Parents, you need to think about having an attorney prepare two simple legal documents for your college-age student. One is a Power of Attorney. The other is a Health Care Proxy. These documents can be invaluable if your child has a medical emergency. We have all heard of cases where a college student gets severely injured. Did you ever wonder who is going to make the necessary decisions for the injured person? Consider that your college-age child is now an adult. Consequently, you may not be able automatically to make decisions for your college-age child. Some states have surrogate decision making statutes. In New York, the statute allows a patient’s parent, other family member or even a close friend to make health care decisions for the patient. The statute applies only where the patient lacks capacity to make such decisions AND did not previously appoint a health care agent. But not all states have such statutes, and, even when a statute exists, there can be issues of which family member will serve as the surrogate decision maker. In states where there is no such statute, the absence of these legal documents can lead to unforeseen and unwanted outcomes and problems.
Start with the premise that, as legal adults, your college-age children can actually prevent you from seeing their financial and/or medical records. For parents, this news may come as a surprise. But, the truth is you have no legal right to access your college-age student’s medical records. That means you have no legal right to find out what medical choices they have made, what medications they are taking, what treatment and/or counseling they will get or what procedures they have undergone. In fact, you can’t even see, or have any access to, their medical records. Technically, their treating doctors should not even speak to you. So, what can we do to help you ask? Call us to prepare a Health Care Proxy for your college-age child to sign.
The Health Care Proxy is a crisis document. It is limited to medical matters and can only be used when there is an incapacity. In other words, it only becomes effective when your child is unable to make decisions on his/her own. So, if your child needs important decisions made while they are unconscious or in a coma, the Health Care Proxy lets you make the important decisions regarding what medical care is provided.
In addition to being unable to make medical decisions without a Health Care Proxy, you can’t make financial decisions for your college-age child without a Power of Attorney. A properly signed POA can help in a myriad of circumstances including financial and medical. The POA allows you to conduct banking transactions for your student. You can also make investments. Is your student involved in an insurance matter? The POA can help with that too. The POA can be used for securing government benefits. It also allows you to deal with medical billing, payments and records. You can even file tax returns for your student. Is your college-age child studying abroad or traveling overseas? The POA can help there too. Of course, the POA is not unlimited. Everything you do while using that POA needs to be done for the benefit of the person who appointed you. Unlike the Health Care Proxy, the POA is effective immediately. No need to wait for an emergency. This immediate effectiveness makes the POA a powerful tool to help your college-age child. In short, the POA can be used as a matter of convenience from simple banking transactions to more complex financial matters, and a lot of matters in between.
While you hope to never need to use these documents, it is best to be prepared in case something goes awry while your child is away at college. Be safe. Be smart. Be prepared. Schedule an appointment with us to make sure you have the right legal documents for your college-age student.
Join us between 11:00 a.m. and 4:00 p.m. on this Sunday, April 19th at the Shop Putnam Business & Home Expo!
Where: Mahopac High School, 421 Baldwin Place Rd., Mahopac, NY 10541
Why: Meet and mingle with local business owners and leaders. Take advantage of Expo specials being offered to visitors attending the Expo. Learn and talk about new products and services offered by people who are experts in their fields. Show your pride and support for your local businesses by coming to the Largest Business Event in Putnam County!
No Reservations Required!
Free to the Public! Bring the family, neighbors and friends!
A life insurance trust is a great way to avoid estate taxes on the proceeds from your life insurance policy. For most people, their life insurance proceeds will be included in their gross taxable estate when they die. The general rule is that life insurance proceeds will be included in the gross taxable estate if: (a) the named beneficiary is your estate or the executor of your Estate; (b) you possessed incidents of ownership at the time of your death (i.e., the ability to change beneficiaries or borrow against the policy); or (c) the ownership of the policy was transferred to someone else within three years of your death. And, for larger life insurance policies, those proceeds could subject your estate to federal and/or state estate taxes.
So, what do you do if you are planning on purchasing a life insurance policy with a large death benefit? Well, you might want to consider creating a irrevocable life insurance trust. The purpose of an irrevocable life insurance trust (sometimes called an ILIT) is to keep the policy proceeds out of your gross taxable estate and out of the estate of your spouse. This type of trust is typically created as a stand-alone trust. Its sole purpose is owning and holding your life insurance policy. Now, in order for the ILIT to effectively exclude the policy proceeds from your gross estate (a) you must not have any ownership rights in the policy; (b) your estate must not be named a beneficiary on the policy; and (c) you may not be a Trustee of the Trust (however, your spouse may act as a Trustee). The ILIT is a separate legal entity. The ILIT will have its own tax identification number. The ILIT will own the life insurance policy. The ILIT will receive the full proceeds which will be available to your heirs upon your death. This strategy also works for those who have an existing life insurance policy where the proceeds are currently includable in your gross tax estate. You can transfer your existing life insurance policy to an ILIT.
Besides avoiding estate taxes, an ILIT can be used to help pay your estate taxes. For many people, life insurance is a great way to help pay estate taxes. Let’s say your net worth is tied up in assets that cannot be easily liquidated, such as real estate or a small business. The life insurance death benefit provides the necessary liquidity so that your heirs do not have to sell the real estate or small business. However, if the life insurance policy is not held in a trust and passes through your estate, much of the benefit will be lost due to increased estate taxes. This strategy can be a great benefit and provide much needed liquidity to pay estate taxes without having your heirs have to worry about liquidating other assets to handle your estate.
Despite its great benefits, an ILIT does have some drawbacks. The trust itself and all transfers of life insurance policies into it are irrevocable. Since the trust is irrevocable, you get the estate tax benefits. But, it cannot be amended. This limitation will prevent you from changing beneficiaries or naming new beneficiaries. It also means you will be unable to borrow against the policy or cash it in. However, if you know that you will not change your beneficiaries and you know that you will not need to access the policy’s cash value during your life time, the Irrevocable Life Insurance Trust can be a great estate tax planning option.
Just click on this link Continuing Education for Realtors to get more information about our upcoming FREE seminar. Three (3) continuing education credits for realtors. Meyer & Spencer, PC is happy to co-sponsor this event with our friends at Tompkins Mahopac Bank! Join us with Glenn Wu on April 22nd at 3 pm at the Tompkins Mahopac Bank branch in Brewster, NY. We look forward to seeing you there!
The importance of a great estate planning team cannot be understated. There is a widely-held misconception that estate planning and an estate planning team are reserved for “other” people. Of course, nothing could be further from the truth. Consider that many residents of Westchester and Putnam County are millionaires – and they don’t even know it! You might be a millionaire if you own your house unencumbered by a mortgage, have retirement funds in and IRA or 401(k) plan and have some life insurance. For many, home equity represents are large portion of our net worth. It is no longer unusual for home values in Putnam County to exceed $600,000 or $700,000 and in Westchester to exceed $750,000. So, when you include life insurance and retirement plans, you probably need some advanced estate planning.
We, of course, think your estate planning team should start with Meyer & Spencer, PC. As your estate planning attorney, we will be responsible for the drafting of your estate planning documents such as your Will, Revocable Living Trust, Power of Attorney, etc. and making sure your estate plan will meet all of your objectives.
A solid estate planning team would also include your financial advisor, banker and accountant. Financial advisors fall into many different categories. The most common is the Series 7 registered representative, commonly known as a stockbroker. Most brokerage firms now call them “financial consultants,” “account executives,” or “investment representatives.” These financial consultants can offer a wide variety of investment products from stocks and bonds to annuities and insurance depending on which licenses they hold. However, in many cases, the financial consultant’s area of expertise will be in the stock market. A good financial consultant will be able to build a diversified portfolio for you depending on your age and your investment objectives.
Another type of financial advisor is the insurance planner most commonly referred to as “financial planners.” Most financial planners have the licensing and ability to trade stocks and bonds; however, their focus is usually different. It is not unusual for an insurance planner to work as part of the estate planning team with a stockbroker to fill in the gaps of your investment portfolio. While a stockbroker may manage your investment account on a five to ten year horizon, insurance planners typically look farther out on the horizon. Insurance Planners can use life insurance, annuities and other investment vehicles to increase your net worth and protect your assets after your death. Insurance planners will also be able to provide disability insurance to ensure that your family’s future will be secure in the event you are disabled and no longer able to work. If you own your own business, an insurance planner would be the proper person with whom to consult when it comes to business succession planning. Whether you sell your business at death, upon disability or at retirement, it is imperative to have a business succession plan in place.
Your banker may be able to provide some of the products that your stockbroker or Insurance Planner provides all under the same roof. This depends on the bank and the experience level of the Financial Advisors working at the bank. Most banks typically have Trust Departments where professional trustees are used to manage trust assets. This is particularly important if you are leaving assets to a disabled child or if you have an estate that is too complex to be properly managed by other family members.
Your accountants round out the Estate Planning Team. Unlike the other financial professionals who can sell investment and insurance products, your accountant’s role is much different. Your accountant will help you analyze your assets and providing insight on the tax ramifications of your various holdings. Your accountant can be extremely helpful in reviewing IRAs and deferred compensation plans. Your accountant can offer guidance to the other members of the estate planning team as to how to best protect these assets.
Regardless of your net worth, it is important that you have experienced and reliable estate planning team working for you. It is also important that your advisors work together so that everyone is aware of what the other advisors are doing. Teamwork and planning are the key components to having a well-rounded all inclusive estate plan.
We know this is not late night television. However, we also know that people like top ten lists. So, we have come up with our Top Ten Reasons to do an Estate Plan. After all, how many times have you thought to yourself “I’ve got to call my lawyer and get my Will finalized soon?” It seems that procrastination is the primary reason that people fail to get their affairs in order. Nowhere is the old saying “if you fail to plan, you plan to fail” more appropriate than in the context of Estate Planning. Without a comprehensive estate plan in place, once you die or become incapacitated in a catastrophic accident, your family will not have any control over how your estate or affairs are administered. So, without further ado, here is our top ten reasons to do an estate plan:
Reason 1: estate planning can save your family tens of thousands of dollars in probate costs and legal fees.
Reason 2: estate planning allows you to determine exactly how and to whom your assets are distributed after your death.
Reason 3: estate planning allows you to designate who will raise your children if both you and your spouse die while your children are under the age of majority.
Reason 4: estate planning allows you to determine the age for your children or grandchildren to receive their inheritance.
Reason 5: estate planning allows you to designate who will manage your assets until such time as your heirs are old enough to receive them outright.
Reason 6: estate planning will prevent conflicts among your family members because all decisions will have been made by you ahead of time leaving nothing left to debate.
Reason 7: estate planning can prevent your child’s ex-spouse from controlling the use of assets you may want to leave to your grandchildren.
Reason 8: estate planning enables the person of your choice to handle health care decision making and financial decision making for you if you are incapacitated.
Reason 9: estate planning can protect your assets from being used to pay off the creditors of your children or other heirs.
Reason 10: estate planning can save your family tens of thousands and even more in Estate Taxes if you have a taxable estate.
The above-listed reasons are just some of the more obvious reasons for getting your affairs in order right away. Once you die, the laws of intestate succession take over and your kids may fight over who should serve as the Estate Administrator and your assets may end up in the hands of someone you did not wish to leave them to. Most people realize that they should have a Will and other advanced care directives in place; however, know you have our top ten reasons to do an estate plan. No one likes to think about their death so they procrastinate about taking the steps to put their plan in place. By failing to plan, your procrastination may unfortunately be a complete disservice to your loved ones.
When looking to buy or sell a house, clients often ask us: real estate broker or salesperson, which is better? Clients usually realize that they should consult with a real estate agent. They just don’t know if it is a broker or a salesperson. The term “real estate agent” is the generic term used to describe real estate brokers and real estate salespersons. Under New York State Law, both brokers and salespersons must be licensed. Indeed, both must keep abreast of changes in the real estate laws by completing continuing education courses. While both are involved in the buying and selling of homes, the broker and salesperson have distinct roles and responsibilities.
A real estate broker is licensed to act independently in the listing, negotiating, selling and/or buying of a home. The broker acts as a “middleman” and can represent the seller, buyer or even both parties where there is full disclosure. The broker’s job is to bring together those seeking to sell real estate with those seeking to buy. The broker’s negotiations typically result in a “meeting of the minds” between buyer and seller which can then be formalized in a contract to be drawn up by the attorneys for the parties. Most brokers are compensated for their work in the form of a commission based upon the sales price of the premises. A broker can be an individual person or a business firm owned and operated by an actual broker. To become a licensed broker, most States require that the individual have 1 to 3 years experience as a licensed Salesperson.
A real estate salesperson is also involved in the negotiations between buyers and sellers and the bringing together of a “meeting of the minds.” The main distinction between broker and salesperson is that the salesperson cannot act independently; he or she must be employed by a real estate broker. In addition, a salesperson has to be an actual person and cannot be a business entity such as a corporation. Salespersons perform their job under the supervision, guidance and responsibility of the employing broker. A salesperson cannot accept a listing for a property in his or her own name; the listing must be taken in the name of the broker. No previous experience is required to obtain a salesperson’s license.
The distinction between the licensing requirements between brokers and salespersons is by no means any indication of ability of that person to perform as a real estate agent. Generally speaking, the role of the broker is in running the business while the role of the salesperson is generating sales. A salesperson can receive a broker’s license but elect to work in another broker’s office under the title of salesperson or associate broker. Likewise, a broker can run the business and also be great at generating sales.
When considering whether you should hire a real estate broker or salesperson, we say that you should go with whom you are comfortable. Experience counts a lot as does the opinions of prior clients of the Broker or Salesperson. A Broker’s or Salesperson’s participation in State and local Real Estate Associations is also usually a good indication of the dedication your agent has to his or her profession.
The most question in our Elder Law practice is: at what age should I start my elder law planning? Unlike many other parts of our lives, there is no one answer. Elder law planning does not come in a “one size fits all” solution. The correct answer to the question is as diverse as our clients. When you should start elder law planning depends upon your specific circumstances. What is right for one family in one situation may be entirely wrong for another family in a different. However, if we had to give a general rule, we would say “the sooner the better.”
One of our primary focuses as Elder Law Attorneys is shielding or protecting a family’s assets from the high cost of nursing home care. Because of this focus, we are necessarily concerned with our clients’ mental health as well as their physical health. We think seniors between the ages of 65 and 70 should start the elder law planning process. In particular, they should consider Elder Law Asset Protection strategies. Most seniors in that age range are still in relatively great health. Consequently, they have the benefit of time – time to establish the elder law plan and time to let the statutory look-back period run out. We are always concerned with the 5-year look-back period because the changes to the Medicaid laws made timing of asset protection strategies a critical issue. In addition to their good health, this group of seniors typically has adult children who are mature enough to understand the importance of elder law planning and of their role in the plan. In many cases, the adult children serve as Trustee of a Medicaid Asset Protection Trust.
As many of you already know, we frequently use trusts to protect assets in the context of elder law planning. We have our clients transfer their assets into a Irrevocable Income Only Trust, also called a Medicaid Asset Protection Trust. In most cases, seniors have the necessary comfort level, faith and trust in their adult children to allow for the use of trusts in their elder law plan. Since the adult children will manage the trust assets, the age and maturity level of the appointed children as well as their relationship with the senior are also important factors.
For younger seniors in this age group we often suggest staggered or staged elder law planning. (Some call it Medicaid trust planning.) In the firt stage, we transfer the senior’s house into a trust right away. Then, as the seniors get older, liquid assets are added. We start with the home because the home is usually the seniors’ largest asset. It is also the asset our senior clients most want to end up in their children’s hands. Elder law planning with a home is a straightforward asset protection strategy and has no effect on a senior’s lifestyle. Other than the change in title of the home from individual name to trust name, the senior will not notice any change at all. There is no impact whatsoever on the senior’s daily life.
It is a much different scenario when seniors are placing their life savings into a Medicaid Asset Protection Trust. As seniors get older and have less of a need for large bank deposits or investments accounts, assets can be transferred to the irrevocable trust because there is less of a need for those assets. The benefit to starting an Asset Protection Plan at age 65 is that the senior is virtually guaranteeing that his/her children will receive an inheritance.
Then, there of those of us who tend to procrastinate when it comes to setting up Wills or Trusts or doing other types of planning we all know we should be doing. Thus, many of the cases we see are already in what we call the “crisis planning” stage. Typically, the senior who waits until age 85 to consider planning is usually doing it at this crisis stage or is doing it because they have seen a close friend or family member lose the bulk of their assets due to nursing home admission. Unfortunately, many people first start to think about asset protection only on the day before they enter a nursing home. In these cases or where there are health issues dictating that nursing home admission is imminent, then more aggressive elder law planning must be undertaken.
After they have signed all their elder law and/or estate plan papers, our clients tell us about the peace of mind they have knowing their plan is in place. On the other hand, crisis planning is nowhere near as beneficial and you can never be sure of the results. Consider this: if at age 65 your house is transferred to an irrevocable Medicaid trust and you make it past the 5-year look-back period, the full value of your home is permanently protected from nursing home costs. And, more importantly, you have guaranteed your kids an inheritance. This type of elder law planning can be done at any age; however, the risk of needing nursing home care is always present as we advance in years. The risk of losing everything is an unnecessary risk that you don’t have to take.
When it comes to Trust and Estates, it seems that everyone has heard the term “trusts.” Many times, clients come to our offices saying they “need” a Revocable Living Trust, a Life Insurance Trust, an elder law Medicaid Asset Protection Trust and/or an Irrevocable Trust. However, they do not seem to know what a trust is or why they need one. While there is a lot of good information available about trusts, there are still a lot of misconceptions about this important estate planning document.
In its simplest terms, all trusts are an agreement – a legally binding contract. The agreement is simple: one person (or legal entity such as a trust company) agrees to hold or manage the assets of another person for the benefit of a third person. Each trust has three parties: (a) the Grantor (Settlor), who is the person putting his or her assets in trust; (b) the Trustee, who is agreeing to hold or manage the assets; and (c) the beneficiary(ies), who get(s) the benefits of the trust assets.
To better understand the concept of a trust, think of a trust as a cargo ship. When you visit your attorney and sign the trust document, you are essentially building a cargo ship in which you can store your assets. Once the trust documents are signed, your trust ship is ready to protect your assets from the kinds of legal tests, storms and rough waters for which it was designed. That said, it is important to understand that not all trusts are alike. In fact, there are many different types of trusts. Each trust is designed to achieve different, and sometimes multiple, objectives. Just like boats are designed for different purposes (sailing, racing, cargo, etc.); trusts also have specific purposes. You may want to protect your assets from nursing home costs. Someone else may want to maximize Estate Tax savings. Still others may need to plan for a disabled child or for children with drug, alcohol or gambling issues. There is no “one size fits all” type of trust. Each family is different. As such, each trust should be custom drafted to meet your family’s particular estate planning objectives. And, just like having a boat is not for everyone, so it is true for trusts. Contrary to what you may hear in the media, a trust is not right for everyone. No matter what type of trust “ship” you decide fits your needs, it should be “built” with safety in mind.
Unfortunately, many people think that, just because they signed the documents in their attorney’s office, they are sailing safely along. In reality, they have never left the dock. You would not set sail on a long journey without stocking your ship. The same is true for a trust. After you build your trust by signing the documents, the next step is funding the trust. By funding the trust, we mean transferring or putting your assets into the trust. Think of it as stocking the ship. Your newly created ship has an endless hull for you to store your assets. It can hold one or multiple pieces of real estate. It can hold one or multiple checking, savings, and/or investment accounts. It can also hold life insurance policies. It can hold all these assets and more. For real estate, you actually need to sign a new deed from you to your new trust. This process is very simple but essential to fund the trust. For transferring bank or brokerage accounts or other assets, you need to talk to each financial institution. They will have you sign a few papers to change the name on the account from your name to the name of your Trust. These financial assets are not in the trust until that paperwork is complete and the funds are transferred by your bank or financial institution. Be sure to follow up with your financial institutions and double check the account statements. Keep in mind that you do not have to transfer all of your assets into the trust. You can pick and choose which assets to transfer and which assets you are going to keep in your own name. Completing this second step is critical to the success of your estate plan. Without proper funding, your “ship” (and your estate plan) is simply lost at sea.
When it comes to elder law mistakes, one wrong move can become one very big, costly mistake. If you are trying to be proactive, make sure you engage an experienced elder law attorney. Otherwise, sometimes things can go wrong through no fault of your own. Take, for instance, the true case of a senior (“Marge”) who came to our office with this elder law mistake. Marge had consulted a real estate attorney instead of an elder law attorney. Marge wanted to protect her home from the high cost of nursing home care. One of Marge’s friends told her to get her house out of her name. Marge bought the house for $40,000.00. At the time she went to the real estate attorney, the house was worth in excess of $600,000.00. Marge walked into the office of the real estate attorney (who had no experience in elder law) and asked him to transfer her property to her children. The real estate attorney obliged and prepared and filed a deed as requested. The elder law mistake is obvious to an elder law attorney. Unfortunately, no one told Marge that, by transferring the deed in that way, her family would be looking at a $540,000.00 capital gain on the property. And, the family was going to have to pay the taxes on that capital gain. Had Marge consulted an elder law attorney, she would have learned that there was a way to avoid incurring that capital gain. The elder law attorney would have told Marge that the simple solution to this problem would have been to include a life estate for Marge. This type of transfer would have not only guaranteed that Marge could live in her house until her death; but would have also provided Marge’s children with a stepped-up tax basis and no capital gains tax issues!
Another type of elder law mistake occurs when people have done elder law planning, but they fail to follow through. Elder law attorneys refer to this inaction as “failure to fund” the plan. In other words, they simply do not take the final necessary steps to protect their assets. Whether it is poor advice by the elder law attorney drafting the plan or simply a failure to follow the attorney’s instructions, the failure to fund trusts is one of the most common mistakes in elder law planning. For example, an elder law client will have a Medicaid Asset Protection Trust (sometimes called an Irrevocable Income Only Trust) prepared by an attorney, but, for some unknown reason, the client does not change the deed to his/her home. The Medicaid Asset Protection Trust never owns the house as it should. In other cases, the elder law mistake is that the client fails to re-title their bank accounts or brokerage accounts to reflect that the assets are held in trust. It is not until after the client needs nursing home care or sometimes after the client’s death that anyone realizes that the Medicaid Asset Protection Trust was an empty shell. The unfunded trust was rendered useless and a solid elder law plan was wasted. This is a huge elder law mistake with significant consequences. In the case of nursing home care, the client will not qualify for Medicaid benefits. Since the elder law trust was not funded, the Medicaid office will have no choice but to treat the assets as belonging to the senior. The end result is that the client will lose all of his/her assets to the high costs of nursing home care. However, the benefits of the Medicaid Asset Protection Trust are not just limited to qualifying for Medicaid. Upon the death of the senior, an unfunded trust means that the decedent’s assets or estate must pass by Will or the laws of intestate succession. If the assets had been placed in the trust, then probate would have been avoided for all assets that were in the Trust. Probate avoidance is an important feature of Medicaid Asset Protection Trusts because the probate process can be costly and time consuming. So, at the time of death, the deceased client’s family will have to go to Court to probate the Will and/or administer the Estate. Had the elder law plan been followed, probate could have been avoided.
The lesson to be learned from these elder law mistakes is that you must do your homework. The truth is that these elder law mistakes could apply to any area of law. Make sure that the attorneys, accountants, insurance planners and investment advisors you hire are professional and competent. When meeting with your advisors, ask a lot of questions. The more informed you are, the less likely it is that you will end up making these common elder law mistakes.