Estate Planning Bits

Sharing critical estate planning and financial information with your children, and how to do this if you want to keep the details private

A few years ago I presented an Estate Planning Program to employees of the Wall Street Journal. Most of these people were rapidly approaching retirement, and by now, they probably are retired.

They were all very interested in planning for their future, but there was one special attendee who was a writer for the Journal. A couple weeks after the presentation, I read his article in the Wall Street Journal about the importance of planning to save taxes, avoid probate, protect assets for long-term care situations, and generally to do estate planning for the right reason, that is to ensure that funds and assets will pass to the appropriate parties at the appropriate times. The article went on to explain the need for all of the important documents, planning and obtaining good counsel for the plan. However, toward the end of the article, the author talked about the importance of discussing the plan with his parents, but since he could not discuss this issue with them personally, he merely stated that he hoped they were reading the article.

My recommendation to many of my clients is to not discuss all of the details of their plan with their children, but to make sure that the kids have a complete and accurate picture of their assets all in one place. This includes copies of bank statements, financial records, life insurance policies, tax returns, etc.

Many people don’t want to make this information available to their children now, but they should at least tell their kids where their important papers are and who is in charge, such as their financial advisor, insurance agent, lawyer, accountant, banker, trust officer, etc. If they don’t do this, their kids will spend a significant portion of their time when their parents either become incapacitated or die, searching for all of the information. Your children will also need access passwords to get information that may be stored on your computer.

In your case, you may have an open family relationship and be willing to discuss planning issues with your children. This includes not only end of life decisions such as life support, organ donation and funeral arrangements, but also discussion about who may be in charge of making financial, medical, and other decisions in the event of your incapacity or death. Although this may lead to the opening of Pandora’s Box and causing family disharmony when children who think they should be in charge find out that they are not, at least all parties within the family will be educated about what you want and what plan has been prepared.

If you are not interested in sharing all of this private information, you may provide a list of items and where the documents are kept, where safe deposit boxes are and located, where the keys are maintained, where passports, veteran’s administration documentation, medical insurance cards, and other important information is maintained. At least then, if there is an emergency, someone will have access to this information, whether it be your child, a trusted advisor, your lawyer or another family member.

Frequently, after a plan is completed in our office, the parents wish a full disclosure to be made (possibly not about all assets,) but about the plan itself, and they want to share the plan with their children. We may consider having an open family discussion with some children being present in the office and some available by conference call or video conferencing in order to allow the entire family to be informed as to the client’s intentions. This serves the purpose of educating all parties so that they will know the intent, goals and objectives of their parents, while at the same time “clearing the air” of any misinformation that may have been implied or presented to any party in the past. If a child asks a question that a parent is not willing to answer, the issue is delicately averted if that is my client’s desired result.

By: Hyman G. Darling, Esq.

Your beneficiary designations – are they up to date?

Often, the assets that an individual plans to pass through their Will are carried out as desired. However, it is important to remember that only assets in a person’s name alone pass through probate. Assets that are joint or payable by a beneficiary designation, such as life insurance or retirement benefits, do not pass through probate, but rather, pass outright to the beneficiary.

Therefore, it is very important to consider and properly designate the names and back-up beneficiaries on retirement plans and life insurance, which are often times greater than other assets that may pass through a Will.

If you are single, you should check your beneficiary designation to ensure that your life insurance and retirement benefits pass to the desired beneficiary and in the correct proportion. For example, if you’re single without children, you may want your siblings or nieces and nephews to be your beneficiaries instead of your parents. Your parents could be elderly and institutionalized, which would mean that funds left outright to them will merely be used for long-term care expenses.

If you are single with a minor child, and if your child is the beneficiary of those benefits, he/she will receive them at age 18. In the meantime, a guardian may have to be appointed by the Probate Court to hold those funds for the benefit of your child, and the guardian may in fact be your divorced, former spouse.

If you are married, you would normally name your spouse to be the beneficiary of life insurance proceeds, but there should also be a secondary beneficiary in case you both die together in a common disaster. In this case, it may be appropriate to designate that the beneficiary is a trust for the benefit of your children, rather than leaving the funds outright to them. If there is no beneficiary designation made, then the balance of the funds that are paid by the insurance company will be payable to your estate, and thus have to pass through the probate process, making the distribution more costly, time consuming and public.

Regardless of your life situation, your beneficiary and back up beneficiary designations should be reviewed often to ensure that they are properly completed. For instance, you may have made your spouse the beneficiary designation of a life insurance policy, but what happens if you are now separated or divorced? Upon your death, the beneficiary designation is payable under a contractual relationship, regardless of what your Will says, and therefore, the proceeds will be payable to your ex-spouse, which is probably not what you want.

Many beneficiary designation forms also permit a portion to be paid to multiple beneficiaries rather than having all funds left to one particular beneficiary. Whether a specific beneficiary receives a dollar amount or a percentage of the proceeds, the form should be reviewed often and kept with all your other important papers, such as the policy itself, your Will, Health Care Proxy, Power of Attorney, and Trust, if applicable. As much care should be taken to complete these important forms all the rest of your legal documents.

By: Hyman G. Darling, Esq.

Your Medicaid application – a complex and complicated process

Elders are often concerned that the cost of long-term care will deplete their estates. Specifically, the cost of nursing home care in Massachusetts is now estimated at between $90,000.00 and $115,000.00 per year. As such, many elders turn to Medicaid, referred to as MassHealth in Massachusetts, which is a joint federal-state program that pays for nursing home care for individuals that meet their stringent financial eligibility rules.

The Medicaid application is often a difficult and time-consuming to complete. The long look-back period and the ever-changing use of asset protection techniques complicate the application process. The supporting documents necessary for a successful application include a birth certificate, health insurance cards and premium information, 36 months of bank statements, three years of tax returns, investment information and insurance policies, all income checks, expense information and trust documents.

Numerous practitioners compare the Medicaid application process to the complexity of the multi-year tax audit. Therefore, due to the complexity of the Medicaid application process, it is strongly encouraged to utilize an experienced elder law attorney with support staff who are specifically trained in the preparation and submission of Medicaid applications

By: Todd C. Ratner, Esquire

Medicaid: Estate recovery – Is your home in jeopardy after Medicaid Eligibility?

Created in 1965, Medicaid is a Federal Program that is designed to pay for the medical expenses of financially needy people. Individuals over the age of 65 are eligible for Medicaid if they meet certain income and resource tests. However, even if an applicant is approved for Medicaid benefits, that does not necessarily mean that Medicaid can’t recover the benefits previously provided to the Medicaid recipient.

Medicaid has the right to recover the value of the benefits it provided on your behalf after the age of 55 for community benefits, or at any age for long-term care or nursing home benefits. However, recovery is limited to your probate estate. Also, Medicaid can only pursue claims against your probate estate if there is no surviving spouse, no child under the age of 18 and no disabled child of any age.

If you own a home, Medicaid may place a lien on your house for the amount of funds expended on your behalf after you reach the age of 55. Pre-death Medicaid liens are simply notice liens. Medicaid has no claim against the real estate until you die. However, if your house is sold before your death, Medicaid can seek recovery from the proceeds of the sale.

Therefore, if you are planning to qualify for Medicaid, you should not only prepare to meet the Medicaid eligibility requirements, but also protect your assets, especially your home, prior to seeking Medicaid benefits.

By: Todd C. Ratner, Esquire

Healthcare Decision Day 2008 – a time to review or establish your Healthcare Proxy

Today is Healthcare Decision Day across the country. The purpose is to raise awareness of the importance of planning for healthcare decisions not only relative to end of life, but all medical decision making. It is somewhat timely that this day follows tax day, resulting in two important dates being consecutively “celebrated.”

In Massachusetts, any adult has the right to prepare for the eventual situation where they may not be able to make decisions for themselves. In the Commonwealth, this is called a Healthcare Proxy, but in other states the document may be called a Living Will, Advanced Medical Directive or Statements of Wishes. These documents should be prepared while you are competent, and well, thus proving that you can think clearly about the decisions you’re making, including who you want to make your end of life decisions.

It is important to put these wishes in writing so there won’t be any issue when it becomes necessary to utilize this document. Perhaps one of the most noteworthy cases in recent history was the Terri Shivo case. Terri had allegedly told others what she wanted, but since her wishes were not in writing, the Courts disregarded them. The 17 court cases that occurred over several years regarding Terri’s desires remind us of the adverse situation that may occur when you don’t effectively plan.

Many people put off these decisions. However, it is important to establish them now so there won’t be any confusion about your desires. This will establish clear lines of authority for decision making and determine the course of action to take or not to take when the time comes. This document is so important that it is really not an option for you to go without it. Whether or not you want to be kept alive is a personal decision that is too important to leave to a likely very emotionally overwhelmed family member.

While most states do not allow for assisted suicide, a decision may be made to not prolong the dying process. This allows a person to be taken off life support if there is no reasonable likelihood that they are going to recover with any dignity or quality of life. This so called “living will” language should be included within your Healthcare Proxy since living wills are not allowable in Massachusetts. However, in other states, this may be utilized as a separate document that provides clarification and direction to the individuals making medical decisions for you when you become incapacitated.

Once the document has been completed, a copy should be given to your family members, your proposed decision makers and the physicians who will be talking with family members about these decisions when the time arises.

While most Healthcare Proxies do not have to be notarized, they need to be in writing and should be witnessed similar to a Will. However, I strongly urge all my clients to be sure that their documents are notarized so if you become ill in a state that requires a notarized statement, the document will comply with the laws there.

If your Healthcare Proxy hadn’t been revised for some time, it should be updated to comply with any new laws, such as the HIPAA waiver, which will permit your agent or backup agent to talk with your physician or medical provider to obtain the necessary information to allow him or her to fulfill your wishes.

By: Hyman G. Darling, Esq.