Estate Planning

By Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Boise, Idaho

This happened for the heiress of L'Oreal, a French cosmetics company.  Liliane Bettencourt is 89.  She and her daughter, Francoise Bettencourt-Meyers, have been suing one another for oyears.  A French Court found the mother to have failing mental healtlh and to be showing signs of dementia.  The Court then appointed the daughter as her mother's guardian.  Now, the daughter can control when her mother can travel and how her money will be managed.¹

Could this happen to you?

A simple way to avoid this is sign a financial power of attorney and health power of attorney stating who you want to make financial and health decisions for you if you are not able to care for yourself.  That will be a great first step.

_________________________

¹Heiress Loses L'Oreal Family Fight.  The Wall Street Journal, Page B8, October 18, 2011.

By Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Boise, Idaho

An inheritance of cash can be good or bad.  The "good" part is easy.  Someone receives the inheritance and uses the funds wisely to enhance their lives.  The "bad" part is often swept under the rug.

If someone inherits money and that person is young emerging into adulthood, likes to spend money freely with no sense of tomorrow, has an addiction problem or has trouble holding down a job, his or her inheritance is likely to evaporate.

An Incentive Trust may be the solution to help a child who is a reckless spender.  How does such a Trust work?  The parents need to sit down with their attorney and discuss the needs and abilities [and shortcomings] of their child.  Between them they can craft a Trust that will provide for the child's future in a constructive way.  Frequently a professional Corporate Trustee (such as a Bank Trust Department) will be the Trustee or co-Trustee with the child.  You don't want to make a family member a Trustee because that will poison the relationship between that person and the child.  Incentive Trusts frequently include a method to help educate the child to manage money responsibly so that he or she can develop the skills to take over their own finances in the future.  These trusts can work if they include objective standards and are transparent so the Trustee knows what the beneficiary is doing and the beneficiary knows the standards used for measurement.

Your other choice is to give the money outright with a "wish and a prayer" that it will all work out, knowing in your heart that result is unlikely.

By Susan M. Graham, Certified Elder Law Attorney, Senior Edge Legal, Boise, Idaho

You may be nominated by a family member or friend to handle their affairs when they die.  It is certainly a compliment and an honor, but also a huge job.  You may want to think twice before you accept, or consider hiring professionalsl to assist you.

There is a long list of steps that need to be taken and the time period to complete the process is easily a year or more.

Some steps are easy, such as changing the locks on the house and making sure the mail is redirected to your address.

Many steps can be more difficult, such as preparing a proper accounting, investing the assets appropriately during the period of administration so you don't lose money, settling family disputes and arranging for care for a dependent family member.  It is often difficult to get through this process and have family relationships remain on a good footing.

An important first step for the person signing a Last Will and Testament or Trust is to talk to the person they are appointing to handle their affairs to see if they are willing to take the job.  That too is a good time to bring up any special concerns that either person may have about the job and the process, which should help when the time comes.

By:  Susan M. Graham, Certified Elder Law Attorney

Do you want to protect your independence, assets and your family?  There are many steps you can take to make it easier for you and your loved ones when the bad days happen:  death or becoming unable to handle your affairs due to illness.  I encourage you to consult with an attorney to discuss many of the following topics to see which will best fit your needs.

1.  Health Power of Attorney.  Signing this document permits the people you rely upon to talk with your doctor when you can't.

2.  Living Will.  If your death is near, you have 3 choices for your end-of-life medical care:  (a) use all the fancy machines to keep you going, (b) have nutrition and hydration with tubes, or (c) "let me go."  If you fail to sign a "Living Will," the legal and medical rules require that you be on "tubes" at a minimum.

3.  Last Will and Testament.  This document declares how you want your property distributed when you die, and if you have minor children, who will be the guardian.  After a death, the Will is filed with the Probate Court to start the administration of the decedent's estate.

4.  Revocable Trust.  This is an other way to arrange for the management of your assets should you be unable to do so due to illness or when you die.  This document usually allows you to avoid probate or going to court.

5.  Financial Power of Attorney.  This document identifies those people whom you selected to handle some of your finances if you are unable to do so because of illness.

6.  Funeral Arrangements.  Pre-planning your funeral is a gift to your family.  Making your arrangements will assure that you will have what you want and save your family from the worry and burden of such decisions at an impossible time.

7.  Pet Care.  You have the opportunity to write down who you want to be the caretaker for your pet when you are gone, recovering from an illness, or in a rest home.

8.  Beneficiary Designation.  Make certain that the beneficiary designation on all life insurance, annuities and retirement accounts, such as IRAs and a 401(k), match your current estate plan.

9.  Professional Advisors.  List those professionals who know about your affairs.  Include your attorney, accountant, insurance persons, doctors, dentist and others you rely on.

10.  Important Records.  Where do you keep your papers?  Who knows where to look?  Do they have a key, or can they get into your safe deposit box?

11.  Family Information.  Do you have a list of contact information for the family and friends who are important to you?  This information is helpful in an emergency.

12.  The Key to Your House.  Who has one?  Do they know whom to contact in an emergency?

13.  Driving Instructions.  If the time comes that it is no longer safe for you to drive, you can arrange ahead of time how to give up your car and provide for alternate transportation.

By:  Susan M. Graham, Certified Elder Law Attorney

This checklist includes important steps to help manage the estate of someone who has died.

1.  Follow the specific funeral and burial instructions left by the decedent.  Contact your local funeral home or mortuary for assistance in making or following through with any prearranged funeral plan.

2.  Arrange for the care of any persons who were dependent on the decedent, such as minor or disabled children, an elderly spouse or the decedent's elderly relatives.

3.  Arrange for the care of any pets of the decedent.

4.  Secure the residence.  You may want to have some trusted friend stay at the house.  Change the locks.

5.  Arrange to receive several copies of the death certificate - ten is not too many in most cases.

6.  Keep track of your time.  Get receipts for all out-of-pocket expenses you pay related to the estate administration so you can be reimbursed.

7.  Notify the decedent's friends, family members and work associates of the death.

8.  Call the attorney who set up the estate plan to make an appointment and learn how to administer the decedent's estate.  The attorney can tell you who is legally responsible under a Last Will and Testament, Trust, or even if no documents were prepared.  Locate the original Last Will and Tesatment or Trust to take to the attorney if those documents exist.  It is important to talk with an attorney prior to making any decisions relating to the administration of the estate.  Sometimes the wrong decision, taken hastily, can be costly.

9.  Do not distribute any personal property items such as rings, guns, china and other household things until you speak to an attorney.  If you distribute such items and you did not have the legal authority to do so, you may be personally liable to others.

10.  Update your own estate plan to be certain you and your family are protected.  It is important that a surviving spouse make changes now that their spouse has died.  In most situations, it will be necessary to prepare a new financial power of attorney, new health power of attorney and new Last Will and Testament or Trust to reflect any changes to your plan.

The Wall Street Journal listed 25 documents you need before you die.¹

Their subheading was "Design your death dossier soon - or you could be setting up your heirs for frustration and financial pain."

They are right.  If you don't take the time to create a plan  for your future and organize your documents, you are leaving a mess for your family.  If may be impossible for the people you rely upon to help you.  The distribution of your estate may be different than what you want because you may have failed to coordinate beneficiary designations on retirement accounts and life insurance with your total plan.

So what are those 25 documents that you should organize and put in one location so they are easy to find?  I will list them below and add a few items they forgot.

Personal Information:

• Birth Certificate
• Marriage LIcense
• Divorce Papers
• Military Discharge Papers
• Death certificates for other immediate family members (spouse, parents, children)

Health Care:

• Personal and family medical history
• Durable health care power of attorney
• LIving Will
• Physician's Order for Scope of Treatment (POST)
• List of doctors and prescription drugs

Proof of Ownership:

• Housing, land and cemetery deeds
• Mortgage papers
• Proof of loans made and debts owed
• Vehicle titles
• Stock certificates, savings bonds and brokerage accounts
• Partnership and corporate operating agreements
• Tax returns

Life Insurance/Retirement Accounts:

• Life insurance policies
• Individual Retirement Accounts
• 401(k) accounts
• Pension documents
• Annuity contracts

Bank Accounts:

• List of bank accounts
• List of all user names and passwords
• List of safe deposit boxes and keys

Estate Planning Documents:

• Will
• Financial Power of Attorney
• Trust
• Funeral Plan
• Pet Care Instructions
• List of who receives your "stuff" (e.g., ring and gun)

So get a box and start putting all these papers in that box.  If you put in copies, mark on the copy to indicate where the originals are located.

Does this seem too much to do?  Well, think about the people you care for and think about covering your back.  If you want your life to go as well as possible, even during the bad days, you have to do your part.

So take 30-60 minutes and gather up these documents.  Good for you if you do what I suggest!

P.S.  The total is 32 - not 25.

________________

¹The 25 Documents you Need Before You Die.  The Wall Street Journal, July 2, 2011, page B7.

I had my sprinklers turned on this spring.  That was the easy part.  One evening I was at my kitchen sink, washing dishes, listening to the radio and noticed my back yard had turned into a lake.  A hole the size of a basketball was gushing water from a sprinkler pipe.  After weeks of having my back yard dug up and pipes replaced by the sprinkler people, they told me it is not the sprinkler system that does not work.  It is the pump for my well.

Let me tell you the obvious.  I know nothing about water systems and do not really want to know.  I just want someone to fix it (and of course yesterday).

So, I called the well man.  He came and told me there was a small part that was frozen last winter.  He replaced it and everything now works.  I've had the pump for 10 years and no one ever told me I needed to do something special to keep it warm in the winter.  I had the part fixed and now I am ready for a hot summer and a green yard filled with flowers and vegetables.  That part I am happy about.  The "fix-it" part made me grumpy for a few moments.

How does this apply to you?

Well, when setting up an estate plan, you do everything you can think of at that time to have the best plan in place to help now, and most importantly during the bad days (should you be unable to handle your affairs or upon death).  The plans we set up for our clients focus on protecting their independence, assets and families.

Then some time passes, and that original plan does not work as well as it did originally.  Just like my pump, some part needs to be fixed and it is not your fault.  The law changes, your health changes, your relationships with people change and your money changes.  Usually one of these four things changes every 3 to 4 years.

What should you do?  I suggest you pull out your planning documents and review them.  Do they still reflect how you want your affairs handled?  Are all your assets titled properly and do you have the proper beneficiaries listed on your life insurance, retirement benefits and annuities?

If not, I encourage you to set up a review with your estate planning professional.  Do it now!  Or you can wait, have a mess that is harder and more expensive to fix, and only find out about it when you really need the plan to work (like the lake in my back yard).

Investor Business Daily reports, "Choosing a financial advisor can be akin to a stroll through a minefield. If you don't prepare, your wealth could get blown up by a Bernie Madoff or wounded by someone whose skills are mediocre or simply not suited to your needs. But with proper preparation, chances are you'll find one of thousands of advisers who can help you set and achieve your goals."

Meeting with a prospective advisor to understand how they get compensated for their services as well as determine your comfort level with that individual is essential. Addition insight into an adviser can be found in promotional materials, websites and professional certifications. You may also look up an adviser's Form ADV, which lists complaints and disciplinary actions, online with the Securities and Exchange Commission or your state regulators.

A estate planning attorney would be a good referral source for a qualified financial advisor.

To view Investor's Daily article which also includes The Certified Financial Planners Board's list of ten recommended questions to ask when interviewing a financial advisor, click here.

by Michael Ettinger, Esq.

A couple came in to see me today for the husband's 88 year old father who is a nursing home in Florida. They now wish to bring him up to New York to be nearer to the family. He has about $600,000 in assets, including his home.

They told me about the very nice lawyer he has down on the west coast of Florida, who set up a revocable living trust for Dad and for Mom who died last year, in February of 2006, and amended it in March of 2010.

They had a great deal of confidence in the lawyer, especially since he had won an award as one of the top lawyers in the locality.

Regrettably, while the attorney prepared a fine estate plan, he was not an elder law attorney and took no steps to protect the couples' assets back in 2006, when they were well into their eighties.

Had the lawyer been knowledgeable in elder law, which unfortunately so many estate planning attorneys are not, he would have set up a Medicaid Asset Protection Trust (MAPT) and started the five year "look back" period running. It is now February, 2011, five years later. Had the MAPT been set up when it should have, in February 2006, instead of the revocable living trust, all of Dad's assets would now be protected and he would be eligible for Medicaid benefits to pay for the cost of his nursing home care.

Instead, the couple will only save half the assets by using the "gift and loan" strategy developed by elder law attorneys to save half the assets on the nursing home doorstep when the client has failed to set up the MAPT. The technique is also call "half a loaf" planning after the old expression.

Nevertheless, the "nice" lawyer ended up costing the family $300,000.00 and it is not the first time we have seen it happen. Indeed, it is the reason your writer published "Ettinger on Elder Law Estate Planning", available on Amazon.com. We believe that clients need a new york "elder law estate planning" attorney and not just an "estate planning" attorney so mistakes like this no longer happen to good people.

submitted by Peter G. Lennington, Esq., St. Paul, MN

This post, examines the unique planning requirements of families with children, grandchildren or other family members (such as parents) with special needs. There are many misconceptions in this area that result in costly mistakes in planning for these special needs beneficiaries. It is therefore incumbent upon us - the client's advisors - to ensure that clients understand all of their options.

COSTLY MISTAKE #1: Disinheriting the child.
Many disabled people rely on SSI, Medicaid or other government benefits to provide food and shelter. Your clients may have been advised to disinherit their disabled child - the child who needs their help most - to protect that child's public benefits. But these benefits rarely provide more than basic needs. And this "solution" does not allow your clients to help their child(ren) after the client becomes incapacitated or is gone. When a child requires, or is likely to require, governmental assistance to meet his or her basic needs, parents, grandparents and others who love the child should consider establishing a Special Needs Trust.

Planning Tip: It is unnecessary and in fact poor planning to disinherit a special needs child. Clients with special needs beneficiaries should consider a Special Needs Trust to protect public benefits and care for the child during the client's incapacity or after the client's death.

COSTLY MISTAKE #2: Procrastination.
Because none of us knows when we may die or become incapacitated, it is important that your clients plan for a beneficiary with special needs early, just as they should for other dependents such as minor children. However, unlike most other beneficiaries, a child with special needs may never be able to compensate for a failure to plan. A minor beneficiary without special needs can obtain more resources as he or she reaches adulthood and can work to meet essential needs, but a child with special needs may never have that ability.

 Planning Tip: Parents, grandparents, or any other loved ones of a special needs child face unique planning challenges when it comes to that child. This is one area where the client simply cannot afford to wait to plan.

COSTLY MISTAKE #3: Failure to coordinate a planning team effort.
It is critical that the advisor assisting with special needs planning include in the planning team: an attorney who is experienced in this planning area; a life insurance agent who can ensure that there will be enough money to maintain the benefits for the special needs child; a CPA who can advise on the Special Needs Trust's tax return; an investment advisor who can ensure that the trust fund's resources will last for the child's lifetime; and any other key advisors that may support the goals of the trust going forward.

Planning Tip: Special needs planning dictates that the client's advisors work together to ensure that there are sufficient trust assets to care for the child throughout his or her lifetime.

COSTLY MISTAKE #4: Ignoring the special needs when planning for the child's benefit.
Planning that is not designed with the child's special needs in mind will probably render the child ineligible for essential government benefits. A properly designed Special Needs Trust promotes the special needs person's comfort and happiness without sacrificing eligibility.

Special needs can include medical and dental expenses, annual independent check-ups, necessary or desirable equipment (for example, a specially equipped van), training and education, insurance, transportation, and essential dietary needs. If the trust is sufficiently funded, the disabled person can also receive spending money, electronic equipment & appliances, computers, vacations, movies, payments for a companion, and other self-esteem and quality-of-life enhancing expenses: the sorts of things your clients now provide to their child or other special needs beneficiary.

Planning Tip: When planning for a child with special needs, it is critical that the client utilize a Special Needs Trust as the vehicle to pass assets to that child. Otherwise, those assets may disqualify the child from public benefits and may be available to repay the state for the assistance provided.

COSTLY MISTAKE #5: Creating a "generic" special needs trust that doesn't fit.
Even some "special needs trusts" are unnecessarily inflexible and generic. Although an attorney with some knowledge of the area can protect almost any trust from invalidating the child's public benefits, many trusts are not customized to the particular child's needs. Thus the child fails to receive the benefits that the parent provided when they were alive.

Another frequent mistake occurs when the Special Needs Trust includes a "pay-back" provision rather than allowing the remainder of the trust to go to others upon the death of the special needs child. While these "pay-back" provisions are necessary in certain types of special needs trusts, an attorney who knows the difference can save your clients hundreds of thousand of dollars, or more.

Planning Tip: A Special Needs Trust should be customized to meet the unique circumstances of the child and should be drafted by a lawyer familiar with this area of the law.

COSTLY MISTAKE #6: Failure to properly "fund" and maintain the plan.
When planning for children with special needs, it is absolutely critical that there are sufficient assets available for the special needs beneficiary throughout his or her lifetime. In many instances, this requires utilization of a funding vehicle that can ensure liquidity when necessary. Oftentimes permanent life insurance is the perfect vehicle for this purpose, particularly if the clients are young and healthy such that insurance rates are low.

Also, because this is an ever-changing area, it is also imperative that the clients revisit their plan frequently to ensure that it continues to meet the needs of the special needs beneficiary.

Planning Tip: Clients should consider permanent life insurance as the funding vehicle for special needs beneficiaries, particularly when the beneficiary is young given the often staggering costs anticipated over that beneficiary's lifetime.

If the client may be subject to estate tax, consider having an Irrevocable Life Insurance Trust own and be the beneficiary of the policy, naming the Special Needs Trust as a beneficiary. Alternatively, in a non-taxable situation, consider naming the client's revocable trust as the beneficiary to help equalize inheritances if that is the client's objective.

COSTLY MISTAKE #7: Choosing the wrong trustee.
During your client's life, he or she can manage the trust. When the client is no longer able to serve as trustee, they can choose who will serve according to the instructions that they have provided. They may choose a team of advisors and/or a professional trustee. Whomever they choose, it is crucial that the trustee is financially savvy, well-organized, and, of course, ethical.

Planning Tip: The trustee of a Special Needs Trust should understand the client's objectives and be qualified to invest the assets in a manner most likely to meet those objectives.

COSTLY MISTAKE #8: Failing to invite contributions from others to the trust.
A key benefit of creating a Special Needs Trust now is that the beneficiary's extended family and friends can make gifts to the trust or remember the trust as they plan their own estates. For example, these family members and friends can name the Special Needs Trust as the beneficiary of their own assets in their revocable trust or will, and they can also name the Special Needs Trust as a beneficiary of life insurance or retirement benefits.

Planning Tip: Creating a Special Needs Trust now allows others, such as grandparents and other family members, to name the trust as the beneficiary of their own estate planning.

COSTLY MISTAKE #9: Relying on siblings to use their money for the child with special needs' benefit.
Your client may be relying on their other children to provide for their child with special needs from their own inheritances. This can be a temporary solution for a brief time, such as during a brief incapacity if their other children are financially secure and have money to spare. However, it is not a solution that will protect the child with special needs after your client has died or when siblings have their own expenses and financial priorities.

What if the inheriting sibling divorces or loses a lawsuit? His or her spouse (or a judgment creditor) may be entitled to half of it and will likely not care for the child with special needs. What if the sibling dies or becomes incapacitated while the child with special needs is still living? Will his or her heirs care for the child with special needs as thoughtfully and completely as the sibling did?

Siblings of a child with special needs often feel a great responsibility for that child and have felt so all of their lives. When your clients provide clear instructions and a helpful structure, they lessen the burden on all their children and support a loving and involved relationship among them.

Planning Tip: Relying on siblings to care for a special needs beneficiary is a short-term solution at best. A Special Needs Trust ensures that the assets are available for the special needs beneficiary (and not the former spouse or judgment creditor of the sibling) in a manner intended by the client.

COSTLY MISTAKE #10: Failing to protect the child with special needs from predators.
An inheritance from parents who fund their child's special needs trust by will rather than by revocable living trust is in the public record. Predators are particularly attracted to vulnerable beneficiaries, such as the young and those with limited self-protective capacities. When you plan with trusts rather than a will, your client decides who has access to the information about their children's inheritance. This protects their special needs child and other family members, who may be serving as trustees, from predators.

Planning Tip: A Special Needs Trust created outside of a will ensures that information about the inheritance is not in the public record, protecting the special needs beneficiary from predators.

Conclusion
Planning for special needs beneficiaries requires particular care and the participation of all of the client's wealth planning advisors. A properly drafted and funded Special Needs Trust can ensure that the beneficiary has sufficient assets to care for him or her, in a manner intended by the client, throughout the beneficiary's lifetime.

(Peter G. Lennington, Esq., is a wealth preservation and estate planning member attorney with offices in St. Paul, MN, Bloomington/Edina, MN, and Minnetonka, MN.  The Lennington Law Firm, PLLC website is located at www.lennington.com.  You can contact Peter G. Lennington via e-mail at peter@lennington.com)