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Trusts/Wills
What is a Trust?
A Trust is a living arrangement that governs how your assets are managed and distributed. You, the “Grantor”, transfer title to certain property to another party, known as the “Trustee”, who holds the property for your benefit or the benefit of others, known as “Beneficiaries”.
The terms and conditions under which the property is to be held by the Trustee are specified in the written document known as a “Trust agreement” or are established by a Will. The Trustee may be an individual or an institution such as a bank or Trust Company. Most commonly, you may serve as your own Grantor, Trustee, and Beneficiary of your own Trust.
Why create a Trust?
A Trust can privately accomplish your personal and financial objectives, including:
- Asset Consolidation and continuity in the management of financial affairs
- Control
- Probate Avoidance
- Tax Planning
Can a Trust be changed?
Trusts can be written so that they are either permanent (irrevocable) or changeable (revocable).
Irrevocable
If the purpose of the Trust is to obtain either present or future tax benefits, then the Trust should be irrevocable. Irrevocable Trusts require that the Grantor give up all rights to the property placed in the Trust and would generally be unable to modify or revoke the terms of the Trust in exchange for potential tax benefits.
Revocable
If the purpose of creating a Trust is to avoid probate and provide for the possible loss of capacity, then the Trust should be revocable or changeable. Under a revocable Trust, the Grantor retains the right to change the terms of the Trust or terminate it at any time until death.
When can a Trust be established?
A Trust can be created either when one is living (Living Trust) or automatically upon the time of death (Testamentary Trust). Living Trust A Living Trust, also known as inter-vivos, is created during a person’s lifetime for the benefit of that person or of other beneficiaries. Testamentary Trust A Testamentary Trust is established under a Will and becomes effective upon death. The Will, however, which includes the Testamentary Trust, is subject to probate.
What are some common Trusts?
Revocable Living Trust
This type of Trust is usually structured to allow individuals to control their assets while they are still capable of doing so. Additionally, a Revocable Living Trust provides instructions as to how one’s assets will be managed and distributed in the event of incapacity or death. This Trust will avoid probate and may reduce estate settlement expenses. The assets placed in the Trust will avoid probate, but will be included in the estate for purposes of estate tax formulation.
Credit Shelter Trust
The primary purpose of this type of Trust is to assure that both a husband and wife utilize their estate and gift tax credits. For example, one can exempt up to $5,000,000 of assets from estate tax in 2012.
Marital Deduction Trust
The Marital Deduction Trust is an irrevocable Trust that becomes effective at the first spouse’s death. This type of Trust is funded with property to be held for the benefit of and is usually controlled by the surviving spouse.
Qualified Terminal Interest Property Trust (QTIP)
The QTIP is a type of Marital Deduction Trust that is usually funded with the assets in excess of the applicable exclusion amount that are placed in the Credit Shelter Trust. The QTIP provides income to the surviving spouse but assures that assets pass to the beneficiaries chosen by the deceased spouse rather than those selected by the surviving spouse.
Irrevocable Life Insurance Trust (ILIT)
The proceeds of a life insurance policy owned by a Trustee of an ILIT are usually removed from an individual’s estate and therefore, from estate tax liability. The income-tax-free life insurance proceeds can be used to pay estate taxes and other settlement expenses quickly.
Charitable Remainder Trust (CRT)
The CRT provides for a future gift to a qualified charity. The individual, his/her spouse, or his/her children will receive income from the Trust for life or over a period of years, after which all remaining Trust assets will be distributed to the charitable beneficiaries. Such an arrangement may reduce the value from an individual’s taxable estate, and therefore the estate tax liability.
Trusts/Wills
Long Term Care Planning
Your second half of life could be costly both financially and emotionally. Will you be proactive or reactive?
What is Long Term Care?
Long term care is a range of services and supports you may need to meet your personal care needs. It includes some type of assistance with the activities of daily living, including:
- Dressing
- Bathing
- Eating
- Toileting
- Continence
- Transferring
Statistics
Cost of care
- Home care: $25/hour
- Assisted Living: $3,500-$8,000/month
- Nursing home: $8,000-$11,000/month
Who will need some type of care?
If you are over 65 years of age:
- 78% will need some type of care, usually home care or assisted living
- 20% will need nursing home care
- 2% are lucky and just drop dead
Long Term Care Planning
Nursing Home Planning
What is nursing home planning?
The Process of Nursing Home Planning is the formulation of a plan that provides for a loved one’s nursing home care while preserving their assets for either their spouse’s use or their beneficiaries’ inheritance.
What options are available to pay for nursing home care?
In general, there are three methods of payment for nursing home care. These are:
- Private Pay – uses the individual’s own assets to pay for all costs associated with nursing home care.
- Long Term Care Insurance – uses the assets provided by a long term care insurance policy issued by an insurance company.
- Medicaid – is a Federal Government program administered by each state for individuals and couples that meet the federal and state guidelines for income and assets. Proper nursing home planning will consider each of these methods of payment for nursing home care.
Is it too late for nursing home planning?
It is never too late for nursing home custodial care planning. Whether a loved one is already in a nursing home, or nursing home care is imminent, action can be taken to either eliminate or greatly reduce the costs of the nursing home care. Assets can be preserved at any time!
How can assets be legally preserved?
In most states, the law allows individuals who require nursing home care to place their assets into various types of legal entities that preserve the principal and create an income stream which can then be used to pay for nursing home care.
Fortunately, Christopher B. Kroll & Associates attorneys utilize every possible legal method to relieve the worry and sleepless nights of those responsible for the nursing home custodial care patient.
Nursing Home Planning
Medicaid
What is Medicaid?
Medicaid is a Federal government program, administered through the states, for those that meet strict maximum asset and income requirements for poverty. Medicaid will cover almost every expense associated with nursing home care.
What does Medicaid coverage include?
Medicaid coverage includes room and board, nursing services, prescription and over-the-counter drugs, durable medical equipment, speech, physical and occupational therapy, medical supplies, and transportation for needed medical services.
Do you have to be poor to qualify for Medicaid?
In Michigan, to qualify for Medicaid coverage one must meet the following asset and income qualifications:
Medicaid Asset Qualifications
- Cash – an individual can possess up to $2000 dollars while a couple can possess up to $109,560 dollars
- Homestead – only one, regardless of value
- Personal Property – unlimited
- Vehicle – only one, regardless of value
- Insurance – up to $1,500 dollars face value
- Irrevocable Prepaid Funeral Contract & Burial Space
- Income Producing Property – if it generates rental income of 6% or more of the owner’s equity after operating expenses
Medicaid Income Qualifications
- Individuals – to qualify, the total gross income of the individual, less a personal-needs allowance of $60 dollars per month, less medical insurance premium payments per month and less guardianship/ conservatorship expenses of $60 dollars per month, is to be paid to the facility as the “patient pay amount.”
- Couples – to qualify, the married person seeking Medicaid benefits must meet the above cited individual standard. However, the spouse may be able to take some of the income for his/her own use under additional spousal allowances. Income solely attributable to the spouse is not counted.
Is applying for Medicaid benefits difficult?
Medicaid is a rapidly changing and complex program. Filing an application is not difficult but meeting the requirements for Medicaid benefits while preserving the assets of the individual or couple is a frustrating and time-consuming task. The attorneys at Christopher B. Kroll & Associates are very experienced in this process and will handle all aspects of the application process so that you can be assured that your loved one is getting the care they deserve, while preserving their assets.
Medicaid
Veterans Benefits
Most people think of veterans benefits as being only for servicemen and women who were wounded or disabled while serving in the armed forces. By and large, that is true. But we have learned that there are substantial benefits that may be available to wartime veterans who are now senior citizens and are facing the burden of long term care due to a host of diseases such as Alzheimer’s, Parkinson’s, MS, Lou Gehrig’s Disease, and many others. In fact, the Veterans Administration estimates that millions of wartime veterans and their spouses may be eligible for Special Monthly Pension benefits, and not even be aware of it!
Wartime veterans, or their surviving spouses, become eligible for the Special Monthly Pension benefit known as Aid and Attendance when they are over 65 years of age, are permanently disabled and unable to work, are homebound, or need the regular aid and attendance of another—whether at home, in assisted/supportive living, or in a nursing home. The program is based on actual financial need for assistance, so there are income and asset limitations.
The maximum benefit available can provide significant help in paying for long term care costs, either for the homebound and/or nursing home veteran/surviving spouse.
There are only three types of persons who are authorized to provide a veteran with assistance filing a claim for veterans benefits:
- An attorney licensed to practice law in your state
- A veterans service organization such as VFW, American Legion, Amvets, etc.
- A state or county official of the Dept. of Veterans Affairs in your state
Unfortunately, there are few attorneys who have knowledge in this particular area of legal practice due to the fact that it is illegal to charge a veteran a legal fee for providing assistance in filing a claim for benefits.
Veterans Service Organizations (VSOs) are often hard-pressed to have sufficient resources to assist multiple generations of veterans, so it is often difficult for a veteran or his/her surviving spouse to get help in filing a claim. Sadly, the Knight-Ridder Newspapers reported on December 30, 2005 that “a veteran who turns to the VA for information about veterans benefits might want to get a second opinion. According to the VA’s own data, people who call the agency’s regional offices for help and advice are more likely to receive completely wrong answers than completely right ones.”
The only other common source of information regarding this benefit generally comes from annuity salespeople who often offer to consult with veterans and their families for free. This “free” offer is based on the strategy of counseling the veteran to meet the asset and income limitations of the benefit by buying an annuity and giving away their assets to their children. The offer is that the annuity sales organization will assist the veteran in filing for the VA benefit claim. They also promise to provide any necessary estate planning work at no charge. In reality, the annuity salesperson is being compensated by the annuity company for selling a financial product to the veteran. An annuity may be an excellent financial decision or a poor one, depending on the facts and circumstances. All we are saying is this: You should seek independent advice before making a decision to purchase an annuity.
A Medicaid trap…
Another important factor that one must consider when thinking about trying to meet the VA asset limitation test is that giving away cash or other things of value can create terrible problems for senior citizens if or when they later need to apply for Medicaid to assist them with skilled nursing home care. Giving away assets can create a long penalty period of ineligibility for Medicaid benefits. Any senior facing long-term care needs to seek capable legal advice from an attorney who is skilled in the areas of estate planning, financial planning options, Medicaid, Medicare, income tax, and gift tax, as well as having experience regarding VA rules.
The big question for many families will be, “What will it cost me to seek advice in this area?” Although an attorney who chooses to actually file a claim for veterans benefits must do that portion of his/her work for free, the attorney may charge the usual fees related to any estate planning, financial planning options, Medicaid, Medicare, income tax, or gift tax work, as well as the determination of the financial suitability of filing for a veterans benefit claim. No one should pay an attorney fee unless receiving a fair return on his/her investment.
We strongly recommend that you contact an elder law attorney such as those at Christopher B. Kroll & Associates to determine if you qualify. An elder law attorney can assist you and your family by explaining many difficult-to-understand things about long term care. Qualification for a VA benefit is only one of several concerns that must be considered. As you struggle to provide dignified long term care for a wartime veteran and/or surviving spouse, we can help you understand the options. We are your advocates, and we want to help you stretch your hard-earned dollars further. VA benefits are only one part of the puzzle. We will hold your hand and guide you every step of the way as we consider all of your family’s resources and needs.
Veterans Benefits
Estate Planning
What is an Estate Plan?
The process of “Estate Planning” is the formulation of a definite plan for managing your assets while one is alive and the distribution of those assets after one’s death.
What do most people want out of an Estate Plan?
The three most common reasons for having an Estate Plan include:
- To insure that, after death, property is distributed to those people they have previously chosen.
- To maximize the value of their assets gifted to their beneficiaries by not exposing them to either court or attorney fees.
- To reduce or avoid paying federal and state estate and income tax liabilities upon death.
What Estate Planning options exist?
Four basic options exist in Estate Planning:
- Do nothing, probably go to probate, and risk exposing your assets to undue taxation.
- Title assets “jointly.”
- Create a Will.
- Create a Trust(s).
Estate Planning
Probate
What is Probate?
The term “Probate” refers to the manner of administering the property (the estate) of a deceased or incapacitated individual by a personal representative (PR) under the jurisdiction of one of Michigan’s county Probate courts.
What is Living and Death Probate?
Probate can take two forms, living and death.
Living Probate
- Guardianship – a Probate procedure that is triggered when one becomes mentally disabled. In this case, the Probate court selects someone, a “Guardian”, to take control of you and your personal affairs.
- Conservatorship – a Probate procedure that is triggered when one becomes mentally disabled in which the Probate court selects someone to take control only of your assets.
Both of the above “Living Probate” procedures require court appointed agents to file strict accounting and reports on a regular basis.
The entire procedure is expensive, time consuming and part of the public record.
Death Probate
There are 5 Steps in a Death Probate:
- Filing Probate Petition and the appointment of the Personal Representative
- Publishing Notice to Decedent’s Creditors
- Inventory and Appraisal of Assets
- Payment of Debts, Claims and Taxes
- Final Distribution and Closing the Estate
How much does Probate cost?
Probate estate administration costs vary. Costs will escalate according to the complexity of issues that affect the estate. However, critics of the system have cited that the average cost of Probate is usually more than 7% of the gross value of the estate.
How long does Probate take?
Again, the timeframe is dependent upon the complexity of the estate; The quickest administration for the closing of an estate is approximately 5 months. However, most estates will take at least one year to close.
Are Probate court proceedings private?
No! All Probate proceedings are public and, as such, anyone can obtain your Probate file and have access to all the details of your personal estate.
Does joint asset ownership avoid Probate?
Assets owned jointly by a husband and wife will pass to the surviving spouse upon the death of the first spouse. However, those previously joint assets will now become “sole” assets, and upon the death of the surviving spouse will be subject to Probate.
Does a Will avoid Probate?
Unfortunately, no. All property that is controlled by your Will must go through the Probate system.
Probate
Powers of Attorney
What is a Power of Attorney?
You, as “principal,” designate another individual or a bank as your “agent” or “attorney in fact” to act for you in handling your affairs; for example, to sign checks and make deposits, pay bills, contract for medical or other professional services, sell property, obtain insurance and do all the things you do in managing your day-to-day affairs.
Planning for lifetime disability
Most people are aware of the fact that they should have a Will and an estate plan so that upon death their estates can be administered and distributed to their beneficiaries promptly and efficiently. However may people fail to plan for lifetime disability.
What are the two main types of Power of Attorney?
General Durable Power of Attorney
A Durable Power of Attorney is a written Power of Attorney which contains words such as: “This Power of Attorney shall not be affected by my disability,” or “This Power of Attorney shall become effective upon my disability.” This document specifically lists which powers it gives to the agent. In order to be valid, it must be signed by you before you become disabled.
Durable Medical Power of Attorney
Is the document authorizing another to act as one’s agent or attorney during incapacity but only limited to medical decisions.
Powers of Attorney
Guardianship / Conservatorship
The role of guardian and/or conservator is one that carries with it considerable responsibility as well as considerable rewards. While assuming the role of guardian/conservator may appear to be a daunting task at first glance, the process of appointment and the fulfillment of ongoing duties are not as complicated as they may seem.
What is a guardianship?
Guardianship is a legal relationship that gives one or more individuals or agencies the responsibility of the personal affairs of the protected person.
What is a protected person?
A protected person is someone who has been determined by the court to be either incompetent or incapacitated. Therefore, a protected person to whom a guardian has been appointed has been determined to be unable to make decisions about various personal affairs of his/her life without the assistance or protection of a guardian. These decisions can involve issues relating to the person’s health, care, safety, habilitation, therapeutic needs, financial affairs, and others areas of the protected person’s life.
What is a conservatorship?
Conservatorship is similar to guardianship in that it is a legal relationship between a protected person and one or more individuals appointed by the court to make decisions on behalf of the protected person. However, while a guardianship may encompass all personal affairs of a protected person, a conservatorship is limited to the management of the property and financial affairs of a protected person.
Who can be a guardian/conservator?
A family member or other interested individual may petition for the appointment of guardian/conservator for a protected person. However, when a relative or other appropriate person is not qualified and willing to act in this capacity, the South Dakota Department of Human Services and the Department of Social Services are authorized to act as guardian/conservator for persons under their care.
What is the procedure for the appointment of a guardian/conservator?
First, a petition for the appointment of guardianship/conservatorship outlining the need for the appointment and the type of appointment requested is filed in the appropriate county. A statement of financial resources and a report from a physician, psychologist, or psychiatrist describing the person’s level of impairment, ability to appear at the hearing, and need for protection is also filed. The court then conducts a hearing and determines whether a guardianship /conservatorship is appropriate, and if so, whether a full or limited appointment is most appropriate.
Guardianship / Conservatorship
Important Documents
Quit Claim Deed
In order to avoid having real estate pass through the probate process, the quit claim deed passes any title to real estate that the grantor may have to another person, entity or trust.
Trust Funding Instructions
After the execution of a trust, the assets of the grantor must be placed within the trust. In order to do this the attorney writing the trust package completes an instrument known as “instructions for funding the trust.” These instructions expressly relate how to transfer each type of asset into the trust.
Certificate of Trust
This document works in conjunction with the “instructions” cited above. Basically, it is a summary of the pertinent provisions of the trust document that allows third parties to act upon the instructions for funding the trust without the third party having an actual copy of the entire trust document.
Special Durable Medical Power of Attorney
This document is the same as the other cited durable powers of attorney, except that it only has one power. That one power being to place assets within the principal’s trust.
Schedule & Deed
The Schedule & Deed is an emergency document that is prepared to be utilized in the event that sudden death occurs prior to the timely completion of the trust funding.
Assignment
An Assignment is a document that transfers the interest of usually intangible property to another or a trust.
Advancement
The advancement is a document that reflects the amount of money or property given by a parent to their child or presumptive heir, in anticipation of the share which the child will inherit in the parents’ estate and intended to be deducted there from.
Memorial Instructions
Express instructions or wishes of an individual regarding funeral, memorials or internment arrangements.
Important Documents
Funeral Pre-Planning
Why prepay for your funeral?
One of the most thoughtful and responsible gifts that you can give your family is to make your funeral arrangements in advance. Without a proper plan in place, your loved ones will be left having to second guess what you would have wanted. By preplanning, you’ll be alleviating the burden and stress that your family faces when you pass away; they will be able to focus on what is important, celebrating you.
Making your final wishes known and prepaying for your funeral is an important step. It provides two important advantages. First, you eliminate the burden of your family having to pay for and plan your final celebration. Secondly, funding your funeral offers protection from inflation by allowing you to lock in today’s prices.
Important considerations when preplanning
- Be informed about your options: prearranging allows you to calmly and thoughtfully consider what is important to you.
- Record your wishes: recording your wishes in writing and sharing them with your family allows for your final wishes to be carried out.
- Visit the funeral home and meet the staff: you should feel comfortable with the personnel that will be carrying out your final wishes.
- If you choose cremation, understand your options: the funeral home should offer a range of cremation service options and explain the cremation process so that you understand the steps and costs involved.
- Ask about price: funeral homes are required by law to provide you with a clear, itemized list of prices for merchandise and services offered.
- Consider the funeral home’s reputation: select a funeral home in your community that has a good reputation.
- Make sure your funds are secured: ask the funeral director how the funds are invested.
- Flexibility: make sure your plan is flexible enough to allow alterations; ask if the plan can be transferred to another state if you move.