets and debts exist. Life has a way of throwing curve balls, so both partners need to be prepared for incapacity and death.
Managing a big age gap in your estate planning really requires careful and consistent review of your planning. Plans should be reviewed more often than for couples in the same generation. A lot can happen in six months, especially if one or both partners have health issues. If you would like to learn more about estate planning issues for older couples, please visit our previous posts.
Planning for the financial future of a loved one with special needs is crucial. Two essential tools in special needs planning are ABLE accounts and Special Needs Trusts (SNTs). Understanding the differences between an ABLE Account and Special Needs Trust will help you make the right choice.
An Achieving a Better Life Experience (ABLE) account is a valuable tool for people with disabilities. As Special Needs Answers reports, they can use it to save up to $18,000 annually starting in 2024. Unlike other accounts, this doesn’t deprive people of means-tested benefits.
ABLE account holders can save up to $100,000 tax-free and spend the funds on disability-related expenses. This covers assistive technology, transportation, education and even leisure activities. Account administration occurs at the state level, and eligibility is set to expand. While anyone disabled before age 26 qualifies now, the threshold will increase to 46 in 2026.
Likewise, individuals can open and manage their ABLE accounts. This provides much more financial independence than a Special Needs Trust (SNT).
A Special Needs Trust (SNT) is a legal document that provisions funds for disabled loved ones. Like the ABLE account, these funds don’t impact eligibility for Medicaid or SSI. An SNT can pay for items that government benefits don’t cover, including therapy, medical care, recreation and travel.
However, there are some limits. Without affecting benefits, SNTs generally can’t be used for essentials, like food and shelter. A Special Needs Trust also can’t cover cash payments or gift cards. Unlike an ABLE account, a trustee manages the SNT. This trustee works with special needs planners to maximize the trust’s value.
One of the main differences between ABLE accounts and Special Needs Trusts is their contribution limits. ABLE accounts are capped at $18,000 annually, with a total savings limit of $100,000. SNTs have no set contribution or savings limits but have tighter controls.
An individual manages their ABLE account. In comparison, a trustee manages an SNT in the name of a disabled individual.
Another critical difference is eligibility of the disabled person. For now, ABLE accounts are only available to people who became disabled before age 26. This is in contrast to SNTs, which have no age restrictions. An SNT is ideal for long-term asset management, while ABLE accounts offer flexibility.
Consult with an elder law attorney to have a full understanding of the differences between an ABLE Account and a Special Needs Trust. Choosing between the two depends on your family’s goals and needs. If you’re looking for a quick, easy, flexible way to save for a loved one’s disability-related expenses, an ABLE account might be ideal. However, a Special Needs Trust is better for long-term planning with no savings limits.
Key Takeaways:
ABLE Account: Offers flexibility and direct control for disabled individuals, with a $100,000 savings limit.
Special Needs Trust: Offers greater flexibility and long-term security but requires a trustee for oversight.
Planning is a Must: An ABLE Account or SNT may better fit your situation. Either way, you should begin planning sooner rather than later to protect your loved one.
Plan Ahead: Work with an estate planning attorney to decide which tool is best for your family.
Comprehensive estate planning today includes elder law and other strategies that help protect your assets and interests if you experience cognitive decline or incapacity. Have you thought about protecting your mental health and care if you can’t advocate for yourself? Based on the Trust & Will article “Guide to Psychiatric Advance Directives – What You Need to Know,” we explore psychiatric advance directives (PADs), their purpose and how to establish them. A Psychiatric advance directive is an additional tool to consider in your overall estate plan.
You might not have heard of psychiatric advance directives (PADs). However, they might be an important strategy in your estate plan. PADs are instructions and preferences for your mental health care. Similar to a living will or advance medical directives, PADs are a legal document outlining your preferences for psychiatric treatment should you become unable to make decisions due to a mental illness crisis. Picture it as your roadmap, guiding healthcare providers on your treatment choices, from medications to therapies, even during challenging times when communication might be difficult.
Psychological and physical health are essential for an individual’s overall wellness. Psychiatric advance directives proactively communicate your psychological treatment preferences, empowering an advocate for your mental health care.
Consider it a letter of instructions to a trusted friend or family member and your healthcare team, ensuring that your wishes are respected and understood regarding your choice of psychiatric provider and mental health facility.
You probably know about advance medical directives and medical powers of attorney in estate planning. Most PADs have these two components. It’s crucial to meet state-specific requirements, such as being of legal age and having witnesses. Remember, PADs come into effect when you’re determined unable to make mental health decisions, often by a qualified mental health professional.
Key Psychiatric Advance Directives (PADs) in Estate Planning Takeaways:
What Are PADs? PADs are legal documents that include advance medical directives and powers of attorney outlining one’s mental health wishes.
Why Have PADs? Instructions and guidance for psychological care when an individual is incapacitated.
How to Establish PADS? Requirements are the same as advance medical directives and a medical POA.
Your mental health matters, and A psychiatric advance directive is an additional tool to consider in your overall estate planning. Speak to an Estate Planning or Elder Law attorney to discuss your needs and how a PAD may play a role. If you would like to learn more about advance directives, please visit our previous posts.
Individuals often overlook strategies in their estate planning to avoid restrictive guardianship if they become incapacitated. While guardianship protects individuals who cannot decide or act for themselves, it can inadvertently strip them of their autonomy. There are alternatives to avoid guardianship as you age.
The restrictive nature of a court-appointed guardian acting on behalf of an impaired individual doesn’t account for that person’s wishes. In a video titled “Alternatives to Guardianship,” The American College of Trust and Estate Counsel (ACTEC) highlights essential guardianship alternatives that preserve a person’s autonomy. This article discusses the need for protection as we age, what guardianship is and how powers of attorney (POAs) are alternative estate planning strategies that give individuals more control over decision-making.
Aging and estate planning go hand-in-hand. Estate plans with strategies that address cognitive decline and incapacity protect you from financial risks, including misuse of assets or unauthorized withdrawals. When it comes to healthcare, individuals must retain control over medical decisions. They may not be honored if you are incapacitated without legally documented healthcare wishes.
Guardianship involves the legal authority granted to a court-appointed guardian to act and make decisions for a person who is physically or mentally incapable. The guardian oversees the person’s health, medical care and property. When an individual is evaluated and deemed incapacitated, a court will assign a guardian.
A guardian’s responsibilities include making personal care decisions, overseeing living arrangements and handling their financial affairs. They are required to keep detailed records and check in with the court regularly. However, guardianships are often appointed without considering alternatives, and they strip an individual of all decision-making authority, including where they live, what they eat and whether they will get any medical care. ACTEC notes that guardianship can be hurtful to the family, in addition to being an expensive process.
A power of attorney (POA) is a legal document that appoints someone you trust to act on your behalf. Only a durable power of attorney is valid if you are incapacitated. There are different POAs to protect your financial interests and medical wishes.
To prevent financial risks if you are incapacitated, a financial power of attorney names an agent with authority over financial matters, such as accessing bank accounts, paying bills and managing retirement accounts, real estate and investments.
A medical power of attorney is a healthcare or advance directive that allows someone else to make medical decisions based on your wishes. Often called a health care agent, this person follows your medical treatment as outlined in the document.
Key Guardianship Alternatives Takeaways:
Common Risks as We Age: Financial loss and unwanted medical care.
Typical Cons of Guardianship: Total loss of autonomy with court-appointed guardians.
Important Benefits of POAs: More control of your wishes and asset protection.
Elder law and estate planning strategies that protect you as you age should not be synonymous with surrendering autonomy through guardianship. Individuals can confidently navigate this terrain by exploring alternatives to avoid guardianship as you age. If you would like to learn more about guardianships, please visit our previous posts.
Today’s wedding couple is as likely to be 30 or 50 years old as they are to be in their twenties. This trend underscores the importance of having open discussions about finances and retirement before exchanging vows. A recent article from Next Avenue, “The Talk Over-50s Should Have Before Tying the Knot.” Whether you’re getting married for the first time or the second, being closer to retirement has major financial implications. There are topics you need to address before a mid-life marriage.
The most important thing is to disclose each person’s financial situation completely. For some people, this includes their retirement goals and lifestyle choices. What are the potential healthcare issues? Is there debt to be considered? How are each managing their investments?
If both people own homes, a plan for going forward needs to ask a simple question: where will the couple live? Will one sell their home or turn it into a rental property? If it is sold, will the seller retain all the income, or will they buy into ownership of the joint residence? Emotional attachments to homes can make this a difficult discussion, but it needs to be addressed.
Getting married changes each spouse’s legal status, meaning estate plans must be updated. If both have an existing estate plan, it needs to be reviewed. Powers of Attorney, Healthcare Proxy, and other estate planning documents must also be updated.
While reviewing and revising estate plans, don’t neglect to check on any accounts with named beneficiaries. More than a few ex-spouses have received insurance proceeds or accounts because someone neglected to update these accounts. The named beneficiary overrides anything in your will, which is critical to updating the estate plan.
If you both have children from prior marriages, meeting with an estate planning attorney to determine how to manage property distribution is another critical step before getting married. You may wish to create and fund trusts before marriage, so assets remain separate property. There are as many different types of trusts as there are family situations, from keeping assets separate to providing for a surviving spouse while ensuring biological children receive their inheritance (SLAT), or family trusts where assets are moved into the trust for the surviving spouse to allocate assets to heirs based on their needs.
Social Security planning should also be part of the discussion. If one spouse is a widow who was receiving survivor benefits, they could lose those benefits when they get married.
Talk with an estate planning attorney to address these topics before a mid-life marriage. That way you fully understand your situation and ensure you and your spouse are ready for the changes and challenges of your senior years together. If you would like to learn more about mid-life or second marriages and estate planning, please visit our previous posts.
Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact Texas Trust Law to schedule a complimentary consultation.
