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ESTATE PLANNING AND ELDER LAW

What is estate and elder law planning? The answer is that it depends on each client's age, family and finances.

For a description of some typical client situations, click on any one or more of the following links:

SINGLE SENIOR CITIZEN

(Estate large enough so estate taxes payable)

Bill is widowed, has five adult children and fifteen grandchildren, is age 70, and is in good health. Bill's total estate is over $5,000,000.00, including a home valued at $750,000.00.

At his estate planning conference, Bill discussed the following estate planning ideas and concerns:

  1. A living trust to avoid probate at Bill's death and also to manage Bill's assets if he becomes incapacitated. Bill will initially serve as his own trustee, with his oldest child named as his successor.
  2. A plan to distribute Bill's estate at his death in equal shares to his children.
  3. Annual exclusion gifts (currently $11,000.00) to each of Bill's children and their spouses and to adult grandchildren. Gifts to section 529 plans for minor grandchildren for college expenses.
  4. Transferring Bill's home to a qualified personal residence trust (QPRT) giving Bill the right to live in the home for a specified number of years and thereafter transferring the home to his children. If Bill survives the term of years, the home can be removed from his estate at a reduced gift tax cost.
  5. Satisfying Bill's charitable desires by naming his favorite charities as primary beneficiaries of his retirement benefits, which will then pass free of income and estate taxes.
  6. Establishing an irrevocable trust to apply for and own a life insurance policy on Bill's life, the proceeds of which would be free from federal and estate tax, but would be available to pay estate taxes due at Bill's death.
  7. A Power of Attorney to Bill's oldest child to handle any financial and business matters, not covered by the trust, if Bill is incapacitated.
  8. Naming Bill's oldest child to make medical decisions for him if he lacks the capacity to make those decisions on his own.
  9. Providing for all of his children to have access to his medical information under the new HIPAA law.
  10. Maintaining adequate liability insurance, including an umbrella policy.
  11. Organizing his asset ownership and beneficiary designations to avoid probate at his death.
  12. Inventorying and keeping his important legal papers and documents in a secure safekeeping location
  13. Deciding whether to become an organ donor (senior citizen status does not mean you are automatically prevented from being an organ donor).
  14. Leaving written instructions for a funeral and burial.

SINGLE SENIOR CITIZEN

(No estate tax potential)

Mary is widowed, has four adult children, is age 75, and is in good health. With her deceased husband's social security, the yearly distribution from her husband's IRA, and her CD interest income, she has an annual income of approximately $35,000. Mary owns her home free and clear. Because her total estate is under $1,000,000, she does not have any estate tax concerns.

At her estate planning conference, Mary discussed the following estate planning ideas and concerns:

  1. A living trust to avoid probate at Mary's death and also to manage Mary's assets if she is incapacitated. Mary will initially serve as her own trustee, with her oldest son named as her successor.
  2. A plan to distribute Mary's estate at her death in equal shares to her children. Mary's youngest son is developmentally disabled and is presently receiving SSI and Medicaid. He will receive his share of Mary's estate in a special needs trust for his benefit that will insure that the receipt of his inheritance will not disqualify him for SSI or Medicaid. Mary's jewelry and her Hummel collection will be divided between her daughter-in-law and her daughter as Mary specifies in a list she will prepare.
  3. Mary is concerned about her potential need for long term care outside the home. None of her children reside in the area and she would prefer not to impose on them in any event. Mary is still young enough to purchase long term care insurance but the cost is prohibitive. Mary desires to receive good care but also to leave an inheritance for her children, particularly her youngest son. Mary and her attorney discuss what long term care options are available in the community, which options can be paid for with Medicaid, what the eligibility rules are currently for Medicaid, and a strategy for Mary should long term care become necessary.
  4. A power of attorney to her oldest son to handle any financial or business matters, not covered by the trust, if Mary is incapacitated.
  5. Naming her oldest daughter to make medical decisions for her if she lacks the capacity to make those decisions herself.
  6. Providing for all of her children to have access to her medical information under the new HIPAA law.
  7. Considering a gift to her church at her death.
  8. Maintaining adequate liability insurance, including an umbrella policy.
  9. Organizing her asset ownership and beneficiary designations to avoid probate at her death.
  10. Inventorying and keeping her important legal papers and documents in a secure safekeeping location.
  11. Deciding whether to be an organ donor (senior citizen status does not mean you are automatically prevented from being an organ donor).
  12. Leaving written instructions for a funeral and burial.

MARRIED SENIOR CITIZENS

(Planning for Long Term Care)

Paul is 85 and Virginia is 80. Paul fell and broke his hip about 30 days ago. He also has multiple other physical problems, including diabetes. Paul was discharged to a nursing home where his care was initially covered by Medicare and his supplemental insurance while he was having therapy. The nursing home has advised Virginia that Paul will not be able to come home from the nursing home and since he has stopped improving, his Medicare and supplemental coverage for the nursing home will terminate shortly, leaving Paul in private pay status.

Paul and Virginia have an income of about $45,000 per year, primarily from their pensions. They own their home, although there is a mortgage. Their savings total approximately $150,000. They do not have long term care insurance. Virginia is concerned about paying Paul's nursing home expenses (estimated at about $50,000 per year) and still having adequate funds for her own needs.

At her conference, Virginia discussed several issues relating to Paul's care needs and her financial situation.

  1. Their income is obviously insufficient to pay for care for Paul in a nursing home and also provide for Virginia's living expenses at home.
  2. It is important to preserve their savings for Virginia's future needs.
  3. Medicaid will provide for Paul's expenses in the nursing home if Paul and Virginia meet certain asset and income qualification requirements.
  4. From an asset perspective, their home is an exempt asset but Paul will not qualify for Medicaid until their savings are reduced to $75,000. To preserve as much of the $150,000 in savings as possible, Virginia and her attorney consider the following planning alternatives:
    • a. Pay down the mortgage on the home.
    • b. Complete any necessary repairs or improvements to the home.
    • c. Prepay funeral and burial costs.
    • d. Purchase a new car for Virginia.
    • e. Invest in a special type of annuity, an immediate annuity, that will make payments over Virginia's life and which is an exempt asset; and
    • f. Establish a special kind of trust (for the benefit of trust) for Virginia, which is an exempt asset. All of these alternatives are intended to reduce Virginia's savings to $75,000 as quickly as possible without spending down the savings for Paul's nursing home bills.
  5. From an income perspective, Virginia will be able to keep her own social security and retirement income. She can also have part of Paul's income if necessary for her to have a minimum level of income for her support. If this income is insufficient, there is the possibility of petitioning the Probate Court for a supplemental income allowance.
  6. Options to provide for Virginia's long term care at a later time are also discussed.

LATER IN LIFE REMARRIAGE

Donald is in his late 50s and has been divorced from his first wife for approximately five years. He has been dating Marla, who is 12 years younger and also divorced, for a year and a half. They have lived together for the last six months.

Donald and Marla have now decided to get married. Donald has three grown children by his prior marriage, and Marla also has three grown children by her prior marriage. Donald has substantial resources, but Marla is less affluent. Both Donald and Marla want to provide for each other, but also want to be sure their respective children receive their inheritance.

When Donald visits with his attorney, they discuss several matters relating to Donald's planned marriage:

  1. The best way to protect each other and their respective children is for Donald and Marla to enter into a premarital agreement before they get married.
  2. To assure that this agreement will be enforceable, Donald and Marla need to each have their own attorney and make a complete disclosure of all of their assets and income to each other.
  3. Donald can provide for Marla with an income/total return trust during her lifetime, if she survives Donald, and also potentially save estate taxes for his children.
  4. Delaying distribution of any portion of Donald's estate to his children until after Marla's death may postpone their inheritance too long and lead to a Astressed relationship@ between Marla's and Donald's children. This can be avoided if Donald can divert some assets, perhaps life insurance, to his children at his death even though Marla survives.
  5. In addition to providing for what happens if Donald or Marla die, the agreement can also include the terms of a property settlement and whether there will be alimony if there is a divorce.
  6. There are also other issues to consider, including who will pay for the living expenses and how medical and long term care expenses will be handled.
  7. The attorney also mentions to Donald that in certain situations merely living together can create rights between the parties like a husband wife relationship. A living together agreement can be completed to avoid the living together agreement producing unintended consequences.

FAMILY WITH ADULT CHILDREN

(Estate large enough so estate taxes payable)

Sam and Carol are in their fifties and have two adult children and four minor grandchildren. Their estate is currently valued at $7,000,000.00 and they anticipate that it will appreciate in the future.

At their estate planning conference, Sam and Carol discussed the following estate planning ideas and concerns:

  1. Separate revocable trusts for each of them to avoid probate at either death and to allow each of them to shelter the maximum amount possible in federal estate tax (currently $1,500,000.00 for each spouse increasing to $2,000,000.00 in 2006 and $3,500,000.00 in 2009).
  2. Each trust provides for care and support of the survivor of them for life and provides that upon the death of both Sam and Carol, their trusts are divided equally between their two children.
  3. A Power of Attorney for business and financial purposes between Sam and Carol and from the two of them to their two children.
  4. Naming each other and then their children to make medical decisions in the event of incapacity. Also providing for access to medical information under the HIPAA law.
  5. Transferring assets with the greatest potential for appreciation to a grantor retained annuity trust (GRAT), which will allow future appreciation on these assets to pass to their children free of gift and estate taxes. Sean and Carol will receive annuity income for life.
  6. Creating an irrevocable trust which would apply for and own a life insurance pol-icy on their joint lives, the proceeds of which would not be included in either of their estates for estate tax purposes and which could be used to pay any estate taxes due at the survivor's death.
  7. Satisfy their desire to benefit their local community foundation by establishing a charitable remainder unitrust (CRUT) into which they would transfer assets which would even-tually be distributed to the foundation at the last of Sam and Carol to die. During their lifetime Sam and Carol would receive from the trust annually a fixed percentage of the trust assets.
  8. Providing for college expenses of their grandchildren through section 529 plans.
  9. Organizing their assets with ownership and beneficiary designations to avoid probate and for optimum income tax planning with respect to retirement benefits.
  10. Maintaining adequate liability insurance, including an umbrella policy.
  11. Inventorying and keeping their important legal documents in a secure safekeeping location.
  12. Deciding whether to be organ donors.
  13. Leaving written instructions for funeral and burial if Sam and Carol have a common fatality.

FAMILY WITH ADULT CHILDREN

(No estate tax potential)

Tim and Alice are in their early seventies and have four adult children. Their total estate is less than $1,000,000.00 and they do not anticipate that it will appreciate significantly in the future.

At their estate planning conference, Tim and Alice discussed the following estate planning ideas and concerns:

  1. A joint living revocable trust to avoid probate when the first spouse dies and also at the death of the survivor.
  2. Providing that if both of them are deceased or incapacitated, their oldest child will be appointed as successor trustee of their trust. After Tim and Alice have died, the trust would be divided equally among their four children.
  3. A power of attorney for business and financial matters between Tim and Alice and also from the two of them to their oldest child.
  4. Naming each other and then one of their children to make medical decisions in the event of incapacity. Also providing for access to medical information under the HIPAA law.
  5. Organizing their assets with ownership and beneficiary designations to avoid probate and for optimum income tax planning with respect to retirement benefits.
  6. Titling their cars to minimize potential liability.
  7. Maintaining adequate liability insurance, including an umbrella policy.
  8. Planning for long term care with insurance or reliance on Medicaid.
  9. Inventorying and keeping their important legal documents in a secure safekeeping location.
  10. Deciding whether to become organ donors.
  11. Leaving written instructions for funeral and burial if Tim and Alice have a common fatality.

FAMILY WITH YOUNGER CHILDREN

(Estate large enough so potential for estate taxes)

Sue and Bob, both 45, are mom and dad for a family of five, their children's ages being 12 through 17. Counting Bob's group life insurance and his 401(k) retirement plan, plus the equity in their home, their private life insurance, and their savings, they have an estate that totals approximately $1,300,000. Sue anticipates a substantial inheritance from her parents, presently both living, at some time in the future.

At their estate planning conference, Sue and Bob discuss the following estate planning ideas and concerns:

  1. A joint living revocable trust to avoid probate when the first spouse dies and also at the death of the survivor.
  2. Providing in the trust that at the death of the first spouse to die, the surviving spouse can decide to put part of the estate into a trust that benefits the surviving spouse but will not be subject to estate taxes when the surviving spouse dies. Estate taxes are not presently a concern in Bob and Sue's estate, but may be in the future if the estate tax is not permanently repealed.
  3. Providing that if both of them are deceased, a trust, with Sue's brother as Trustee, will be established to provide for support for the children and to pay for their post high school education. Once all of the children have completed their education, separate equal trusts are established for each child, with distribution one-half (1/2) at age 25 and the balance at age 30.
  4. Appointing a Guardian, Bob's sister, for the children under age 18 at the death of the survivor.
  5. A power of attorney for business and financial matters from Bob to Sue and vice versa and also from Bob and Sue to Sue's brother.
  6. Naming each other and then Sue's brother for her and Bob's sister for him to make medical decisions in the event of incapacity. Also, providing for access to medical information under the HIPAA law.
  7. Naming a beneficiary if the entire family has a fatal catastrophe.
  8. Organizing their assets with ownership and beneficiary designations to avoid probate and for optimum income tax planning with respect to retirement benefits.
  9. Saving for college expenses through Section 529 plans.
  10. Saving for their own retirement and taking full advantage of 401(k) opportunities.
  11. Considering charitable gifts at the death of the survivor or if there is a catastrophe that wipes out the entire family.
  12. Titling their cars to minimize potential liability, particularly since the oldest child is now driving.
  13. Maintaining adequate liability insurance, including an umbrella policy.
  14. Inventorying and keeping their important legal documents in a secure safekeeping location.
  15. Deciding whether to be organ donors.
  16. Leaving written instructions for funeral and burial if Bob and Sue have a common fatality.

FAMILY WITH YOUNGER CHILDREN

(No estate tax potential)

Jim and Jane are in their early thirties with two minor children and a third on the way. Their estate is not large enough to plan for estate taxes, but they do want to make sure their children are taken care of in the event both of them were to die.

At their estate planning conference, Jim and Jane discussed the following estate planning ideas and concerns:

  1. Wills for each of them which provide that at the first spouse's death everything will pass to the survivor.
  2. Providing in the Wills that at the survivor's death, a trust, with Jim's sister as trustee, will be established to provide for the support and education of children under the age of 22. Once their youngest child reaches age 22, the balance remaining in the trust will be divided equally among all the children.
  3. Appointing a guardian, Jane's brother and sister-in-law, for children under age 18 at the death of the survivor.
  4. A power of attorney for business and financial matters between the two of them and also from the two of them to Jim's sister.
  5. Naming each other and then Jim's sister for him and Jane's brother for her to make medical decisions in the event of incapacity. Also providing for access to medical information under the HIPAA law.
  6. Naming of beneficiary in the event the entire family dies in a common disaster.
  7. Organizing their assets with ownership and beneficiary designations to avoid probate at the first spouse's death and for optimum income tax planning with respect to retirement benefits.
  8. Saving for college expenses through section 529 plans.
  9. Saving for their own retirement and taking full advantage of 401(k) opportunities.
  10. Titling their cars to minimize potential liability.
  11. Maintaining adequate liability insurance, including an umbrella policy.
  12. Inventorying and keeping their important legal documents in a secure safekeeping location.
  13. Deciding whether to become organ donors.
  14. Leaving written instructions for funeral and burial if Jim and Jane have a common fatality.