With aging comes many blessing and challenges. One of those challenges is the possibility of cognitive impairment at some point in your life. A solid estate plan addresses that issue.
For family members, the warning signs can be hard to spot, and the person may even try to hide them. There may be confusion over regularly performed tasks, forgetting to pay a bill or missing a meeting. According to the Taunton Gazette’s article “Preparing for complications associated with aging,” family members must keep their eyes open for clues, including lapses in judgement about financial matters, like sending money to a phone call scammer, or changes in behavior.
A conversation should be part of estate planning or when talking about regular financial planning. Address the potential problems, while parents still have mental capacity. As soon as any warning signs are evident, the time frame for preparedness needs to speed up.
When discussing the estate plan, several documents are used to prepare for cognitive impairment. In addition to a last will and testament, the estate plan needs to have a health care power of attorney and a durable power of attorney.
A Health Care Power of Attorney is a legal document that gives caretakers, usually an adult child, and sometimes a trusted friend, the legal ability to speak with health care providers about medical treatment. These documents need to be kept current so there are no obstacles to their use. Every three to five years, they should be updated, or as circumstances change. Without them, the caretaker won’t be able to have a conversation with a loved one’s doctor regarding any health issues, including cognitive impairment.
A Durable Power of Attorney allows another person, who is called the “agent,” to handle almost everything in your life. This should be current, since many banks and financial institutions will balk if they are handed a POA that is more than five years old – sending it to their legal department and holding things up while they await an answer.
Cognitive impairment is an important reason many aging adults rely on trusts. Unlike assets held in an individual’s name, assets owned by a trust can easily be managed by a trustee. If you’re the trustee and become mentally incapacitated, your chosen back-up trustee can manage the assets. The trustee needs to be someone you trust who is willing to take on this task.
One of the challenges of cognitive impairment is transferring the management of a person’s assets and their health care decisions to someone who is not impaired. The aging parent may be very good at hiding their disability, and they can often mislead family members for extended periods of time.
One unusual and creative idea: create a “disability panel” or “disability board of directors”— a group of family members, friends, or beneficiaries who decide if the loved one needs help. This is far easier than relying on doctors to declare incompetency or needing to apply to the court for guardianship when you show signs of cognitive impairment.
Your estate planning attorney will be able to help you prepare for the challenges of aging by creating a plan for incapacity as part of your overall estate plan.
***Want to learn more about how to protect your family from the government, lawsuits, accidental disinheritance, or nursing homes? Click THIS LINK to book a seat at one of our upcoming fun and educational workshops.***
In this video, Cindy discusses some gun trust horror stories she’s come across in her practice. There’s no wiggle room when you mess up a gun trust that hold NFA firearms. Can you say “contraband”?
Other videos and articles you may find interesting:
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In many states, family members, including the surviving spouse, typically aren’t required to pay the debts from their own assets, unless they co-signed on the account or loan. This includes credit card debt.
All the stuff that a person owns at the time of death, which includes everything from money in the bank to their possessions to debts they owe, is called an estate. When the deceased person has debt, the executor of the estate will go through the probate process.
During the probate process, all the deceased’s debts are paid off from the estate’s assets. Some assets—like retirement accounts, IRAs and life insurance proceeds—aren’t included in the probate process. As a result, these accounts may not be available to pay creditors. Other assets can be sold to pay off outstanding debts.
A relative or the estate executor will typically notify any lenders, like credit card companies, when that person passes away. The credit card company will then contact the executor about any balances due. Note: the creditor can’t add any additional fees, while the estate is being settled, and the executor SHOULD NOT arrange to make any payments without first consulting with a probate attorney.
If there’s not enough money in the estate to cover credit card debts, the card issuer may have no recourse. The executor and the heirs aren’t responsible for these debts. Unlike some debts, like a mortgage or a car loan, most credit card debt isn’t secured. Therefore, the credit card company may need to write off that debt as a loss.
You should start learning about the probate process in your state to have the best defense for dealing with creditors and debt collectors.
If you need help, talk to an experienced estate planning attorney.
***Want to learn more about how to protect your family from the government, lawsuits, accidental disinheritance, or nursing homes? Click THIS LINK to book a seat at one of our upcoming fun and educational workshops.***
Financial infidelity – when one spouse is making significant financial moves without the knowledge of the other.
When one member of a couple handles all the finances and dies, the surviving spouse is often left with a serious problem. Locating investment accounts, passwords to online accounts and other important information becomes an overwhelming issue, according to the article “Why smart people don’t recognize financial infidelity” from The Mercury. It’s a relatively new term, but not a new dilemma.
Take the case of a recently widowed or divorced person who has met a new person who appears to be the new love of their lives. The person is kind to them, supportive, and well, perfect. It’s hard to believe that such a seemingly wonderful person could have a dark side. However, whenever a new friend, hobby, or investment idea starts having a major impact on the person’s financial life, or if they have simply been careless with their financial affairs, the impact can become catastrophic.
People who are not confident in their ability to manage money or investments often hand off that responsibility willingly to their partner. If in a prior life, your spouse managed all of the household money and you did not learn how to handle the tasks that are required to run a home or manage an investment portfolio (or work with advisors), you might be a little too willing to pass that job on to a new partner.
You may fall into the traditional role of one person being responsible for the outside bills and investments and the other handling all of the household tasks.
Financial infidelity also includes things like having accounts that are not known to the other spouse or taking out credit cards without the other person’s knowledge. The same goes for one spouse suddenly putting a lifetime of savings into a single investment, or someone who knows little about markets spending a great deal of time day trading with the family’s savings. Gambling or excessive spending can also be financial infidelity.
What can you do? Here are a few tips.
Don’t give up control of finances. It’s not uncommon for people to combine finances when they are first married. However, if you’re heading into a second marriage, you may want to keep your money separate at first. Not paying attention to what’s going on with your money at any stage of life can lead to problems.
Educate yourself about money. If one of you is better at money management, that’s fine—but the one who isn’t needs to get up to speed. There are classes in personal finance at the local high school or college, so cost should not be an issue.
Speak up. If one person is made to feel like they can’t talk with their partner about money, there’s a problem. There may be accusations of trust—but trust is not granted automatically. Trust is built between a couple through experience. Financial transparency between partners is a sign of respect.
Read and understand documents before you sign anything. If you have questions, don’t sign anything until you have a full understanding. You should not be pressured into making decisions or commitments until you’re completely comfortable with all of the information. If you don’t get a satisfactory answer, don’t sign.
Part of your protection from financial infidelity is an estate plan. Speak with an estate planning attorney about creating a plan to protect your assets after you pass and while you are living. An estate plan needs to include – at a minimum – a Will, a Durable Power of Attorney, Designation of Health Care Surrogate, and may include Trusts, Living Wills, and other documents, depending upon your situation.
***Want to learn more about how to protect your family from the government, lawsuits, accidental disinheritance, or nursing homes? Click THIS LINK to book a seat at one of our upcoming fun and educational workshops.***
***Want to learn more about how to protect your family from the government, lawsuits, accidental disinheritance, or nursing homes? Click THIS LINK to book a seat at one of our upcoming fun and educational workshops.***
What happens if your ex-spouse is named on your Will or Trust, or on a beneficiary designation form?
If you’re divorced, have you checked your beneficiary designations and the people you’ve named in your estate planning documents lately? If you completed any of these documents before your divorce was final, you may be in for a nasty surprise.
Your ex-spouse may still have legal authority to make medical decisions for you, access your bank accounts, or even decide whether or not you get to live or die, or are buried or cremated. He may be named as your personal representative (executor) or trustee on your Will or Trust. Or maybe she’s still listed as a beneficiary under your Will or Revocable Trust, or on your 401(k) or pension.
But better to get the surprise now – while you can still fix it. What would happen if you died before fixing it?
As usual, the government has a plan for you – whether you like it or not.
In Florida, we have statutes that essentially kill off your ex-spouse if he or she is still named in your Will,Trust, or as a beneficiary on your bank or investment account after your divorce was final. Our statutes even include the beneficiary designation forms you filled out for your IRA, and certain life insurance and annuity policies. So, if you forgot to remove him or her, maybe things will work out. It depends on who you named after him or her. Chances are, if you forgot to remove your ex, then you didn’t remember to add your new spouse.
However, Florida’s statutes have a big BUT…
They specifically don’t includeFlorida state retirement plans (such as a 403(b) or any other plan under the Florida Retirement System) or any plans covered by federal law, such as employer provided pension and retirement plans. That means your401(k), profit sharing, and pension plans aren’t covered by Florida law.
Florida state retirement plans have their own rules, but, basically, whoever is on your beneficiary designation form gets the benefits. Oh, your ex-spouse is named and your current wife and children get nothing? Too bad, so sad. Forgot to name someone, or the person you named is dead? The state has rules to determine who gets your money. It may not be what you wanted.
Federal rules are just as bad. Any plan covered by ERISA is governed by the plan’s documents. Generally, the rules are designed to make administration quick and easy, so the person named on your beneficiary designation form wins. Each plan has its own rules for determining what happens if you forgot to name someone, or a named beneficiary is dead. If you have multiple accounts, they could each have different rules.
So, whether you’ve ever been divorced or not, make sure you periodically verify who your beneficiaries are in your estate planning documents, and on every account, plan, or policy that has a beneficiary form.
***Want to learn more about how to protect your family from the government, lawsuits, accidental disinheritance, or nursing homes? Click THIS LINK to book a seat at one of our upcoming fun and educational workshops.***
Recently, the Supreme Court declined to rule in a Second Amendment case, New York State Rifle & Pistol Association Inc. v. City of New York, which could have allowed it to clarify just how far the landmark Second Amendment cases Heller and McDonald go. But New York City changed the controversial law as soon as it realized the case was headed to the Supreme Court; since the law was no longer in effect, a majority of Justices said there was no case to rule on. But it looks like some Massachusetts cases just may provide the opportunity NYC didn’t.
In District of Columbia v. Heller, (2008), the Court struck down the District of Columbia’s handgun ban and its requirement that lawfully owned rifles and shotguns be kept “unloaded and disassembled or bound by a trigger lock.” The Court declared that an individual’s right to keep and bear arms for lawful purposes is independent of service in a militia, and that such lawful purposes included self-defense within the home. Washington D.C. is a federal enclave, so people were unsure whether this ruling applied to the states under the “incorporation” theory of the Fourteenth Amendment. In McDonald v. City of Chicago (2010), the Court affirmed that it did.
So what’s going on in Massachusetts – my birthplace, and also the birthplace of the American Revolution? The place where its citizens once stood up to government oppression and where the confiscation of guns and gunpowder by the British was one factor that sparked a war? Under its current laws, individuals who want to carry a concealed firearm have to prove to government authorities that they have “good reason” to fear for their safety before a permit is issued. Not to go too in depth into constitutional law, but laws that restrict our individual rights can’t be arbitrary. In other words, they must be quantifiable, measurable, and apply equally to everyone. The argument here is that “good reason” is very subjective and therefore unconstitutional. And, of course, the other argument is that self-defense is a natural right and no reason is needed when it comes to self-protection.
Massachusetts has also enacted so-called “assault weapons” and ammunition bans. Its definition of “assault weapons” is so broad that it includes many popular guns. I’ve seen estimates that about half of the types of guns legal under federal law are banned in MA. The constitutional issue here is some wording in Heller that implies that individuals have a right to own guns “in common use.” But appeals courts are reading Heller and McDonald oddly – everyone’s all over the map and no one seems to really know how to apply either case.
The MA ban also includes “copies or duplicates” of so-called assault weapons. What does that mean? No one knows for sure. Another tenet of constitutional law is that a law can’t be vague, so that’s also on the table.
There’s no guarantee the Court will agree to hear these MA cases, but it’ll sure be interesting if it does.
***Want to learn more about how to protect your family from the government, lawsuits, accidental disinheritance, or nursing homes? Click THIS LINK to book a seat at one of our upcoming fun and educational workshops.***
***Want to learn more about how to protect your family from the government, lawsuits, accidental disinheritance, or nursing homes? Click THIS LINK to book a seat at one of our upcoming fun and educational workshops.***
VA Aid & Attendance can help defray the costs of senior care.
The U.S. Department of Veterans Affairs offers some funding programs that can help offset the cost of some types of senior care.
U.S. News & World Report’s recent article, “Veteran Benefits for Assisted Living,” explains that many senior living companies try to help many veterans maximize their benefits, which in some cases can significantly reduce the cost of senior living.
Note that the VA won’t pay for a veteran’s rent in an assisted living facility. However, VA benefits may pay for some of the extra services required, like nursing assistance, help with bathing and toileting, and possibly meals.
There are a variety of benefits that may help, based on a vet’s specific service history and eligibility. The most commonly used benefits are the Aid & Attendance Pension. Another common benefit is the Survivor’s Pension for spouses of a deceased veteran with wartime service.
The VA’s Aid & Attendance and Housebound program is part of the pension benefits paid to low-income veterans and surviving spouses. The VA says these benefits are paid in addition to a monthly pension to veterans or their surviving un-remarried spouses. A vet must meet certain military service conditions, and also satisfy one of the potential medical conditions, including:
Requiring the aid of another person to perform personal functions, like bathing, dressing, eating, toileting, or staying safe from hazards;
Being disabled and bedridden, above what would be thought of as recovery from a course of treatment, such as surgery;
Being a patient in a nursing home due to physical or mental incapacity; or
Having very poor eyesight (5/200 corrected visual acuity or less in both eyes) or a field of vision limited to five degrees or less.
Vets may qualify for these benefits, which are added to the standard monthly low-income pension, when he or she is “substantially confined to your immediate premises because of permanent disability,” the VA says. Eligibility for the program is based on a case by case basis and involves a review by the VA.
It’s important to begin the application process early, rather than waiting for a crisis to occur. Ask an experienced estate planning or elder law attorney to help you and to discuss your options.
***Want to learn more about how to protect your family from the government, lawsuits, accidental disinheritance, or nursing homes? Click THIS LINK to book a seat at one of our upcoming fun and educational workshops.***
As a parent, why wouldn’t you want to protect your children a bit after you’re gone, if you could?
If you’re a parent, you probably love to help and protect your children—you knew they’d have to fall down and go boom, but you always made sure you had Bandaids and a kiss ready. You bought them car seats and helmets, you had them vaccinated, and you taught them about the birds and the bees and how to drive responsibly. You bought them a cell phone so they could call you if they got in trouble, you paid for AAA so they wouldn’t be stranded in the middle of nowhere, and maybe you even bailed them out of jail due to a stupid mistake. You loaned (gave) them money or let them move back in when life dealt them a bad hand. We parents spend our lives showing our children how much we love them by helping and protecting them, and how we leave them an inheritance is one of the most tangible ways we can show our love once we’re gone.
There are a variety of ways that you can leave money and property to your children, and you can choose the method that you think takes your goals, including their well-being, into account.
The Outright Gift
The first option for leaving an inheritance is to make an outright gift using a Will to all children over the age of majority in your state (18 in Florida). This is often what comes to mind first when people think about planning for their children’s inheritance. This may be a fine solution for parents who have financially responsible adult children and who’ll be leaving a small amount of property and money to them.
For most people, however, leaving an outright gift using a Will is not the best option. If your children are minors, they can’t legally take control over an inheritance, so it’ll more than likely have to be held in a special account or be managed by a court-supervised guardian until they reach adulthood. But even if your children are young adults, they may not have the maturity to make good financial decisions. Further, it’s impossible to foresee what the future holds, even for mature children who normally exercise good financial judgment. They could, for example, experience a divorce or be sued and have a judgment entered against them, and their inherited money could be used to satisfy those claims. Leaving an inheritance outright provides them with absolutely no protection.
Certain types of trusts can be used to protect your children from their potential predators and creditors. They can prevent the money you have worked hard to save from going to your children’s creditors or divorcing spouse, while enabling the trustee to make distributions for your children’s benefit in accordance with your wishes.
In Trust with Child as Trustee
If you make your adult child the trustee of a trust that’s established when you pass away, and he or she is also the beneficiary, the trust terms will specify the amount of discretion your child will have in making distributions to him or herself. Like an outright gift, this is often not the best choice for parents concerned about immature children or children who may have present or future money or liability problems. If your child is able to exercise control over the trust property in his or her role of trustee, then his or her creditors and predators will be able to reach those assets to satisfy their claims.
There’s also the possibility of conflict, especially if the siblings don’t get along, if there are multiple siblings acting as co-trustees, or if one sibling is the trustee and the other siblings are beneficiaries (from my experience, having one child control another child’s money is usually a recipe for the destruction of a family after a parent dies).
Some of these concerns can be addressed by a beneficiary-controlled trust. This type of trust enables a beneficiary to be a trustee of his or her own trust, but the trustee/beneficiary can only make distributions for his or her health, maintenance, education, and/or support. An independent co-trustee may be empowered to make distributions for the beneficiary’s benefit for reasons beyond health, maintenance, education, or support. Typically, the terms of this type of trust enable the beneficiary to remove and replace his or her co-trustee if the beneficiary is not satisfied with the co-trustee’s performance. Although the trustee/beneficiary has some degree of control over his or her inheritance, this type of trust prevents the money and property intended for your child from being used to satisfy the claims of creditors, divorcing spouses, and lawsuits.
Distribute percentage at certain ages
One of the most common–though not necessarily the best–choices parents make regarding how to distribute money and property held by a trust is to include terms requiring or allowing distributions of principal at a certain age or at several ages. For example, a trust could require or allow one-fourth of the trust’s principal to be distributed at age 25, one-fourth at age 30, and the balance at age 35. This distribution scheme may address parents’ concerns about their children receiving a large sum of money before they have the maturity to handle it responsibly, but it may not provide as much protection against creditors as many parents would prefer—which is a concern regardless of the age of the beneficiaries. If a beneficiary can require a distribution to be made from the trust, his or her creditors or divorcing spouses can also look to it to satisfy their claims. In addition, once a distribution is made to one of your children, it is vulnerable to present or future creditors’ claims.
Incentive trust distributions
Many parents want to pass on their values to their children, and an incentive trust is sometimes used as a mechanism for encouraging children to achieve important goals by authorizing trust distributions based upon the beneficiaries’ achievement of certain conditions, e.g., graduating from college, or denying distributions to beneficiaries who use drugs.
Although this trust protects the money and property held in the trust from the beneficiaries’ creditors until the funds are distributed, there are some possible downsides. This type of trust has the potential to trigger resentment in the beneficiaries whose behavior you wish to influence, especially if they believe the trust’s conditions are unfair: For example, a trust that rewards high income by increasing distributions as income increases may be perceived as unfair by a beneficiary who has chosen a laudable but low-paying career such as teaching or social work.
In addition, this type of trust may not provide trustees with much flexibility in making distributions and may be difficult and expensive for trustees to administer, as substantial investigation or proof may be necessary to establish whether the trust conditions have been met by the beneficiary.
Distributions for specific purposes
A trust providing for distributions for the beneficiaries’ “health, maintenance, education, or support” is quite common. It’s also possible to set up a trust that gives the trustee the discretion to make distributions to beneficiaries for other specific purposes, for example, starting a business or buying a house. In those circumstances, the trustee may need to evaluate, for example, whether the beneficiary is able to afford the monthly payments, home maintenance, and taxes before making a distribution to be used as a down payment on a house. Like other types of discretionary trusts, the money and property held by the trust will be protected from claims by creditors, divorcing spouses, or lawsuits.
Complete discretion by the trustee
A fully discretionary trust authorizes a trustee to make distributions to beneficiaries but does not require distributions to be made. Although this type of trust protects the money and property held in the trust from being used to satisfy claims made by the beneficiary’s creditors, some parents may be concerned that this type of trust gives the trustee too much control. Because the trustee does not have to make distributions, your children will not be able to depend upon receiving money at certain intervals or occasions, which may make financial planning more difficult. There is also the risk that unequal distributions among multiple beneficiaries could lead to family conflicts and resentment when the trustee is the only one to decide who gets money and when.
Let’s talk about the best option for you and your family
Each type of trust has its pros and cons. But don’t let the options paralyze you – there’s no one “right answer” when it comes to estate planning. Estate planning is a fluid process and can change as needed or desired. The right strategy–or combination of strategies–for your family depends upon your unique circumstances and goals. Call our office today at 941-44-5958 to set up a consultation so we can make sure your Will and/or Trust will provide for your children in the way you intend after you pass away.
***Want to learn more about how to protect your family from the government, lawsuits, accidental disinheritance, or nursing homes? Click THIS LINK to book a seat at one of our upcoming fun and educational workshops.***
[Updated June 15, 2020: The 
