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Four Reasons to Revise Your Estate Plan

Four Reasons to Revise Your Estate Plan

by | Apr 18, 2022 | Asset Protection, Estate Planning

The need for an estate plan is something that many Americans only recognized as important during the worst months of the Coronavirus pandemic. We generally dislike thinking about our eventual demise, but the mortality rates of COVID-19 prompted us to see matters in a different light. In April 2020, professors David Horton and Reid Weisbord, respectively of the University of California Davis and Rutgers Law School, published the results of a survey showing that 68% of Americans did not have a will or any kind of estate planning strategy in place at a time when COVID-19 contagion was at a very high level.

 

Passing away without a will or an estate plan throws you into what is known as intestacy, which essentially means that your assets and property will be distributed according to state law. The probate code in many states calls for an estate distribution among tax agencies, creditors, surviving spouses, and descendants. This is not an ideal situation for many families; moreover, the interests of couples who never married, and of people who live in non-traditional family structures, are seldom taken into account by intestacy laws.

 

Seasoned estate planning attorneys can tell you that intestacy is only one of two major problems related to probate matters in the U.S. Failing to review, update, and revise an estate plan can complicate matters at a time when you won’t be around to fix the problem. If you already have an estate plan, great…but there is also a chance that you need to revise it due to legislative changes related to taxation, probate, or trusts. Even if changing legislation hasn’t impacted your estate plan, the natural evolution of your life probably has. Please take a moment to think about the major life events you have experienced since your estate plan was created. If any of them match the situations below, this is your cue to revise your plan.

 

Family Matters

Let’s consider the joy of getting married or welcoming a baby. Think about the letdown of getting divorced, or the sorrow of losing a loved one. These are major life events that call for an immediate revision of your estate plan, particularly when they involve weddings or marriage dissolution.

Moving Across State Lines

If you moved to Alabama from another state, the only way to tell if your estate planning strategy will continue to be effective is to review it. Keep in mind that some states have specific provisions with regard to the number of witnesses who must sign legal documents, such as trusts, living wills, medical directives, and others. Likewise, if you purchase a vacation home or investment property in a state other than the one you reside in, your plan will need to be updated accordingly.

Changes in Trustee or Estate Executor Designation

Your estate plan likely names an executor, personal representative, or trustee who is responsible for carrying out your wishes, distributing your assets, and otherwise administering your estate. If something happens to your named executor or trustee—or your relationship takes a turn for the worse—you should revise your estate plan immediately.

Changes to Assets and Liabilities

Filing for bankruptcy, paying off debts, selling a home, winning the lottery, or purchasing a collectible car are all examples of financial events that can significantly change the value of your estate, thus calling for an adequate revision.

Want to learn more about estate planning and the important role it can play in your future? Feel free to contact our office with questions. You can also download a free copy of The Basics of Estate Planning in Alabama, or attend one of our upcoming free workshops.



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What is a Trust…and Do I Need One?

What is a Trust…and Do I Need One?

by | Apr 13, 2022 | Avoiding Probate, Elder Law, Estate Planning, trust

Most people know that a will is an important piece of the estate planning puzzle, but there are many misconceptions about trusts. Most people believe that trusts are reserved for the very wealthy. While it’s true that not everyone needs a trust, it is hardly limited to those with multi-million dollar estates. Depending on your estate planning goals, assets, and wishes, a trust may be a very viable option for you—even if your estate is modest.

But, what is a trust…and how do you know if you need one?

What is a trust?

A trust is a legal contract that ensures the proper distribution of assets to the trustor’s beneficiaries. Assets can be distributed in the exact manner you wish them to be. The individual creating the trust—called a ‘trustor’ or ‘grantor’—places title to his or her assets into the ownership of the trust. The process of transferring assets to the trust is called ‘trust funding,’ and is an essential part of successful trust creation. The trustor will also name a person to manage and administer the assets held in the trust, called a ‘trustee.’ A well-organized and regularly maintained trust has the potential to save your loved ones from certain headaches, like probate court, and can offer tax benefits for inheritances, as well as more privacy and control over your assets.

General Guidelines

Generally speaking, trusts may be a viable option for you if you have a net worth of $100,000 or more, a considerable portfolio of real estate and other tangible assets, or detailed instructions for how you’d like your assets to be distributed to your beneficiaries when you pass away. It’s important to note that these recommendations are not set in stone, as each circumstance is highly unique, and even those who don’t meet these guidelines may still benefit from drafting a trust.

Types of Trusts

To further answer the question “what is a trust,” and determine whether a trust will fit your unique needs, it’s important to understand the different types of trusts that exist, and what makes them different. The most common types of trusts include:

  • Revocable (aka ‘Living’) Trust: This flexible trust allows you to cancel, maintain, and make amendments to the trust while you’re still alive. A revocable trust isn’t subject to probate, but doesn’t always protect assets from creditors, as the trustor still legally owns the assets that have been transferred to the trust.
  • Irrevocable Trust: Contrary to a revocable trust, irrevocable trusts are not able to be revoked or amended without the consent of all beneficiaries named in the trust. While this certainly limits the flexibility of the trust, it better protects the trustor from creditors and lawsuits. Additionally, an irrevocable trust can help minimize estate tax liabilities.
  • Testamentary Trust: Also referred to as a ‘will trust’ this type of trust is generated from a last will and testament, becoming effective (and irrevocable) after the trustor passes away. Testamentary trusts ensure that assets are distributed to beneficiaries at a designated time—known as the ‘trust expiration,’—which is prompted by a triggering event, such as the beneficiary turning a certain age. Because this trust is part of a will, it must go through probate before the trust can be created.
  • Charitable Trust: This type of irrevocable trust allows you to leave behind a legacy of giving. Charitable trusts are often established to reduce estate and gift tax liabilities. A charitable remainder trust (CRT) carries the added benefit of providing a source of income to you or your beneficiaries during the trust term. At the time of your passing, all remaining assets will then be distributed to the designated charity.
  • Special Needs Trust: Parents and guardians of children and adults with a disability can use this type of trust to protect a beneficiary’s eligibility for needs-based government programs, like SSI and Medicaid. This allows trustors the ability to provide financially for these beneficiaries when they are no longer around to physically care for them.

While creating a trust isn’t for everyone, it is a valuable part of an estate plan for many, providing an additional layer of protection for your legacy, and the future security of your loved ones. The flexibility, problem-solving, and variety that a trust provides makes it an attractive option for those seeking a well-rounded estate plan.

Educating yourself on trusts is only the first step. When it is time to create your trust, working with an experienced estate planning attorney will ensure that your trust is established and funded properly. Contact usvia the brief form below to get started today, or learn more about protecting your assets by signing up for Miller Estate and Elder Law’s FREE estate planning workshop.



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The Difference Between Wills and Trusts

The Difference Between Wills and Trusts

by | Apr 5, 2022 | Avoiding Probate, Estate Planning, trust

Establishing an estate plan that clearly lays out your instructions for asset distribution is one of the greatest gifts you can give to the people you care about. Two of the most important ingredients to ensure your assets and loved ones are protected are wills and trusts. These legal instruments are often confused with one another, making it difficult to discern which option is right for you. What are wills and trusts? How are they different? When should you use wills vs trusts? 

What follows is answers to these questions (and more), to help you make the best decisions for your family, and your legacy.

What are Wills and Trusts?

Wills and trusts both outline instructions for how you want your assets distributed, so you’ll see some overlap in what each is capable of doing, and the advantages and disadvantages of each. One of the major differences is when and how each becomes effective.

Wills

A will is considered a “simple” document, providing instructions for how you’d like your assets to be distributed. In your will, you’ll name an executor who will be responsible for distributing your assets per your wishes. Additionally, a will allows you to name a guardian for minor children and pets, forgive debts owed to you, and provide any additional instructions for such matters as funeral arrangements, and how taxes should be paid.

Trusts

A trust is a bit more complicated than a will, establishing a separate legal entity that holds legal title to your assets, and naming a trustee to manage and distribute those assets on your behalf, should you become incapacitated or pass away.

While there are many different types of trusts, they can all be classified in one of two ways:

  • Revocable (Living) Trust: This document allows the trustor to create the trust, retitle assets to the trust, assign a trustee, and make alterations, amendments, or terminations while they are living. This type of trust allows you to make an impact while you’re still alive, while giving you the flexibility to easily make amendments as life circumstances change.

  • Irrevocable Trust: This type of trust also assumes asset ownership, but cannot be altered, amended, or terminated by a trustor without the permission of his or her beneficiaries. While more restrictive than revocable trusts, this type of trust offers tax benefits that a revocable trust does not. 

Will vs Trust: What’s the Difference?

Both wills and trusts will help you handle your estate planning affairs, but there are some key differences that may help you decide whether your unique situation requires one or the other—or even both—options.

  • Effective Date

As aforementioned, one of the key differentiators of wills and trusts is when they go into effect: a will goes into effect upon death, while a trust becomes effective immediately upon funding and signing it. 

  • Privacy and Probate

All wills must undergo an often-arduous, time-consuming, and expensive probate process, which becomes public record and is accessible to anyone. Trusts, on the other hand, are not subject to probate and remain private. This can make trusts an attractive option for those seeking a faster and more private estate administration process for their beneficiaries…and one that is protected from the challenges often presented in probate court.

  • Property Coverage

A will covers any property solely owned by the grantor at the time of death, but does not cover property held by a trust, or any jointly owned property. A trust will only protect the property that has been transferred to it. Anything outside the trust may be subjected to probate.

  • Cost, Complexity and Maintenance

Wills created by an estate planning attorney often contain more complex terminologies, but a will can be extremely simple, with some states even allowing handwritten wills. This simplicity keeps the cost of creating a will at a minimum and, since wills are typically only revised for major life events, maintenance costs are also low.

Since trusts require you to fund them by transferring title to your assets, they can be more complex, and it is highly recommended you work with a trust attorney to ensure your trust is fully funded, supported by proper documentation, and kept up-to-date as you acquire new assets, and as life changes. This continuous maintenance can add additional costs, but ensures you’ve got 100% of your bases covered.

Will vs Trust: Which one is right for me?

The first step in answering this question is to assess your situation, needs, and goals. Things like your age, wealth, marital status, minor children, special needs, and unique requests play a pivotal role in making this decision. Most people need a will, but a trust is not vital for everyone. Enlisting the help of an estate planning and trust attorney is always the best option to find the estate planning solutions that best suit your needs. Contact Miller Estate and Elder Law to begin your custom-tailored estate plan, or register for our next FREE estate planning workshop today to learn more about estate planning and asset protection.

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Medicaid Income Limits: Will Medicaid Take My Home?

Medicaid Income Limits: Will Medicaid Take My Home?

by | Mar 17, 2022 | Asset Protection, Long-Term Care, Medicaid

Many people worry about what will happen if their spouse needs to go to the nursing home. Will Medicaid take the home where so many of their memories were made? What about their car? Investment accounts? Their life savings? While it’s true that Medicaid income and asset limits are strict, with proper planning and an understanding of Medicaid eligibility requirements, most couples can avoid losing their hard-earned assets to the nursing home.

In Alabama, the average cost of nursing home care is $6,459/month—and this number is expected to increase to $11,648 by the year 2038. Medicaid will pay the cost of long-term care for those who meet income and asset eligibility requirements. If you are married, in order to qualify for Medicaid, the individual who needs nursing home care cannot have monthly income in excess of $2,523, and cannot own assets valuing more than $2,000. The spouse who doesn’t need nursing home care—known as the “community spouse”—can keep one half of their assets, valuing no more than $137,400.

Fortunately, for married couples, Medicaid does not include the marital home towards the asset limit. The community spouse can continue to live there. However, if they eventually need long-term nursing care, Medicaid will put a lien on the house for the amount of money they pay for your care, and your children may not be able to inherit the home.

That being said, you have worked a lifetime to accumulate your wealth and assets, and passing them down to your children and grandchildren is important. There are some strategies that can help you comply with Medicaid income limits, without making costly mistakes that could disqualify you:

1. Asset Protection Trusts. These trusts, when drafted and funded properly, transfer the ownership of assets from you to the trust. This means they are protected from Medicaid, and other creditors and predators. However, keep in mind that Medicaid will look back 5-years from the date of application—any assets transferred during that period can incur penalties.

2. Income Trusts. Qualified or Pooled Income Trusts can hold income in excess of the $2,323/month limit imposed by Medicaid.

3. Medicaid Compliant Annuities or Promissory Notes. This can be helpful to offset the cost of nursing home care if a penalty period is inflicted. While planning ahead is obviously a better choice, if you find yourself in a crisis where nursing home care becomes necessary on short notice, this strategy can save you and your heirs money.

4. Spend Down Assets in Compliance with the Look-Back Period. The following purchases and investments will not violate the 60-month look-back period:

a. Pay off accrued debt
b. Purchase medical devices, like wheelchairs, dentures, eyeglasses and hearing aids, etc.
c. Home modifications and renovations
d. Vehicle repairs
e. Create a formal life care agreement with the help of an attorney
f. Pre-pay for your funeral

To qualify for Medicaid, it’s imperative that you avoid certain mistakes—and some of them are not so obvious. Working with a qualified elder law attorney who understands Medicaid income limits and eligibility requirements, as well as how to structure a trust to protect your assets while increasing your chances of qualifying for Medicaid, is so important.

Attorney Bill Miller of Miller Estate and Elder Law is an experienced elder law attorney, with offices in Birmingham and Anniston, AL. Gain access to his free 20-minute webinar about Medicaid qualification by following the link below, or contact us via the website today.

https://millerestateandelderlaw.com/medicaid-qualification-webinar

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My Spouse Needs to go to the Nursing Home…Now What?

My Spouse Needs to go to the Nursing Home…Now What?

by | Mar 6, 2022 | Asset Protection, Elder Care Planning, Elder Law, Long-Term Care, Nursing Home

You’ve been married to your spouse for decades. Lately, you’ve noticed that they are losing the ability to look after themselves. You realize that they may soon need nursing home care. You know this requires a lot of planning. Are you prepared?

When a spouse needs nursing home care, most people find that they are ill-prepared for the expenses associated with it. Paying out-of-pocket is expensive. After all, you’ve worked a lifetime to purchase your home and build your nest egg you should be able to pass those down to your children and grandchildren…not lose them to the nursing home. Your other options are to apply for Medicaid, or use long-term care insurance. Sadly, long-term care insurance is often overlooked until it’s too late to get it, leaving Medicaid as the only option. However, Medicaid eligibility can be tricky, and most people wonder how their assets might be impacted.

What Happens to My Income?

If your spouse has to go to a nursing home, all of their income will go to the nursing home.  You can keep all of your income but in many cases that is not going to be enough.  Without proper long-term care planning and a loss of your spouse’s income, your life savings could be drained in a matter of months if you have to pay out-of-pocket. Becoming eligible for Medicaid is challenging, with inhibitive income and asset limitations that may leave your spouse unqualified to receive these benefits. As the spouse who is not going to apply for Medicaid (also known as a “community spouse”), your income will not be factored in to eligibility. However, your spouse’s monthly income (which cannot exceed ~$2,523 per month ) will be used to determine Medicaid eligibility, and to pay for care, if approved. This leaves you at home with just one income to cover all of your expenses.

What About My Other Assets?

The other consideration when determining Medicaid eligibility is the assets that are owned by you and your spouse, regardless of whose name they are held in. The Medicaid applicant cannot own assets valued over $2,000 to qualify, not including your primary home or car. You, as the community spouse, can keep half of your assets, up to a maximum of $137,400.

You might also wonder which assets are included—and which are excluded—in the Medicaid application process. Typically, liquid assets, like bank accounts, insurance policies valued over $1,500, stocks and bonds, mutual funds, and second homes and cars, are considered countable assets. It should be noted that your home and one car are not included. This is because the community spouse would continue to reside in and otherwise utilize these assets. Additional assets that are exempt from Medicaid include personal effects, burial plots, and life insurance policies valued under $1,500.

So, What Are My Options?

If your spouse needs nursing home care now, and you are faced with either having to pay out-of-pocket or qualify for Medicaid, you still have some options. You may be tempted to spend down or transfer your assets, but Medicaid will look back 5-years from your application date to ensure you did not give away money to become eligible. Medicaid qualification is a confusing area of law, so it is best to plan with an elder care attorney who can take the guesswork out of applying for Medicaid and help you to avoid common mistakes that may cause penalties and delays in approval.

If you expect your spouse will need nursing care in the not-so-distant future, it’s best to start planning immediately. This is also a good time to consult with an elder law attorney about best practices for maximizing retention of assets and nursing home care provisions for your spouse. Your elder law attorney may suggest actions like:

  • Paying down existing bills: Medical bills, car loans, credit cards, etc.
  • Home improvements: Repairing plumbing and heating systems, fixing the landscaping, purchasing household goods and furnishings, and making structural modifications.
  • Funeral trusts: Purchase a pre paid funeral plan which in not countable and while takes care of an inevitable expense.

At this point, you’ve probably determined that paying for long-term nursing home care can be complicated at best, with so many variances and challenges depending on your unique circumstances. Proper planning should be implemented sooner rather than later to prevent costly and stressful consequences. Miller Estate and Elder Law can help you strategize in order to yield optimum benefits for you, your spouse, and—ultimately—your entire family.

Watch our FREE webinar to learn more about Medicaid eligibility and how to get your spouse qualified for the care they need, without sacrificing your life savings.

https://millerestateandelderlaw.com/medicaid-qualification-webinar

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bill@millerestateandelderlaw.com