How to Estate Plan for Children in a Blended Family

How to Estate Plan for Children in a Blended Family

blended-family

Beginning a new relationship later in your life can be an exciting development. You’ve learned a great deal from past experience—and you’re ready to begin again from a more mature and responsible position. This means that making decisions in your estate planning will be key to building your new life the way you want. However, if either you or your new partner have children, it can create some complications when it comes to providing for your heirs. There are many things to consider when it comes to drafting an estate plan for a blended family. By talking things over with everyone involved, you can ensure that there are no surprises later.

Considerations For Estate Planning in a Blended Family

When it comes to drafting an estate plan for children in a blended family, here are a few important things to consider:

  • All Heirs are Not the Same. It may seem like you must provide for your children and stepchildren in the same way once becoming one big family. However, this is a common misconception. While you may be close with your stepchildren, it’s okay to acknowledge that your relationship with them is not the same as with your own kids. It’s important to protect your children when it comes to crafting your new estate plan and to make sure that everyone is aware of your decisions.
  • You’ll Need to Update Both Your Will and Your Beneficiaries. Any time you marry—whether it’s the first time or the third—you’ll need to significantly alter your estate plan. An entirely new set of circumstances, both personal and legal, are at play. While updating your will may seem like a no-brainer, be sure to look over all of your life insurance, bank, and retirement accounts. You will likely want to update your beneficiaries on these accounts as well.
  • What Happens If One Partner Passes Away First? When you remarry, you will likely have assets that you bring to the marriage. During the marriage, you will also accumulate mutual marital assets. This distinction becomes important should one partner die before the other. If you don’t properly plan for what will happen to both sets of assets, you may find that the wrong person receives property after the partner’s death—for example, a stepchild instead of a biological child.
  • Hiring an Experienced Estate Planning Lawyer. It’s essential to hire an experienced attorney who knows the ins and outs of estate planning. They’ll make the process run as smoothly as possible.

Estate planning in any family can be a complex process, but it becomes even more complicated when you’re in a blended family. At Miller Estate & Elder Law, we understand these unique challenges. Download our free guide and e-book, Estate Planning for Second Marriages—or give us a call at 256-472-1900—to begin protecting your children and family today.

 

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Get the Facts: 10 Surprising Long-Term Care Statistics

Get the Facts: 10 Surprising Long-Term Care Statistics

older man nursing home resident sitting at dinner table with nurse smiling

When it comes to long-term care, many people are unaware of the potential costs, and the likelihood of needing such care in their lifetime. Planning in advance for long-term is crucial to safeguarding your assets and ensuring a financially secure future. Below, we’ll explore ten surprising long-term care statistics that highlight the importance of proactive planning.

1. Probability of Needing Long-Term Care

According to the Administration for Community Living (ACL), 70% of people aged 65 and older will require some form of long-term care in their lifetime. This statistic underscores the need for adequate preparation.

2. Average Length of Care

The average duration of long-term care is approximately three years. It’s essential to consider the potential financial and emotional impact of extended care needs.

3. Caregiving by Family Members

Family members provide the majority of long-term care, with around 83% of elder care being provided by unpaid family caregivers. This not only highlights the significant role that families play in the caregiving process, but also the lack of education around how to become a paid caregiver—yes, that IS an option!

4. The Rising Cost of Care

Long-term care costs are on the rise. The annual median cost for a private room in a nursing home is approximately $105,850 a year, while a home health aide costs around $56,056 per year. These expenses can deplete savings quickly if not planned for in advance.

5. Medicaid as a Primary Payer

Medicaid becomes the primary payer for long-term care services for many individuals. Around 62% of nursing home residents depend on Medicaid to cover their care costs. Medicaid has strict eligibility requirements, with a look-back period of 5-years. Once again, advanced planning is crucial in order to qualify for this government program—you may not need it now, but now IS the time to start planning.

6. Gender Disparity in Caregiving

Women tend to shoulder the majority of caregiving responsibilities. In fact, women are more likely to be informal caregivers, and provide care for longer durations compared to men.

7. Impact on Spousal Care

Approximately 75% of married seniors will require long-term care services, with the majority of care provided to a spouse. This emphasizes the need for spousal planning to protect both partners. Do you know what to do if your spouse needs nursing home care?

8. Informal Caregiver Burnout

The strain of caregiving can lead to caregiver burnout. Nearly 40% of caregivers for older adults experience significant psychological distress due to the demands of caregiving.

9. Limited Coverage by Health Insurance

Most health insurance plans, including Medicare, only cover a limited amount of long-term care costs, leaving individuals responsible for a substantial portion of their care expenses. Planning well in advance of needing care can help ensure you don’t lose your life savings to the nursing home.

10. Financial Impact on Families:

The cost of long-term care can pose a significant financial burden on families. It’s estimated that 15% of caregivers had to reduce their work hours or quit their jobs altogether to accommodate caregiving responsibilities. The good news is that many caregivers can qualify to receive compensation for their caregiving responsibilities—ask us about how you can become a paid caregiver in Alabama.

These surprising long-term care statistics should serve as a wake-up call for individuals and families who want to plan for and secure their future. Being proactive and exploring options like long-term care insurance, setting up a Medicaid Asset Protection Trust, or consulting with an elder law attorney can help protect your assets and ensure a secure future. By planning well in advance, you can alleviate financial stress and focus on providing the best possible care for yourself or your loved ones. Remember, the time to plan is now—and we can help!

If you or a loved one is getting close to nursing home age, contact us to learn your options, and get a plan in place for the future. Call (256) 251-2137 or contact us using the brief form below:

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When to Form a Medicaid Asset Protection Trust

When to Form a Medicaid Asset Protection Trust

house shaped cookie cutter with lock and money

If you’ve been following our blog, you’ve learned that—with a little planning—even middle-class American homeowners can qualify for Medicaid coverage. You’ve started exploring your options, and maybe you’ve even heard of Medicaid Asset Protection Trusts. This powerful legal tool could help you gain the long-term care coverage you’ll likely need in old age…but the sooner you start planning, the better.

What You (Really) Need to Know About Medicaid Asset Protection Trusts

Medicaid Asset Protection Trusts (MAPT) are a special type of irrevocable trust designed to shield assets from being counted as part of your Medicaid eligibility determination. When properly designed, they allow you to transfer assets out of your name, and remove them from your personal ownership. On paper, you cease to be the owner of whatever you place in the trust, while still retaining certain benefits and some control over everything you’ve worked a lifetime to earn. The primary objective with a MAPT is to protect your life’s work from being depleted to pay for nursing home costs (which can be exorbitant).

How Medicaid Asset Protection Trusts Work

When a MAPT is created, the individual—known as the grantor—transfers assets into the trust. The grantor names a trustee (either a trusted loved one or professional advisor) to manage the trust and make distributions according to the trust’s terms, which you set. By transferring assets into the trust, you, the grantor, effectively surrender ownership, yet retain control by virtue of determining how the assets can and cannot be used. Since Medicaid has a look-back period of five years, all of this needs to happen far in advance of when you anticipate needing Medicaid coverage. This will help you avoid penalties.

When to Get Started on Your Medicaid Asset Protection Trust

There are two common situations in which you might need a MAPT:

  1. Planning for long-term care: If you anticipate the need for long-term care in the future, creating a MAPT early helps safeguard your assets and avoid penalties.
  2. Preserving family wealth: By establishing a trust, you protect your assets from being spent down to cover nursing home expenses, ensuring that your loved ones can inherit your wealth…and not the nursing home.

A Medicaid Asset Protection Trust provides a strategic means to protect your assets while ensuring you remain eligible for Medicaid benefits. By transferring your assets into this type of irrevocable trust, you safeguard your life’s work for your family’s future benefit, while making sure you have access to the care you need. If you’re considering establishing a MAPT, it’s important to work with an experienced estate planning attorney who can steer you clear of pitfalls and penalties that are otherwise hard to avoid.

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Is Selling Your House for $1 A Good Idea?

Is Selling Your House for $1 A Good Idea?

memory care

Transferring property to a child or other relative can be tricky business. Essentially, houses and other property are valuable assets, and if there is a chance you may be applying for Medicaid, some people think they can get around these penalties by selling their house for a dollar. However, this strategy can lead to a number of problems for you or your family members.

The Gift Tax and Real Estate Sales

While it may seem like you are clearing a big asset off your books by selling it to your child, the tax burden will be kept in the family.

For one, the IRS is will not recognize the transaction as a legitimate sale, and you may still be subject to either a gift or estate tax. If you sell your house for $1, the IRS will not consider this a sale, but instead a gift. So, for example, if your house is valued at $300,000 and your child buys it for $1, it is considered a gift in the amount of $299,999. You would be on the hook to pay a gift tax on the majority of this value if your estate is otherwise large enough to owe gift/estate taxes.

If after selling your house to your child for $1, they decide to sell it at fair market value, they will have to pay a capital gains tax on the property. Since the initial transfer to your child would be considered a gift, the tax basis for the property would be based on the amount that you initially purchased the house for plus the cost of any improvements – known as the adjusted basis.  Say you bought your house for $50,000 and made no improvements, and your child sells it for $300,000 after buying it for $1. They would pay capital gains taxes on the $249,999 difference.  Anytime you gift property, the donee gets a carryover basis.

How a Sale Could Affect Medicaid Application

Almost more importantly is the question of how selling your house for $1 could affect your ability to qualify for Medicaid in the future. If you sell your house to your child for $1 to try to spend down your assets, and then apply for Medicaid within 5-years of that transaction, you will incur a penalty that will keep you from receiving Medicaid benefits for many months when you otherwise might have received those benefits.

The bottom line is that there is no way to fully avoid paying taxes when it comes to transferring valuable properties, such as a house, to your loved ones. By working with an experienced estate planning attorney, however, you will be able to minimize the tax burden that you or your loved ones will have to pay.

Contact Miller Estate and Elder Law

At Miller Estate and Elder Law, we have many years of experience when it comes to helping people strategically transfer property to their children and loved one. To find out more, do not hesitate to give us a call at (256) 251-2137 or contact us via the brief form below.




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Is It Time for Memory Care: 13 Signs Your Loved One Needs Memory Care

Is It Time for Memory Care: 13 Signs Your Loved One Needs Memory Care

memory care

Deciding when it’s time to consider a memory care facility for a loved one with dementia is not easy. Not only is this an emotionally charged subject liable to trigger family conflict, but there is no single set of criteria available to guide your decision. Dementia arrives in stages, but no two cases are the same—and every family has different needs.

Whether memory care for dementia is appropriate for your loved one depends on many factors—but it’s not a subject you can ignore. To assess whether it is time for your loved one to enter a memory care facility, ask yourself the following questions:

  1. Have friends or family members commented on changes in their behavior?
  2. Does your loved one often become agitated or combative?
  3. Is your aging relative withdrawn or nervous?
  4. Are their hygiene needs met?
  5. Does your loved one wander?
  6. Are their living conditions safe?
  7. Are their medications properly managed?
  8. Is your loved one well-nourished?
  9. Have you started to feel caregiver burnout?
  10. Is caring for your loved one going well?
  11. Are you feeling resentful towards them?
  12. Is caregiving affecting your own health?
  13. Are you and your family safe?

Subtle changes in behavior are often the first sign that a loved one will soon need memory care, though these changes can be hard for family members to pick up on. Furthermore, aggression and agitation can be dangerous signs of dementia, especially when that person is being cared for by an elderly spouse. Changes in hygiene, wandering off, and the inability to navigate their living conditions can also be signs that a loved one needs additional assistance. Finally, caregiver burnout is a common problem when caring for someone with dementia, and it can have serious physical and emotional consequences—both for the caregiver, and the patient).

Addressing the need for memory care for dementia is not just a medical matter, but a legal one, too. Getting the right legal documents in place early can save a lot of time, money, and aggravation when dementia becomes a bigger issue later.

A failing memory can complicate the estate planning in countless ways. If your aging loved ones are showing signs of dementia, please consider it an urgent matter that demands immediate attention. To learn more about what you need to do (and how to do it), download our free Living with Dementia e-Book using the brief form below, or reach out to Miller Estate and Elder Law to request a free consultation today.

At Miller Estate & Elder Law, we have decades of experience helping our clients with every aspect of estate planning and elder law. We’ve seen every mistake in the book, and are here to make sure you don’t make any of them! Give us a call today at (256) 251-2137 or use the contact form below.


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7 Common Estate Planning Mistakes (That You Can Easily Avoid)

7 Common Estate Planning Mistakes (That You Can Easily Avoid)

Family legal advisor explaining document details to mature father and adult daughter

Estate planning is a complex and nuanced process, and it’s easy to make mistakes when you don’t have professional guidance. Whether it’s a lack of communication with your executors and heirs, or failing to properly fund your trust, there are plenty of opportunities for you to torpedo your estate plan. Making a mistake in your estate plan could not only prevent your loved ones from receiving their inheritances, but could also stick them with an expensive, emotional, and time-consuming probate battle.

Luckily, working with an experienced estate planning attorney can prevent you from making these 7 common estate planning mistakes.

7 Common Estate Planning Mistakes

Here are 7 of the most common estate planning mistakes people make:

  1. Not Communicating with Your Heirs. Anyone who is named into a role in your estate plan—executor, personal representative, trustee, etc.—should know what their responsibilities are once you pass away. Furthermore, we encourage our clients to communicate with their heirs and beneficiaries about what they will be inheriting, and why. This can help prevent (or at least reduce) conflict.
  2. Not Taking Taxes into Consideration. Estate taxes really only affect larger estates, but if you don’t take this possibility into account, your heirs could end up with a nasty surprise as their inheritances get eaten up by taxes. There are numerous strategies you can take now to avoid this situation in the future. An estate planning attorney or financial planning professional can guide you through the tax planning process.
  3. Not Planning for the Death of an Executor of Beneficiary. If your executor, trustee, or one of your beneficiaries suddenly dies, the courts will step in and make determinations about how your estate will be administered. Since this may be contrary to your wishes, it’s important to plan for these contingencies.
  4. Not Naming a Beneficiary on Your Retirement Accounts or Insurance Accounts. Retirement accounts and insurance policies are great for estate planning because—when beneficiary designations are set up properly—they pass directly to their intended recipient, without having to go through probate. If you don’t name a beneficiary, however, this advantage is negated, and the accounts may be subject to probate, where it could be claimed by creditors or predators.
  5. Not Updating Your Plan. If you experience a major life event, you’ll want to update your estate plan right away. Getting married or divorced, having a child (or welcoming a new grandchild), or if one of your beneficiaries develops a substance abuse issue or gambling problems…there are countless situations that may require you to make some updates to your plan.
  6. Not Funding Your Trust. Many people use trusts as a vehicle through which to pass along their assets, without being subjected to probate court. However, if your trust is not properly funded, it serves little purpose. Your heirs and beneficiaries will still end up in probate court, and your assets may or may not be distributed the way you wish.
  7. Not Having Contingency Plans in Place. No matter how well you plan, chances are something in your estate will not go exactly according to plan. For each possibility, it’s important to have a contingency plan in place. An experienced estate planning attorney can help with this.

At Miller Estate & Elder Law, we have decades of experience helping our clients with every aspect of estate planning and elder law. We’ve seen every mistake in the book, and are here to make sure you don’t make any of them! Give us a call today at (256) 251-2137 or use the contact form below.


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