Estate Planning Basics You Need to Know – Annapolis and Towson Estate Planning

The key reason for estate planning is to create a plan directing where your assets will go after you die. The ultimate goal is for wealth and real property to be given to the people or organizations you wish, while minimizing taxes, so beneficiaries can keep more of your wealth. However, good estate planning also reduces family arguments, protects minor children and provides a roadmap for end-of-life decisions, says the article “What is estate planning?” from Bankrate.

Whenever you have opened a checking and savings account, retirement account or purchased life insurance, you have been asked to provide the name of a beneficiary for the account. This person (or persons) will receive these assets directly upon your passing. You can have multiple beneficiaries, but you should always have contingent beneficiaries, in case something happens to your primary beneficiaries. Named beneficiaries always supersede any declarations in your will, so you want to make sure any account that permits a beneficiary has at least one and update them as you go through the inevitable changes of life.

A Last Will and Testament is a key document in your estate plan. It directs the distribution of assets that are not distributed through otherwise designated beneficiaries. Property you own jointly, typically but not always with a spouse, passes to the surviving owner(s). An executor you name in your will is appointed by the court to take care of carrying out your instructions in the will. Choose the executor carefully—he or she will have a lot to take care of, including the probate of your will.

Probate is the process of having a court review your estate plan and approve it. It can be challenging and depending upon where you live and how complicated your estate is, could take six months to two years to complete. It can also be expensive, with court fees determined by the size of the estate.

Many people use trusts to minimize how much of their estate goes through probate and to minimize estate taxes. Assets that are distributed through trusts are also private, unlike probate documents, which become public documents and can be seen by anyone from nosy relatives to salespeople to thieves and scammers.

Trusts can be complex, but they do not have to be. Trusts can also offer a much greater level of control over how assets are distributed. For instance, a spendthrift trust is used when an heir is not good with handling money. A trustee distributes assets, and a timeframe or specific requirements can be set before any funds are distributed.

Living wills are also part of an estate plan. These are documents used to give another person the ability to make decisions on your behalf, if you become incapacitated or if decisions need to be made concerning end-of-life care.

An estate plan can help prevent family fights over who gets what. Arguments over sentimental items, or someone wanting to make a grab for cash can create fractures that last for generations. A properly prepared estate plan makes your wishes clear, lessening the reasons for squabbles during a difficult period.

Protecting minor children and heirs is another important reason to have a well thought out estate plan. Your Last Will and Testament is used to nominate a guardian for minor children and can also be used to direct who will be in charge of any assets left for the children’s care.

Reference: Bankrate (Aug. 3, 2020) “What is estate planning?”

 

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Don’t Overlook Key Parts of Estate Plan – Annapolis and Towson Estate Planning

The importance of having key estate planning documents cannot be overstated. That includes a will, an advance directive, powers of attorney for health care and financial matters and guardianships for minor children. Trusts may also be part of an estate plan, and they need to be created and funded in a timely manner. However, according to the article “7 Things Your Client’s Estate Plan Might Be Missing: Morningstar” from Think Advisor, there are a number of frequently overlooked additional parts to an estate plan that make a difference.

Financial Overview. This gives a broad outline of your assets and can be a useful discussion starting point, when one spouse manages the money and the other needs to be brought up to speed. It includes information about larger assets, including the home, investments, cars and other valuables.

A Directory. Creating a complete master list of all accounts, including the account number, website addresses and the names of any individuals that you deal with on a regular basis, avoids sending loved ones on a scavenger hunt. Keep this document safe—either encrypt it or keep it in a locked, fireproof safe in your home.

Personal Property. Wills contain directions about property, but not everything gets included. Make a list of any tangible personal property that you want to go to specific people, like jewelry or artwork, and create a detailed memo. It will not be part of the will, but most states consider such memos legally binding, as long as they are mentioned in the will. Your estate planning attorney will know what is best for your situation and in your state.

Plan for Pets. The best way to do this is with a pet trust, which is enforceable. You name a person to take care of your pets, and how much money they should use to care for the pet. The will can be used to specify who should be your pet’s caretaker. You can leave assets for the pet, but the designated person is not legally bound to use the money for the pet’s well-being.

Digital Estate Plan. Make a plan for your digital property, including tangible digital devices, like computers and phones and the data stored on devices in the cloud and online accounts, including social media, websites, emails, photos, videos, etc. Start by making an inventory of all digital accounts, which needs to be stored in the same way your directory is: under lock and key.

End of Life Plan. Advance directives are used to direct your wishes towards life-extending care, but they do not always go into detail. Providing additional information to loved ones who might need to make health care decisions could alleviate a lifetime of guilt. Having conversations is a starting point but putting your wishes into a document is better.

Ethical Will. An ethical will in which the person hands down their belief system to loved ones is a gift and part of your legacy. What would you want the next generation to know about your beliefs? What life lessons do you want to share?

Reference: Think Advisor (July 22, 2020) “7 Things Your Client’s Estate Plan Might Be Missing: Morningstar”

 

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Estate Planning Documents for a Natural Ending – Annapolis and Towson Estate Planning

If you want to control your demise, there are a handful of documents that are typically created during the process of developing an estate plan that can be used to achieve this goal, says the article “Choosing a natural end” from The Dallas Morning News.

The four documents are the Medical Power of Attorney, the Directive to Physicians, the Out-of-Hospital Do-Not-Resuscitate, and the In-Hospital Do-Not-Resuscitate. Note that every state has slightly different estate planning laws. Therefore, you will want to speak with an experienced estate planning attorney in your state. If you spend a lot of time in another state, you may need to have a duplicate set of documents created. Your estate planning attorney will be able to help.

For the Medical Power of Attorney, you are appointing an agent to make health care decisions, if you cannot. This may include turning off any life-support systems and refusing life-sustaining treatment. Talk with the person you want to take on this role and make sure they understand your wishes and are willing and able to carry them out.

You have the right to change your agent at any time.

The Directive to Physicians is a way for you to let physicians know what you want for comfort care and any life-sustaining treatment in the event you receive a diagnosis of a terminal or irreversible health condition. You are not required to have this, but it is a good way to convey your wishes. The directive does not always have to be the one created by the facility where you are being treated, and it may be customized to your wishes, as long as they are within the bounds of law. Many people will execute a basic directive with their estate planning documents, and then have a more detailed directive created when they have a health crisis.

The Do-Not-Resuscitate (DNR) forms come in two different forms in most states. Unlike the Directive to Physicians, the DNR must be signed by your attending physician. The Out-of-Hospital DNR is a legally binding order that documents your wishes to health care professionals acting outside of a hospital setting not to initiate or continue CPR, advanced airway management, artificial ventilation, defibrillation or transcutaneous cardiac pacing. You need to sign this form, but if you are not competent to do so, a proxy or health care agent can sign it.

The In-Hospital DNR instructs a health care professional not to attempt CPR, if your breathing or heart stops. It is issued in a health care facility or hospital and does not require your signature. However, the physician does have to inform you or make a good faith effort to inform a proxy or agent of the order.

If you would prefer not to spend your final days or hours hooked up to medical machinery, speak with your estate planning attorney about how to legally prepare to protect your wishes.

Reference: The Dallas Morning News (Jan. 12, 2020) “Choosing a natural end”

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What Is an Advance Care Directive? – Annapolis and Towson Estate Planning

People start out with good intentions at the start of the year, and then fail to follow through.  This makes difficult situations even worse for their family. The process begins with discussions about your care wishes, explains the Chicago Tribune’s Daily Southdown in the article “Talk to your family now about advance care directives.”

That conversation should include who you would trust as a health care agent. This person would be named in the medical power of attorney, an advance directive legal document that gives that person the power to make medical and care decisions on your behalf if you are not able to.

That person needs to know, from you, what is important to you when it comes to quality of life, or length of life.

This is a very important document, as the person has the power to make life and death decisions on your behalf.

It also covers whether you want to be an organ donor. If an unexpected accident occurred and your organs were still healthy and working, would you want to give them to someone who needs a kidney or a heart? If that would be your goal, you need to make your wishes known to your health care proxy and health care providers, as well as to your family.

A living will is also important to have in place. This is used in cases of incurable or irreversible injury, disease, or illness. It expresses your wishes for end-of life care. It gives you the ability to refuse any death-delaying treatment and allow you to die naturally.

These are family matters that should be discussed, but often are not. The topics are hard, as they are centered on our mortality, the mortality of those we love and the reality of death. However, when family members know what their loved one’s wishes are, it provides the family with a tremendous relief.

Without a medical power of attorney or living will, the family may end up fighting over what each member thinks their loved ones wanted. Without clear direction from the family and the correct legal documents, the health care provider must take steps to prolong life, even if that is not what the person wanted.

When naming a health care agent, think about someone who you trust completely. That person will have access to your medical records and be able to approve who else sees them. They may also authorize tests and treatment, decide where you will receive care, which physicians will provide care and whether to accept, withdraw or decline treatment.

Reference: Chicago Tribune’s Daily Southdown (Dec. 30, 2019) “Talk to your family now about advance care directives”

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How Do I Plan for My Incapacity? – Annapolis and Towson Estate Planning

The Post-Searchlight’s recent article, “How to go about planning for incapacity,” advises that planning ahead can make certain that your health-care wishes will be carried out, and that your finances will continue to be competently managed.

Incapacity can strike at any time. Advancing age can bring dementia and Alzheimer’s disease, and a serious illness or accident can happen suddenly. Therefore, it’s a real possibility that you or your spouse could become unable to handle your own medical or financial affairs.

If you become incapacitated without the proper plans and documentation in place, a relative or friend will have to petition the court to appoint a guardian for you. This is a public procedure that can be stressful, time consuming and costly. In addition, without your directions, a guardian might not make the decisions you would have made.

Advance medical directives. Without any legal documents that state your wishes, healthcare providers are obligated to prolong your life using artificial means, if necessary, even if you really don’t want this. To avoid this happening to you, sign an advance medical directive. There are three types of advance medical directives: a living will, a durable power of attorney for health care (or health-care proxy) and a Do Not Resuscitate order (DNR). Each of these documents has its own purpose, benefits and drawbacks, and may not be effective in some states. Employ an experienced estate planning attorney to prepare your medical directives to make certain that you have the ones you’ll need and that all documents are consistent.

Living will. This document lets you stipulate the types of medical care you want to receive, despite the fact that you will die as a result of the choice. Check with an estate planning attorney about how living wills are used in your state.

Durable power of attorney for health care. Also called a “health-care proxy,” this document lets you designate a representative to make medical decisions on your behalf.

Do Not Resuscitate order (DNR). This is a physician’s order that tells all other medical staff not to perform CPR, if you go into cardiac arrest. There are two types of DNRs: (i) a DNR that’s only effective while you are hospitalized; and (ii) and DNR that’s used while you’re outside the hospital.

Durable power of attorney (DPOA). This document lets you to name an individual to act on your behalf. There are two types of DPOA: (i) an immediate DPOA. This document is effective immediately; and (ii) a springing DPOA, which isn’t effective until you’ve become incapacitated. Both types end at your death. Note that a springing DPOA isn’t legal in some states, so check with an estate planning attorney.

Incapacity can be determined by (i) physician certification where you can include a provision in a durable power of attorney naming one or more doctors to make the determination, or you can state that your incapacity will be determined by your attending physician at the relevant time; and (ii) judicial finding where a judge is petitioned to determine incapacity where a hearing is held where medical and other testimony will be heard.

Reference: The Post-Searchlight (December 13, 2019) “How to go about planning for incapacity”

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What Does an Estate Planning Attorney Really Do? – Annapolis and Towson Estate Planning

Vents Magazine’s recent article, “Understanding What an Estate Planning Attorney Does,” explains that estate planning is a legal set of instructions for your family about how to distribute your wealth and property after you die. Estate planning attorneys make sure the distribution of property happens according to the decedent’s will.

An estate planning attorney can provide legal advice on how to prepare your will after you pass away or in the event that you experience mental incapacity. She will have all the information and education on all the legal processes, beginning with your will and moving on to other important estate planning documents. She will also help you to understand estate taxes.

An estate planning attorney will also help to make certain that all of your savings and property are safe and distributed through the proper legal processes.

Estate planning attorneys can also assist with the power of attorney and health care directives. These documents allow you to designate an individual to decide issues on your behalf, in the event that you become mentally incapable of making decisions for yourself. They can also help you with a guardian who will look after your estate.

It’s important that you select the right estate planning attorney to execute the legal process, as you’ve instructed in your estate plan. You should only retain an attorney with experience in this field of law because other legal counsel won’t be able to help you with these issues—or at least, they may say they can, only to find out later that they’re not experienced in this area.

You also want to feel comfortable with your estate planning attorney because you must disclose all your life details, plans and estate issues, so she can create an estate plan that’s customized to your circumstances.

If you choose the right attorney, it will save you money in the long run. She will help you save from all the estate taxes and make all the processes smooth and easy for you and your loved ones.

Reference: Vents Magazine (December 12, 2019) “Understanding What an Estate Planning Attorney Does”

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How to Spot Problems at Nursing Homes – Annapolis and Towson Estate Planning

The best time to shop for a nursing home, is when you do not need one. If you wait until you can no longer safely or comfortably live on your own, you probably will not be in a position to do a lot of legwork to investigate facilities. Do your research well ahead of time, so you know the nursing homes in your area that provide high-quality care and, more importantly, the ones that have significant problems.

As you evaluate and compare facilities, you need to know how to spot problems at nursing homes. The marketing brochure, website and lobby might be lovely, but you should base your decision about a long-term care facility on much more data than those things. Here are some tips on how to dig for possible problems at nursing homes:

  • Online search. Check out the nursing home’s website to get an overview of the services it offers and the industry affiliations or certifications it has. Look at the daily menus to see if the meals are nutritious and have enough variety. Most people would not enjoy eating the same main course two or three times a week. Look at the activities calendar to see if you would be happy with the planned social events. On some websites, you can view the floor plans of the resident rooms.
  • Ask your primary care doctor to name a few facilities he would recommend for his parents, and those where he would not want them to live.
  • Local Office on Aging location. Every state has an Office on Aging. Contact them to get as much information as you can about safety records, injuries, deaths, regulation violations and complaints about local nursing homes.
  • Your state’s Long-term Care Ombudsman (LCO). Every state also has an Ombudsman who investigates allegations against nursing homes and advocates for the residents. Your state LCO should have a wealth of information about the facilities in your area.
  • State Online Database or Reporting System. Some states have online databases or collect reports about nursing homes.
  • Medicare’s Nursing Home Compare website. Medicare maintains an online tool, Nursing Home Compare, that provides detailed information on nursing homes. Every nursing home that gets any funding from Medicare or Medicaid is in this database. You can enter the name of a specific nursing home or search for all the facilities in a city or zip code. The tool includes information about abuse at long-term care facilities. On the webpage, you can explore the Special Focus Facility section to find nursing homes with a history of problems.
  • Word of mouth. Ask your friends, relatives and neighbors to recommend a quality nursing home. Personal experience can be extremely valuable.
  • Make a short list of the top candidates. After you collect as much information as you reasonably can, narrow your options down to four or five facilities that best meet your needs and preferences.
  • Visit your top choices. There is no substitute for going to a nursing home and checking it out in person. Pay attention to the cleanliness of the place throughout, not just in the lobby. Give the facility the “sniff” test. Determine whether they use products to mask unpleasant odors, instead of cleaning thoroughly. See whether the residents are well-groomed and wearing fresh, clean clothes. Observe the interaction of the staff with the residents. Notice whether people who need assistance at mealtime, get the help they need without having to wait.
  • Take online reviews with a grain of salt. Fake reviews are all over the internet. If you see a nursing home with only a few reviews, and they are all five stars, be skeptical.

Once you gather this information, you will be ready in the event you need to stay in a nursing home for a short recuperation from surgery or longer term.

References:

AARP. “Finding a Nursing Home: Don’t Wait Until You Need One to Do the Research.” (accessed December 5, 2019) https://www.aarp.org/caregiving/basics/info-2019/finding-a-nursing-home.html

CMS. “Find a nursing home.” (accessed December 5, 2019) https://www.medicare.gov/nursinghomecompare/search.html

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How Can Life Insurance Help My Estate Plan? – Annapolis and Towson Estate Planning

In the 1990s, it wasn’t unusual for people to buy second-to-die life insurance policies to help pay federal estate taxes. However, in 2019, with estate tax exclusions up to $11,400,000 (and rising with the cost-of-living adjustments), fewer people would owe much for estate taxes.

However, IRAs, 401(k)s, and other accounts are still 100% taxable to the individuals, spouses and their children. The stretch IRA options still exist, but they may go away, as Congress may limit stretch IRAs to a maximum of 10 years.

Forbes’ recent article, “3 Ways Life Insurance Can Help Your Estate Plan,” explains that as the IRA is giving income from the RMDs, it may also be added, after tax, to the life insurance policy. If this occurs, it’s even possible that the death benefits could grow in the future, giving a cost-of-living benefit to children. This is one way how life insurance can be used creatively to help your estate plan.

For married couples, one strategy is to consider how life insurance on one individual could be used to pay “conversion tax” at death, using tax-free benefits. When the retiree dies, the spouse beneficiary can then convert all the IRA (taxable money) to a Roth IRA, which is tax-exempt with new, lower income tax rates (37% in 2018-2025 versus 39.6% in 2017 or earlier).

This tax-free death benefit money can be used to pay the taxes on the conversion, letting the surviving beneficiary have a lifetime of tax-exempt income without RMD issues from the Roth IRA. The Social Security income could also be tax-exempt, because Roth withdrawals don’t count as “income” in the calculation to see how much of your Social Security is taxed. However, you’d have to be within the threshold for any other combined income.

Life insurance for both individuals (if married) may also be a good idea. If the spouse of the IRA owner dies, the money from the life insurance can be used once again. If this is done in the tax year of the death for married individuals, the tax conversion could be done under “married filing status” before the next year, when the individual must use single tax filing status.

Another benefit of the IRA-to-Roth conversion is the passing of Roth IRAs to heirs, which could create a lasting legacy, if planned well. New life insurance policies that add long-term care features with chronic care and critical care benefits can also provide an extra degree of benefits, if one of the insureds has health issues prior to death.

Be sure to watch the tax rates and possible changes. With today’s lower tax rates, this could be very beneficial. Remember that there are usually individual state taxes as well. However, considering all the tax-optimized benefits to spouses and beneficiaries, the long-term tax benefits outweigh the lifetime tax liabilities, especially when you also consider SSI tax benefits for the surviving spouse and no RMD issues.

Life insurance in retirement can help protect, build and transfer wealth in one of the easiest ways possible. If you’re not certain about where to start with your life insurance needs, speak with an experienced estate planning attorney.

Reference: Forbes (November 15, 2019) “3 Ways Life Insurance Can Help Your Estate Plan”

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Q & A – Medicaid for Nursing Home Care – Annapolis and Towson Estate Planning

As we approach our third act, new terminology comes into our daily lives that we may have heard before, but maybe never gave much thought to. Terms like Medicare, Medicaid, Social Security, Long-Term Care, and so on, can become sources of anxiety, if we don’t truly understand them. Therefore, today we’re answering some of the fundamental questions about Medicaid for nursing home care, in the hopes that we can alleviate at least one source of anxiety for you.

Question #1 – What is Medicaid?

Medicaid is a state and federal government-funded program that provides medical services to financially eligible individuals. Unlike Medicare, you do not have to be elderly to qualify for Medicaid, and many elderly individuals receive Medicaid benefits, including nursing home care. Every state administers its own version of Medicaid. For more information on Medicaid programs in your state, visit the Medicaid website, and select your state.

Question #2 – What are Medicaid’s basic financial eligibility requirements for nursing home care?

To determine your eligibility for nursing home benefits under Medicaid, the government will look at your income and resources in a given month to ensure you are within the legal limits for Medicaid benefits. To qualify for Medicaid, your monthly income must be less than the Medicaid rate for nursing home care, plus your typical monthly healthcare expenses. If you are eligible, you are allowed to keep $70 of your income for personal use. The rest is taken to pay for your care.

Question #3 – What is the Medically Needy Program under Medicaid?

For individuals that may exceed the financial limits to receive Medicaid, they may still qualify to receive Medicaid benefits under the medically needy program. This program allows individuals with medical needs to “spend down” their income to acceptable rates, by paying for medical care for which they have no insurance. For individuals over the age of 65, states are required to allow you to spend down your income regardless of medical necessity.

Question #4 – What resources can we have if my spouse is applying for Medicaid?

When a married couple applies for Medicaid, both spouses’ income and resources are included in the qualifying calculations. You may have all of the “exempt” resources, like an automobile and a house, along with one non-exempt item that does not exceed a set value (currently just over $58,000), such as cash or investments. Once your spouse qualifies for Medicaid, after one year, all excess income and resources must be transferred to the non-Medicaid-benefitted individual. That spouse may also accrue income and resources over and above the limits that Medicaid imposes on the benefitted spouse.

More information can be found on the Medicaid website, including requirements and benefits information for the state in which you reside.

References:

Medicaid.gov. (Accessed November 28, 2019) https://www.medicaid.gov/medicaid/index.html

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