As we approach the 4th of July and are thinking about the celebration of the Declaration of Independence, we would also like to reflect briefly on freedom from an estate planning perspective.
- Freedom to choose who you want to act on your behalf when you no longer can, instead of the Court deciding who this person(s) will be.
- Freedom to allocate assets to whomever you want, instead of the State of New Hampshire deciding for you.
- Freedom to minimize taxes, instead of burdening beneficiaries who then face adverse tax implications.
- Freedom to protect loved ones and to make their lives easier and less costly in the event of a disability or of a death, rather than having them involved with the Court and other bureaucracies.
Be proactive and celebrate the freedom to plan for yourself and for those dearest to you. Wishing you a happy and safe 4th of July and a wonderful summer!
There is a new law relating to elder abuse that criminalizes elderly financial exploitation…this law is not limited to an incapacitated person.
- Makes it a crime for fiduciaries who knowingly, or recklessly for their own profit or advantage, deprive or take real or personal property of an elderly, disabled or impaired adult for the benefit of someone other than the adult.
- Makes it a crime for a person through the use of undue harassment, duress, force, compulsion or coercion acquires possession or control of an interest in real or personal property of an elderly, disabled or impaired adult, or establishes a relationship with a fiduciary obligation to an elderly, disabled or impaired adult that gives the person control or interest in real or personal property or other financial resources.
- Prior to this statutory change, unless the incident involved an obvious crime, like a forged check, the police often considered reports of financial exploitation to be family or civil matters allowing the perpetrators to continue the exploitation without fear of criminal liability, which as you can imagine was very frustrating.
As a follow-up to our "tongue-in-cheek" April Fool's Day post, here's an example of an estate planning attorney who drafted a trust, but didn’t assist with any of the funding. The client thought he and his family were "all set" because they had a trust.
Unfortunately, an unexpected heart attack claimed the client's life, and as it turned out, everything was not "all set." There was nothing in his trust and all of his assets went through probate. His probate estate incurred $20,000.00+ in legal fees to go through the probate process.
Without funding your trust with assets, your trust will not accomplish your goal of avoiding probate and of making it easier and less expensive for your loved ones and beneficiaries down the road.
Instead of telling you how to avoid probate, in honor of April Fools Day, we decided to provide you with a list of how to guarantee that your assets will go through the probate process when you pass away.
- Own everything in your name only
- Fail to name beneficiaries on all of your accounts, no transfer on death designations either
- Don’t own anything jointly, and if you do own real estate jointly, have it owned as tenants in common (note that only sometimes does owning real estate as tenants in common make sense)
- Create a trust, but don’t put anything in it. We lawyers call it “the funding of your trust.” If you don’t put anything in your trust, there is nothing for your successor Trustee to distribute and then the assets go through probate. Your estate planning attorney should assist you with the funding of your trust.
In our previous post we shared three important questions about estate plans that people often don't consider.
Here are some additional questions, all of which are relevant to estate planning and can be addressed in your estate plan:
- What happens if you all die in plane crash, where will your assets go?
- What can you do to protect assets for your disabled child?
- Can your son who you haven’t spoken to in years contest your Will?
- Who will take care of your dog after you die?
- Where should you keep your estate planning documents?
- When do you want life support to be pulled?
Some time ago, one of our posts referenced the reality that estate planning is important for people of "all ages," not just for those in there sixties.
But taking a more general view, people often ask, "What is probate, anyway?"
Very simply, probate is the process by which a person's assets change hands at their death. If a person dies and his or her will says that all assets are to go to the children, the children cannot take possession of those assets until the will and other papers have been filed with the probate court, and the probate court has given its approval.
The whole process takes at least six months, and often more.
Gifting can have serious consequences, in the event a person needs nursing home care and doesn't have enough funds to pay for his/her care for 5 years.
As we discussed in a previous post, there is a five (5) year disqualification period for Medicaid purposes for any improper transfer or gift. The question is what constitutes an improper transfer?
- Giving away assets for less than FMV unless such transfer is exempt under the rules; paying for your grandchild's education, your daughter's new car, and/or giving each of your children $14,000.00 for Christmas every year are all improper transfers
- Adding a child or another third party as a partial owner/owner of your property
- Selling assets for less than FMV; i.e., my car was worth $10,000.00, but I gave it to my grandson for $2,000.00
- Purchasing an annuity that doesn't comply with the Medicaid rules
- Paying a family member for services without a written contract
- Disclaiming assets from an inheritance
Unfortunately, the Medicaid system's holiday spirit can be more like Ebenezer Scrooge's. This being the case, if you are contemplating any "improper transfers" and there is any possibility that you or your spouse could need nursing home assistance down the road, it is important to contact your elder law attorney prior to doing so.
