Estate Planning Bits

What personal and financial documents must you keep, and for how long?

Some people like to keep things like old bank statements, electric bills, etc., and some are people throw them away as fast as they receive them. I recently started to clean my basement and found records going back some thirty years. While I am certainly not a hoarder, I do have lots of clutter that must be dealt with.

Clutter can make a difficult time ever more so if you should happen to pass away without first dealing with it. What a mess you would leave for your family. The following is a short synopsis and guide as to what to keep and what to toss or shred.

Records to keep:

Legal records, including wills, life insurance policies should be retained indefinitely, as well as information regarding the purchase or sale of a home, second home, timeshare, etc., as you will need them to determine the tax basis or cost of such assets, so that when they are sold, you or your heirs will not be paying excess capital gains tax. These records should be in a separate box and clearly marked “do not destroy,” but once the assets are sold and the statute of limitations has run on the government being able to audit or review the return, then they may be destroyed. Some people like to keep their deeds and mortgages for posterity, and some people actually frame their old deeds and mortgages for decoration, as many of them were colorful or handwritten with a fountain pen.

Tax returns, investment statements, 1099 Forms, W-2s, etc. should be kept for seven years, as the IRS has several years to audit a return once it has been filed. It is also normally good to keep records of stock purchases and sales in the event of a review by tax authorities. Such financial documents are also important to retain in the event that you need long-term care, as often the Medicaid office will request bank records and tax returns for five years prior to you requesting such assistance. If the records do not exist, you may be required to purchase them from the bank or financial institution, and this could be somewhat expensive and time consuming.

Pay stubs, credit card bills, bank statements, etc, are probably necessary to save for only one year, although if the records have to do with taxes, they should be kept for seven years. Most credit card companies, utilities, and banks have records available relatively easily, (although there may be a fee imposed for them), but they are available nonetheless. A problem may arise when a bank is acquired by another bank, and the acquiring bank must keep these records for some period of time, but they usually do not keep them any longer than the required seven years. The same is true of brokerage firms and utilities that are being acquired, merged, or sold.

It may be helpful to label the box that is holding these records so that when you place the 2013 records in your storage, you can then remove the box from 2006 and have those records shredded. In this manner, you never have more than seven years records at a time, and you are continuously purging the old records as you replace the most recent year in the storage area.

 

Hyman G. Darling, Esq.

Photo credit: ifindkarm under Creative Commons License

The danger in adding your child to your bank account

How do you know what really is the right thing to do in order to protect your assets or attempt to avoid probate?

One of the relatively simple, often used, and inexpensive techniques is to merely add your child’s name to a bank account. This involves going to the bank and completing a signature card. With this common, joint account the funds are then subject to withdrawal by either or the survivor. An alternative would be to have the account in the client’s name with a beneficiary. This is normally called an in-trust for or payable on death account.

In these types of situations, the funds are not available to your child during your lifetime, but rather, pass to your child upon your death. In some cases, a bank will allow more than one beneficiary to be listed.

Unfortunately, these types of accounts do not protect assets from long-term care expenses. Since the assets are still available to you, and you have the right to withdraw the funds and are required to report their interest on your tax return, these assets are essentially still owned by you. This is, however, and effective tactic if your goal is simply to avoid the probate process.

If your child’s name is merely added to the account as a joint owner, then another issue that may come up involves a situation where your child is sued, dies, has marital problems, or becomes disabled himself. In these circumstances, there will be an issue as to whether those assets are truly yours, or available to your child, and a governmental agency or creditor of your child may attempt to attach those assets or cause them to be “accessible assets.”

In some cases, a trustee in bankruptcy may also attempt to cause those assets, or at least half of them, to be available to the creditors of your child since his name is on the account, despite the fact that the funds actually belong to you.

Needless to say, you usually cannot have your cake and eat it too, and therefore, it is critical that you understand the ramifications of merely adding your child’s name to your account.

 

Hyman G. Darling, Esq.

Photo credit: Microsoft 

Massachusetts medical orders for life-sustaining treatment

Medical Orders for Life-Sustaining Treatment (MOLST) is a standardized, voluntary form that allows a seriously ill patient to provide preferences for certain medically appropriate life-sustaining treatments into valid medical orders that may be honored by all health care professionals. The form contains valid medical orders concerning:

• CPR
• Intubation/ventilation
• Transfer o a hospital
• Dialysis;
• Artificial Nutrition
• Artificial Hydration and
• Other treatment preferences. 

MOLST is based upon the ethical and legal principles of patient self-determination and respect for patient autonomy. Its instructions are effective immediately and reflect the patient’s current health status and preferences. MOLST is suitable for patients of any age with a serious medical condition including, but not limited to: life threatening disease, chronic progressive disease, dementia, life threatening injury, or medical frailty.

A valid MOLST must be signed by both the patient (or the patient’s health care proxy – but only if the patient has lost capacity, or the patient’s guardian) and the attending physician, nurse practitioner, or physician assistant.

A Health Care Proxy and MOLST are two different forms used in Massachusetts to express a person’s wishes about their own medical care. These forms are used for different reasons and at different times in health care planning. Although MOLST is not intended to be drafted by elder law attorneys, attorneys should ensure that there are no inconsistencies between a Health Care Proxy and the MOLST.

 

Todd C. Ratner, Esq.

Photo credit: Microsoft  

 

The necessity of careful estate planning in bankruptcy

The Bankruptcy Appellate Panel recently upheld a decision by U.S. bankruptcy judge, Boroff regarding the intersection of a common estate planning tool and bankruptcy, (see BAP NO. MW 12-060.)

Specifically the debtor had a one quarter interest in real estate that was subject to a life estate. The debtor filed bankruptcy and attempted to claim her one quarter remainder interest as exempt, pursuant to the Massachusetts Homestead statute.

The trustee objected to the exemption on the basis that the Massachusetts homestead statute does not specifically protect the debtor's type of ownership interest. The judge and panel agreed with the trustee, as the statute only protects a "sole owner, joint tenant, tenant by the entirety, tenant in common, life estate holder, or holder of a beneficial interest in a trust", none of which specifically capture the debtor's ownership type.

Despite the debtor's argument that creating a life estate with a remainder interest by simple deed is a common and cost effective estate planning tool, the court held that the specific language of the statute could not be ignored, and the legislature's failure to include remainder interests meant the homestead protection did not apply to the debtor. As such, the beneficiary of a remainder interest seeking bankruptcy protection would be better off talking to an estate planning attorney about establishing a trust in order to protect the real estate prior to filing bankruptcy.

 

Justin H. Dion, Esq.

Photo credit: Microsoft 

2013 numbers that might matter to you

Every year, many important numbers are adjusted for cost of living increases or other adjustments. 2013 is no exception, and the following is a list of some of the important numbers to be considered: 

Estate and Gift: 

Annual exclusion gifts - $14,000

Lifetime gift credit - $5,250,000

Estate tax credit - $5,250,000 

Medicaid: 

Maximum community resource allowance - $115,920

Minimum community spouse resource allowance - $25,000

Maximum amount Medicaid recipient may own - $2,000

Minimum monthly maintenance allowance - $2,898 (until July, 2013) 

Medicare Part A: 

Hospital deductible (days 1 – 60) - $1,184

Hospital co-insurance (days 61 – 90) - $296/day

Hospital co-insurance (days 91 – 150) - $592/day 

Medicare Part B: 

Deductible - $147/year

Standard premium (if individual’s income is less than $85,000) - $104.90/month 

Income taxes: 

Maximum wages for Social Security tax purposes - $113,700 

Capital gains tax: 

Maximum rate – 20%

Phase-out of itemized deductions: 

Cut by 2% for each $2,500 of adjusted gross income over the same thresholds for phase out of standard deductions.

Phase-out of standard deductions: 

$250,000 for single taxpayers

$300,000 for married taxpayers 

 

The above numbers are the standard numbers for 2013, but many of these may be adjusted for both tax and Medicaid purposes with accounting and/or legal assistance. There are exceptions to both rules and figures, and you should not merely consider that the aforementioned numbers are set in stone without proper planning.

 

Hyman G. Darling, Esq.

Photo credit: Microsoft 

 

10 perils of joint tenancy

Joint tenancy is a form of co-ownership. An advantage is that when one co-owners dies, the surviving co-owner instant has access to the jointly held property, eliminating the need for probate. However, joint tenancy can have its perils. 

Control Issues: By providing someone with co-ownership, you give them control of your asset. If you add another person as co-owner of your home, you cannot sell or mortgage the home unless that person agrees. 

Creditor Issues: If creditors seek out your co-owner for outstanding debt owed, the creditors may be able to obtain part of your home or bank account that is held in joint tenancy.

Relationship Issues: If you and your co-owner experience a falling out, the co-owner may be able to take all of the money out of the bank account.

Substitute for Will Issues: Parents of several children may place one child’s name on an account and assume he will divide assets equally among all siblings. Unfortunately, this method provides no stipulations over control of the money. The surviving co-owner can do with it what he pleases, with no legal obligation.

Uncertainty Issues: Unplanned ownership of property often leads to unwanted results, especially for people unable to manage assets.

Tax Issues: Careful planning to eliminate or reduce estate taxes can be completely thwarted by a joint tenancy that passes property outright to a surviving joint owner.

Long-term Care Issues: Thoughtful planning to reduce long-term care financing can also be thwarted by a joint tenancy that passes property outright to a surviving joint owner.

Marriage Issues: Individual property may become marital property once it is transferred into a joint tenancy.

Incompetency Issues: If a co-owner becomes incompetent, part of the property may go into a conservatorship, making it burdensome if the other joint tenant wants to sell the jointly held property.

Distribution Issues: Joint tenancies deprive you of the flexibility of a will or trust, where you can stagger the distribution ages of the beneficiaries. In a joint tenancy arrangement, the joint tenant receives the asset all at once.

Todd C. Ratner, Esq.

Photo credit: Microsoft   

Good grief! Preparing your family to handle your death

Imagine that today you pass away. Your loved ones would be devastated, but they would, nonetheless, be called upon to tend to your final affairs – arranging your funeral, managing your final debts, and possibly even having to probate your estate. Will you have left your affairs in complete disarray, or will you have set in place a plan to ensure that your loved ones are able to carry out your last wishes with the least amount of effort?

When you pass away, your loved ones will be experiencing grief. It consists of the emotions and sensations that accompany the loss of someone or something dear to you. Sometimes grief reactions are so severe that they are mistaken for signs of dementia or severe psychiatric illness.

Given the intense effect that grief will have on your loved ones, it is imperative that you create a plan to facilitate the handling of your own final affairs. In addition to establishing an estate plan, it is important that you inform your loved ones of your plan. It is not necessary that you share the its details, but at a minimum, the person you have chosen to carry out your affairs should be informed as to where to find important documents, such as your last will and testament and other financial documents.

Sometimes, it is a good idea that you do discuss the details of your estate plan with your loved ones. If you have chosen to distribute your estate in unequal shares, but you do not discuss this plan with your loved ones, it is likely that your plan will cause hurt feelings and conflict within your family.

You might also choose to establish a prepaid funeral and memorial service. You may pre-pay for your funeral, and the money will be held in trust to cover your final expenses when the time comes. When you pass away, your family will only need to call the funeral home, and your plan will be carried out with the least amount of effort required from your grieving loved ones.

The planning that you do today may prevent rifts in your family tomorrow.

 

Gina M. Barry, Esq.

Photo credit: Microsoft   

What VA benefits are available to you?

Very often, Veteran’s Administration benefits are overlooked, despite their availability for veterans and their families. All these people have to do is file an application, and yet many individuals are surprised when they learn that they are entitled to monthly payments.

A veteran must have served during a war and also must have served 90 days or more of active duty. War time includes but is not limited to the Afghan, Iraqi, or prior wars such as World War II, the Korean Conflict, Vietnam, Desert Storm, and Desert Shield. In addition, the veteran must have been honorably discharged or medically discharged.

The most popular benefit is one called Aid and Attendance. This is available to both a veteran and their surviving spouse. In order for the spouse to become eligible, they must have been married to the veteran as of date of death, and they may not have been remarried.

There are also asset and income tests to qualify for VA benefits, and at the time when  this article was written, there are proposed laws to limit the options for gift giving and transfer of assets in order to qualify for VA benefits. There are no laws in place as of now, but there are limitations on assets, excluding the value of one’s home, car, and certain other items.

In order to qualify for these benefits, a person must have income and assets under a certain level. One means of protecting assets is to make gifts to others; however, the recipient may not include someone who is also living in the home, because there is a VA rule that states that the assets of all individuals living in their home are counted. The veteran must relinquish and transfer all rights, including the right to receive any income from those assets, in order to make it an effective transfer.

The VA does not impose any transfer penalties, but when a transfer occurs, it will also be counted for Medicaid purposes, so it must be reviewed within the entire planning process. Keep in mind that once a transfer is made, the recipient now owns those assets and if that recipient gets sued, divorced, dies, or becomes disabled themselves, those assets may be used for that person’s care, and will not be available for the use of the veteran or their spouse.

Certain assets may be transferred relatively easily, but there are other assets that may have adverse consequences, such as an IRA or 401 K plan. In order for those assets to be transferred, they would have to be cashed in, and then the applicant would be taxed on all of the funds received, and only the net amount would be able to be be gifted.

If the IRA was converted into an annuity, then the stream of income would also be counted for VA benefits, and this excess income may cause a disqualification.

Of course, if a person needs certain things, such as renovations to a house to make it more accessible, new furniture, a new television, car, etc, these purchases are not considered to be disqualifying transfers, but merely an expenditure of funds for the benefit of the applicant.

There are many rules and regulations involved in the process of attempting to qualify for benefits, as well as exceptions. Most cities, towns, and states have veteran’s services offices that assist veterans and their families. They may also consult the Department of Veterans Affairs website. Also when consulting an attorney, make sure you speak with one who has an accreditation with the VA as a certified VA attorney. 

 

Hyman G. Darling, Esq.

Photo credit: Microsoft   

Estate planning for blended families: considerations for cohabitating or married couples with kids from other relationships

The days of mostly traditional American families are probably gone for good. The modern family of today is often a mix of spouses, exes, kids, and steps who somehow find a way to make it all work. Estate planning for such an intricate blended family may be a little tricky, and there are lots of factors to consider. 

With blended families, it is important to give significant thought, time, and attention to the many planning issues regarding financial, insurance, and tax related matters. While traditional estate planning documents are critical, it is also important to consider a prenuptial or a cohabitation agreement. Either one of these agreements should spell out, in as much detail as possible, what will occur if the relationship dissolves, regardless of whether or not the couple is married. 

One of the major issues that this agreement should address is housing. Both parties may be liable on a mortgage, and it is very important to consider the status of the real estate upon dissolution of the relationship. 

There may also be provisions within the agreement relative to the distribution of assets upon death. In cases where there is a significant mortgage, the parties may consider purchasing life insurance to cover the outstanding balance of the mortgage so that the survivor may receive sufficient liquid assets to continue paying the mortgage despite the loss of one income. 

Additional life insurance may also be necessary if one of the parties is under an order of the court from a prior divorce decree wherein a percentage of assets is required to be maintained for the benefit of children from the prior marriage. 

These are just a few of the issues that blended families will likely face. For a more comprehensive analysis of your situation, it is recommended that you meet with a qualified estate planning attorney.

 

Hyman G. Darling, Esq.

Photo credit: Microsoft   

 

Usernames, passwords and logins: preventing a disaster for your heirs

If you pay bills and bank online and handle much of your financial activity there, your agents under your durable power of attorney, or the executor of your will, or the administrator of your estate must have access to that information in order to manage your financial affairs when you are no longer able to do so. 

Even something so seemingly simple as canceling a deceased person’s account on a social networking site such as Facebook, LinkedIn, or Twitter, may be extremely frustrating and heartbreaking for a fiduciary who doesn’t have the username and password combination to access that account. 

Most security officers of websites will allow access with proper documentation, such as a certified death certificate and certificate of appointment from a probate court, appointing someone as the fiduciary of the decedent’s affairs. However, when someone becomes incapacitated, the guardian or conservator who needs access to the information is often blocked by the website’s privacy officer, who may require a specific order from a judge. In fact, some credit card companies and other vendors will also not allow a fiduciary to have access without a specific court order. 

This may all be prevented by taking a few simple steps right now. 

It is critical to trust at least one person with your “sacred” information regarding passwords. A perhaps preferred option is to place this information in a sealed envelope and keep it with your original will and durable power of attorney at your attorney’s office. As passwords are changed and new sites are added to the list, this envelope may be updated or substituted. 

You may not wish to share private login information with anyone during your lifetime, but in the event of incapacity or death, it is vital that this information is available to those who will handle your affairs. This information may also remain private simply by telling whoever will be responsible for your financial affairs the login name and password for access to your computer and that there is a document there with all of the necessary information. 

Another option is a company called Legacy Locker. It provides family members or fiduciaries safe and secure access to account information in time of need. Confidential information will be preserved in one place and only distributed under emergency circumstances. Fees are generally charged annually or as an upfront lump sum for your lifetime. 

It is likely that safeguarding this private information is going to be an integral part of preparing an estate plan in the future. This will provide piece of mind so you can be assured that your personal information will remain confidential until it must be accessed by someone responsible for handling your affairs.

 

Hyman G. Darling, Esq.