Massachusetts Estate Planning & Asset Protection Blog

Can Your Will Protect You When You Don't Die?

Posted by Massachusetts Estate Planning & Elder Law Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Thu, Aug 07, 2014

 

What Happens When You Don’t Die?

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Is your “I love you” will capable of protecting you or your spouse from long-term care costs?

You know the kinds of wills we’re talking about: The husband leaves everything to the wife, the wife leaves everything to the husband and after they both die, everything goes to the kids. This works well in situations where the spouses are healthy one day and are deceased the next. 

However, as most of us know, life usually doesn’t work that way very often. Research indicates that nearly 70% of individuals over 65 will require some kind of long-term care in their lifetimes.

Thus, many spouses worry that if they predecease an ill spouse who is currently in a nursing home or will require long-term care at some point in the near future, there will be insufficient funds available to provide for their institutionalized spouses’ needs. This is an especially relevant concern for expenses that are not covered under Medicaid such as: care managers, private nurses, single rooms, as well as certain therapies and drugs.

Another concern is that the availability of funds from “I love you” wills and trusts will disqualify the surviving ill spouse from eligibility for Medicare benefits. As you know from prior articles, Medicare (MassHealth in Massachusetts) is the only long-term-care governmental program in the United States and does not cover long-term custodial care.

To solve this problem many of our clients rely on a “testamentary trust”. This is a trust built into the will of each spouse. For many estate planners, this is counterintuitive because much of the estate planning occurs within the context of a revocable living trust. In order to preserve access to Medicaid eligibility without requiring that the surviving spouse spend down the assets and lose the chance to maintain a “rainy day fund”, creating a testamentary trust in the will of the pre-deceasing spouse is essential.

What this means is that around age 55, you have to completely revise your wills and trusts to accommodate a different paradigm of thought. The thinking process is no longer “What happens when I die?” Now the question becomes “What happens if I don’t die and live a long time with expensive long-term care?”

The new paradigm requires a new estate plan. If you consider yourself middle-class (meaning that your net worth will be significantly impacted by the cost of long-term care for you and/or your spouse) and are over age 55, we suggest that you revise and update your estate plan to reflect your current and future needs as soon as possible.

At the Estate Planning & Asset Protection Law Center, we help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones.  We provide clients with a unique educational and counseling approach so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.

We encourage you to attend one of our free educational workshops, call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy.

 Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Tags: will, living will, Estate Planning, Estate Planning, Alzheimer's Disease, Elder Law, asset protection, long term care, Medicaid, in-home care, Health Care, estate reduction, estate, elder care journey, hospice, Alzheimers Disease, medicaid qualification, Wills, assets, Medicaid penalties, alzheimer's activities, in home, incapacity, Elder Law, Attorney, myths, Alzheimer's, alzheimers, financial, Attorney, income, Alzheimer's, federal, health, surviving spouse, in-home care, long term care insurance

Massachusetts Estate Planning Attorney | 10 Detrimental Estate Planning Myths

Posted by Massachusetts Estate Planning & Elder Law Attorney, Dennis B. Sullivan, Esq., CPA, LLM on Wed, Oct 10, 2012

There are a variety of misconceptions associated with estate planning, which unfortunately often lead to detrimental mistakes. Please take the time to read “10 Common Estate Planning Myths That Can Be Detrimental to Your Family”, in which Erik Carter of Forbes.com discusses estate planning myths that often keep people from initiating an estate plan that could protect their home, spouse, life savings and legacy.

10 Common Estate Planning Myths That Can Be Detrimental to Your Family

estate plan, estate planning, Massachusetts

1) Estate planning is just for the wealthy. This myth comes from the focus of so many attorneys and financial advisers on the estate tax, which may not be an issue this year until your estate surpasses $5,120,000, an amount that most of us would characterize as pretty well-off, if not downright rich. This focus makes sense for estate planning professionals since they make so much more money dealing with that issue, but estate planning is about so much more than that. It’s also about making sure that your finances are taken care of if you’re incapacitated, that decisions about your health care are carried out the way you’d like even if you’re not able to make them, and that your children and other heirs are taken care of when that time eventually comes. That’s why estate planning isn’t just for the Donald Trumps of the world. Estate planning is for anyone who may become seriously ill or pass away. In other words, it’s for everyone.

2) I’m too young for estate planning. We never know when we might need estate planning and by then, it will be too late. For example, history is replete with the stories of celebrities who unfortunately died before creating a will, many of them at a relatively young age.

3) If I pass away without a will, the state will get my assets. If the last two myths can lead so many to inaction, it always amazes me that this myth hasn’t led to a boom in the will-making business. If you pass away without a will, each state will apply its “laws of intestacy” to determine who will get what. You can check out a site called mystatewill.com to see what that outcome may look like. If you don’t like it, get a will drafted. If you’re fine with it and have minor children, get a will anyway. That’s because the will also allows you to determine who would be the guardian of your children if that need should arise, which is probably not a decision you want a court to make.

4) If I have a will, I don’t have to worry about probate. This may be wishful thinking as probate can be a long and expensive process in which one or more courts decide who will inherit your assets. While a will provides the court with guidance on your wishes, it doesn’t actually avoid the process altogether. Since a will is public information, it can be easily contested in court, adding more time and cost. In addition, if you have real estate in more than one state, each property may have to go through probate in its respective state.

5) I need a lawyer to draft these documents. If your family and financial situation is relatively simple, you can draft many of these documents yourself at no or low cost. For health care decisions, you can get a health care directive from your hospital or download a state-specific form from the National Hospice and Palliative Care Organization here at no cost. Another resource for health care decisions is the Five Wishes, which is a popular, low-cost living will form made available from the non-profit Aging with Dignity organization. You can draft other legal documents like a power of attorney and a simple will for free at sites like DoYourOwnWill.com or for a relatively low cost at sites like LegalZoom and Nolo. Your employer may also offer these documents at no or low cost as an employee benefit.

6) I don’t need a lawyer at all. While these documents may cover most common situations, there may be a complicating issue warranting legal advice that you’re not even aware of. That’s why it’s still a good idea to at least run these documents by a qualified estate planning attorney, which may cost you less than having the attorney draft them all from scratch. You can search for an attorney by asking for referrals from family, friends, and other professionals, by using the lawyer referral service of your local bar association, or by searching the membership of organizations like the American Academy of Estate Planning Attorneys and the National Network of Estate Planning Attorneys.  Finally, don’t forget to ask your employer about any discounted legal services they may offer.

7) To avoid probate, you have to draft a trust. One area that you’re most likely to need an attorney is drafting a trust. Avoiding probate is one of the most common reasons people do this, but there may be cheaper and easier methods that may be sufficient for your needs. First, jointly owned property (like what you own with your spouse) generally passes to the other owner(s) without going through probate (unless it’s a “tenancy in common”). Second, life insurance, annuities, and anything in a retirement plan like a 401(k) and IRA avoids probate as long as there is at least one living beneficiary listed. Some states also allow you to avoid probate by adding beneficiaries to bank accounts with a “payable on death” registration and to brokerage accounts, real estate, and even vehicles with “transfer on death” registrations. You can see what’s available in your state here. Finally, each state has methods to speed up or even skip probate for “small estates,” which in some states can be quite large.

8) Trusts avoid estate tax.  Most trusts do not help you avoid estate taxes in and of themselves. However, if you’re worried about having a taxable estate, be sure to seek qualified legal advice (your nephew who just graduated from law school with a focus on criminal law doesn’t count) since certain trusts can be used as part of a strategy to reduce and even eliminate estate tax liability.

9) I don’t have enough money to worry about the estate tax. This may be true today, but if nothing changes, estates over $1 million are scheduled to be subject to a 55% estate tax starting next year. When you add in the value of your home, life insurance proceeds, and your retirement accounts, that $1 million may start looking a little too close for comfort.

10) I’ll have to pay a gift tax if I give someone over $13k per year. Anything (except for money paid directly to a medical or educational institution, charity, or to a 529 plan) over $13k that you give someone (other than your spouse) in a single year simply reduces your lifetime gift and estate tax exclusion amount (currently the $5,120,000 that’s falling to $1 million next year). Only after you use up the entire exclusion amount do you actually have to start paying anything. In other words, you’d have to give away quite a bit. That being said, you would still have to file a gift tax return and then keep track of how much you’ve reduced your lifetime exclusion amount by, so try to stay within the $13k annual exclusion amount just to avoid that hassle.

As you can see, there are lots of misconceptions out there about estate planning and understandably so as it can be complex, constantly changing, and removed from our everyday lives. Knowing the truth about these myths can help you avoid numerous mistakes."

At the Estate Planning & Asset Protection Law Center, we help people and their families learn how to protect their home, spouse, life-savings, and legacy for their loved ones.  We provide clients with a unique educational and counseling approach so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future.

We developed our Unique Self-Guided 19-Point Trust, Estate, & Asset Protection Legal Guide, so you can learn where problems may exist in your planning as well as opportunities for improvement and how to implement a plan to protect your spouse, home, family, and life savings. 

Click Here to Download our Trust, Estate, & Asset Protection  Legal Guide

We encourage you to attend one of our free educational workshops to learn more about our process and what you can do to enhance the security of your spouse, home, life savings and legacy. To register for a seat at an upcoming workshop call (800) 964-4295 (24/7) or register online at www.SeniorWorkshop.com

Tags: Estate Planning, probate, trusts, gift tax, estate tax, Massachusetts, lawyer, myths

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