Oconee Estate Planning Blog

What Do I Need to Know about Second Marriage Estate Planning?

AARP’s recent article entitled “Remarried with Children? 5 Estate Planning Mistakes to Avoid” says that most  mean well and want their spouse to inherit their possessions when they die, then want their heirs to split what’s left when the spouse dies. Here are five mistakes to avoid and to prevent fighting and hard feelings after you are gone.

Mistake #1: Failing to change beneficiaries. This is one of the most common mistakes. An advantage of changing the name of the beneficiary, is that the money will go directly to the intended person, typically the surviving spouse, bypassing the probate process. Review all of your financial accounts to be certain that your spouse is designated the beneficiary, if that is your intention. You should also check all life insurance beneficiaries because these payouts also do not go through probate.

Mistake #2: Failing to change your will. A will states who gets the rest of the assets that you and your spouse accumulated during your lifetimes. Update your will to avoid handing your home to your ex-spouse. People on their second marriage usually decide that the surviving spouse gets all the assets, and upon the death of the second spouse, the remaining assets will be divided evenly among the children. However, this assumes that everyone will still be getting along in the future, and that your spouse, upon your death, will not write a new will that removes your side of the family from the estate. You should also plan in advance who will get important family items, no matter if their value is sentimental or otherwise. You do this with a codicil to your will or a letter of instruction to your executor.

Mistake #3: Treating all heirs equally. There is no law that says all children must be treated equally. There are many reasons why parents do not treat children equally, such as when there is a child with special needs. In that instance, you should talk to your spouse about how to ensure that child is protected, perhaps through an ABLE (Achieving a Better Life Experience) account or a trust. In some situations, a child may have an addiction or a gambling problem. Some parents will create a “spendthrift trust” which disburses money at regular intervals to the beneficiary and deters creditors from getting the money in the trust.

Mistake #4: Waiting until you are gone to give. If you are planning to leave money to your children, you might think about giving it to them now, rather than in your will. The IRS allows you to give up to $15,000 per person without having to pay the federal gift tax or deal with the IRS. Your spouse may also give the same amount.

Mistake #5: Not Using an Experienced Estate Planning Attorney. If you are older and on your second marriage, chances are that your life is not uncomplicated. Ex-spouses, blended families and comingled assets create complexity, as well as having a child with special needs or an aging parent. It is smart to invest the time and money in creating a comprehensive estate plan with the help of an experienced estate planning attorney.

Reference: AARP (July 9, 2021) “Remarried with Children? 5 Estate Planning Mistakes to Avoid”

Suggested Key Terms: Estate Planning Lawyer, Wills, Codicil, Intestacy, Probate Court, Inheritance, Asset Protection, Will Changes, Letter of Last Instruction, Probate Attorney, Estate Tax, Gift Tax, Unified Federal Estate & Gift Tax Exemption, ABLE Account, Spendthrift Trust

How Do I Spot Elder Abuse?

The Courier Tribune’s recent article entitled “Are you a victim of elder abuse?” reports that the biggest problem is that these thefts often go unreported.

The main reason why so much elder abuse flies under the radar and is not reported, is because the one doing the abusing is typically a family member.

Remember that financial abuse and theft are not the only forms of elder abuse. This crime also includes emotional, sexual and physical abuse, neglect and exploitation.

Emotional abuse can include threats, belittling and verbal attacks. It can be anything that causes mental distress and pain.

Exploitation can be fraud, undue influence over a senior’s assets and being pressured to sign papers he or she does not understand. This might be a power of attorney (POA) that gives a caretaker overly broad authority to abscond with a senior’s money or property.

One Texas county says the elder abuse reports are on the rise—a phenomenon seen across the U.S.— with self-neglect comprising the largest percentage of intake reports for older people, followed by financial crimes.

If you or a loved one sees themselves in any of those categories, speak to an elder law attorney and go to the National Center on Elder Abuse website (ncea.acl.gov).

If you or an elderly family member is being abused in some way, help is available.

In all states, there are professionals who are required to report suspicions of maltreatment.

Known as mandatory reporting, many states have a comprehensive list of professions who must take actions and file a report, such as chiropractors, occupational therapists, member of the clergy, attorneys, animal control officers, bank employees and many others.

Reference: Courier Tribune (July 11, 2021) “Are you a victim of elder abuse?”

Suggested Key Terms: Elder Law Attorney, Elder Abuse, Financial Abuse, Undue Influence, Power of Attorney

Do I Need Long-Term Care Insurance?

Women face some unique challenges as they get older. The Population Reference Bureau, a Washington based think tank, says women live about seven years longer than men. This living longer means planning for a longer retirement. While that may sound nice, a longer retirement increases the chances of needing long-term care.

Kiplinger’s recent article entitled “A Woman’s Guide to Long-Term Care” explains that living longer also increases the chances of going it alone and outliving your spouse. According to the Joint Center for Housing Studies of Harvard University, in 2018 women made up nearly three-quarters (74%) of solo households age 80 and over. Thus, women should consider how to plan for long-term care.

Ability to pay. Long-term care is costly. For example, the average private room at a long-term care facility is more than $13,000/month in Connecticut and about $11,000/month in Naples, Florida. There are some ways to keep the cost down, such as paying for care at home. Home health care is about $5,000/month in Naples, Florida. Multiply these numbers by 1.44 years, which is the average duration of care for women. These numbers can get big fast.

Medicare and Medicaid. Medicare may cover some long-term care expenses, but only for the first 100 days. Medicare does not pay for custodial care (at home long-term care). Medicaid pays for long-term care, but you have to qualify financially. Spending down an estate to qualify for Medicaid is one way to pay for long-term care but ask an experienced Medicaid Attorney about how to do this.

Make Some Retirement Projections. First, consider an ideal scenario where perhaps both spouses live long happy lives, and no long-term care is needed. Then, ask yourself “what-if” questions, such as What if my husband passes early and how does that affect retirement? What if a single woman needs long-term care for dementia?

Planning for Long-Term Care. If a female client has a modest degree of retirement success, she may want to decrease current expenses to save more for the future. Moreover, she may want to look into long-term care insurance.

Waiting to Take Social Security. Women can also consider waiting to claim Social Security until age 70. If women live longer, the extra benefits accrued by waiting can help with long-term care. Women with a higher-earning husband may want to encourage the higher-earning spouse to delay until age 70, if that makes sense. When the higher-earning spouse dies, the surviving spouse can step into the higher benefit. The average break-even age is generally around age 77-83 for Social Security. If an individual can live longer than 83, the more dollars and sense it makes to delay claiming benefits until age 70.

Estate Planning. Having the right estate documents is a must. Both women and men should have a power of attorney (POA). This legal document gives a trusted person the authority to write checks and send money to pay for long-term care.

Reference: Kiplinger (July 11, 2021) “A Woman’s Guide to Long-Term Care”

Suggested Key Terms: Elder Law Attorney, Medicare, Medicaid, Paying for a Nursing Home, Long-Term Care Planning, Long-Term Care Insurance, Medicaid Planning Lawyer, Social Security, Elder Care, Financial Planning, Estate Planning Dementia, Alzheimer’s Disease, Power of Attorney

What Should a Power of Attorney Include?

The pandemic has taught us how swiftly our lives can change, and interest in having a power of attorney (POA) has increased as a result. But you need to know how this powerful document is and what it’s limits are. A recent article from Forbes titled “4 Power of Attorney Clauses You Need To Focus On” explains it all.

The agent acting under the authority of your POA only controls assets in your name. Assets in a trust are not owned by you, so your agent can’t access them. The trustee (you or a successor trustee, if you are incapacitated) appointed in your trust document would have control of the trust and its assets.

There are several different types of POAs. The Durable Power of Attorney goes into effect the moment it is signed and continues to be valid if you become incapacitated. The Springing Power of Attorney becomes valid only when you become incapacitated.

Most estate planning attorneys will advise you to use the Durable Power of Attorney, as the Springing Power of Attorney requires extra steps (perhaps even a court) to determine your capacity.

All authority under a Power of Attorney ceases to be effective when you die.

There are challenges to the POA. Deciding who will be your agent is not always easy. The agent has complete control over your financial life outside of assets held in trust. If you chose to appoint two different people to share the responsibility and they don’t get along, time-sensitive decisions could become tangled and delayed.

Determine gifting parameters. Will your agent be authorized to make gifts? Depending upon your estate, you may want your agent to be able to make gifts, which is useful if you want to reduce estate taxes or if you’ll need to apply for government benefits in the near future. You can also give directions as to who gets gifts and how much. Most people limit the size of gifts to the annual exclusion amount of $15,000.

Can the POA agent change beneficiary designations? Chances are a lot of your assets will pass to loved ones through a beneficiary designation: life insurance, investment, retirement accounts, etc. Do you want your POA agent to have the ability to change these? Most people do not, and the POA must specifically state this. Your estate planning attorney will be able to custom design your POA to protect your beneficiary designations.

Can the POA amend a trust? Depending upon your circumstances, you may or may not want your POA to have the ability to make changes to trusts. This would allow the POA to change beneficiaries and change the terms of the trust. Most folks have planned their trusts to work with their estate plan, and do not wish a POA agent to have the power to make changes.

The POA and the guardian. A POA may be used to name a guardian, who would be appointed by the court. This person is often the same person as the POA, with the idea that the same person you trust enough to be your POA would also be trusted to be your guardian.

The POA is a more powerful document than people think. Downloading a POA and hoping for the best can undo a lifetime of financial and estate planning. It’s best to have a POA created that is uniquely drafted for your family and your situation.

Reference: Forbes (July 19, 2021) “4 Power of Attorney Clauses You Need To Focus On”

Suggested Key Terms: Power of attorney, Estate Planning Attorney, Trustee, Guardian, Beneficiaries, Beneficiary Designation, Agent, Durable, Springing

Has COVID Affected Baby Boomers’ Retirement Plans?

Baby boomers, who are either in retirement or very close to it, have had COVID-19 make an especially significant effect on post-work plans. That’s according to a recent survey from the Center for a Secure Retirement and CNO Financial Group. With the coronavirus, Boomers had to help family financially, which meant less for their own retirement.

Money Talks News’ recent article entitled “5 Impacts the Pandemic Had on Baby Boomers’ Retirement Plans” provides five important ways the pandemic has changed baby-boomer retirement dreams. The results are based on a survey of more than 2,500 middle-income boomers — defined as Americans who were born between 1946 and 1964, and who have an annual household income between $30,000 and $100,000 and less than $1 million in investable assets.

1. Their main ‘non-negotiable’ retirement priorities have changed. Before the pandemic, 56% of boomers said maintaining financial security and independence was their top “non-negotiable” retirement priority. However, it’s now back to the basics for more boomers. The top retirement priorities are now: spending time with grandchildren (43%); maintaining financial stability and independence (35%); staying active (34%); being able to travel (30%); and living close to family and friends (25%).
2. They’ve supported other family members financially. Many middle-income boomers reported that they assisted family members financially during the pandemic, with 41% of those surveyed saying that was the case.
3. They haven’t been able to save much for retirement. Among middle-income baby boomers who offered cash to support family during the pandemic, 75% say they haven’t been able to save as much for retirement as they wanted.
4. They’ve delayed plans to move. Retiring by the beach or near the grandkids are common retirement destinations. However, the pandemic has thwarted those plans for many a baby boomer. Among middle-income baby boomers who helped support family during the pandemic, 65% say that they delayed their moving plans.
5. They’ve re-evaluated retirement finances and expenses. Helping the kids in the pandemic has meant an adjustment for many baby boomers’ budgets. About half (51%) responded that they’ve re-evaluated finances and expenses for retirement.

Reference: Money Talks News (Aug. 2, 2021) “5 Impacts the Pandemic Had on Baby Boomers’ Retirement Plans”

Suggested Key Terms: Estate Planning Lawyer, Probate Attorney, Retirement Planning, Financial Planning, COVID-19 (coronavirus), Baby Boomers

How Do I Avoid Estate Planning Mistake with a Blended Family?

The Wealth Advisor’s recent article entitled “Remarried With Children? 5 Estate Planning Mistakes to Avoid” says that you can’t guarantee that everyone in the blended family will be happy with the arrangements you’ve made with a second marriage.

Mistake #1: Failing to change beneficiaries. With a beneficiary designation, the money passes directly to your intended beneficiary without probate. Look at all of your financial accounts to be certain that your spouse is designated the beneficiary if that’s what you want. Plus, check your life insurance beneficiaries because these payouts also bypass probate.

Mistake #2: Failing to update your last will. Your last will determines much of who gets the assets you and your spouse accumulated during your lifetimes. You probably don’t want your ex-spouse to get these. People on their second marriage frequently decide that the surviving spouse gets all the assets; upon the death of the second spouse, the remaining assets will be divided evenly among all of the children. There are ways to make that happen, but it takes very special legal planning.

Mistake #3: Treating all heirs equally. Most spouses aren’t financial equals when they marry, and this is particularly so in second marriages. If your new spouse moves into your house, for example, you may want your children to get the proceeds when it’s sold, not your spouse or your spouse’s children. There are many reasons why parents don’t treat children equally, including when there’s a child who’s disabled or has special needs. A child may also suffer from an addiction and require a trust that provides stipends at regular intervals to the beneficiary and deters creditors from getting money in the trust.

Mistake #4: Failing to give while you’re still alive. If you’re planning to leave money to your kids, you might think about giving it to them now. You can give up to $15,000 per person without having to pay the federal gift tax or deal with the IRS. Plus, your spouse may also give the same amount.

Mistake #5: Failing to work with an experienced estate planning attorney. If you’re older and on your second marriage, your life is probably complex with ex-spouses and children and stepchildren. Blended families and comingled assets make things complicated, as does a child with special needs or an aging parent. An experienced estate planning attorney can work through all of your issues and make sure you have the best and most comprehensive plan for your circumstances.

Reference: The Wealth Advisor (July 12, 2021) “Remarried With Children? 5 Estate Planning Mistakes to Avoid”

Suggested Key Terms: Estate Planning Lawyer, Wills, Probate Court, Inheritance, Asset Protection, Trusts, Probate Attorney, Estate Tax, Gift Tax, Beneficiary Designations, Life Insurance, Blended Family

Why Do I Need a Will, Like Yesterday?

A recent Gallup poll found that fewer than half of Americans (46%) have a last will that states the way in which their assets are to be handled after their death.

Surprisingly, the results of this survey have been nearly unchanged since 1990 at between 44% and 51%.

Real Simple’s recent article “6 Reasons You Need to Make a Will Now” says that one of the most common myths is that a last will isn’t needed if you want all of your assets to go to your family.

1. While the state has laws on what happens if you die without a last will, what if that’s not exactly how you want your estate to be distributed?
2. Another major reason for creating a last will is to make certain that someone is named to care for your minor children.
3. A last will lets you designate guardians to care for your children after your death. Without a guardian in a last will, a judge will decide who raises your children if you pass away. That judge likely would be someone who does not know you or your children or your family and friends. Without a last will, you will be allowing this “stranger” to make this life-changing decision for your children.
4. Also, there are taxes. If you have a last will in place, it will minimize estate taxes your family may have to deal with. A comprehensive estate plan created with the help of an experienced estate planning attorney can reduce tax exposure by as much as 40%. This move alone can help avoid having to pay taxes on your income a second time.
5. A last will isn’t just for your benefit. Your family will ultimately be most impacted by whether you took the time to draft up this important document. Creating a last will can give them some peace and comfort during a difficult time. In contrast, not having a last will leaves them with no guidance as to your wishes and can add to their burdens and stress during their grieving.
6. Care and maintenance of pets. The law says that pets are just property. If you regard your pets as members of the family, then you can leave money to an individual whom you designate as the caregiver for your pet if it survives you. A last will lets you to give your pet to a chosen loved one. This simple step alone can help prevent your pet from going to a shelter.

Reference: Real Simple (June 25, 2021) “6 Reasons You Need to Make a Will Now”

Suggested Key Terms: Estate Planning Lawyer, Wills, Intestacy, Probate Court, Inheritance, Asset Protection, Probate Attorney, Estate Tax

What Happens to My Home If I Leave It to a Medicaid Recipient in My Will?

When a beneficiary is on Medicaid and she’s set to get a bequest of the grantor’s home in her last will, the question may arise about the impact on her Medicaid benefits.

The answer will depend on the Medicaid program and what the daughter decides to do with the house, says nj.com’s recent article entitled “What happens to my daughter’s Medicaid if I leave her my home?”

Medicaid provides health coverage for some low-income people, families and children, pregnant women, the elderly, and people with disabilities.

In some states the program covers all low-income adults below a certain income level.

Medicaid programs are required to follow federal guidelines, but coverage and costs may be different from state to state.

Here, if the daughter receives Medicaid because she also receives SSI or has ABD Medicaid, the house will not be counted as a disqualifying asset if the house is the daughter’s principal place of residence.

If the daughter sells the house, the sale proceeds would be countable.

If she is getting expanded Medicaid through Obamacare, her eligibility would be based on income. So, if the daughter rented the house or sold the house, the income that would be generated could disqualify her from continuing to receive benefits, depending on the amount of income she gets.

If the daughter is disabled, consider leaving the daughter the house in a special needs trust. With a special needs trust, there’s a legal arrangement and fiduciary relationship that allows a physically or mentally disabled or chronically ill person to enjoy trust assets without jeopardizing their eligibility for Medicaid.

A Medicaid Asset Protection Trust is an irrevocable trust, and assets placed in the trust are considered completed gifts to the beneficiaries, protecting the assets from Medicaid (after the look-back period).

With a Medicaid Asset Protection Trust, even if the house is sold, the sale proceeds wouldn’t disqualify the daughter from receiving Medicaid.

Ask an experienced elder law attorney for help with this situation.

The laws regarding Medicaid and Medicaid eligibility are extremely complex and vary from state to state. Accordingly, nothing in this article should be considered legal advice.

Reference: nj.com (July 30, 2021) “What happens to my daughter’s Medicaid if I leave her my home?”

Suggested Key Terms: Elder Law Attorney, Special Needs Trust, Medicaid Trust Planning, Medicaid Planning Lawyer, Disability

What Should I Know about Medicaid and VA Pensions?

For seniors who are looking at Medicaid and VA Pensions, there are a few key things to consider, says WRAL.com’s recent article entitled “The top 5 things to know about Medicaid and VA pension.”

1. Background and criteria for qualification. An initial question that arises with Medicaid and VA Pension is how to know whether you are eligible. Both are needs-based programs and examine your net worth and your income. You also must satisfy certain thresholds, before you qualify for these benefits.
2. Medicaid and your assets. A frequent concern for those looking at Medicaid, is what will happen to their assets after they no longer need this assistance. Being proactive can help avoid or decrease any asset seizures. Proactive planning can save the house, and Medicaid won’t sell the house out from underneath your spouse. After the death of the person getting Medicaid, the state will attempt to recoup the cost of what it is spent on the individual. In effect, Medicaid becomes a creditor of their estate after their death. The state can potentially foreclose on the house. That is where people hear stories about Medicaid taking the house. However, with planning and the help of a Medicaid planning attorney, a senior can implement some simple tools to avoid this.
3. Misconceptions about Medicaid and VA Pension. A big misconception about these programs is that after you’ve applied once and been denied, you can’t try to qualify again. However, if your life circumstances change, you may meet requirements. Work with an elder law attorney to see exactly when you meet the eligibility requirements, so you don’t miss out on funds that might be needed.
4. Factors that affect qualification. For some planning on receiving Medicaid or VA Pensions, they may inadvertently disqualify themselves or extend their waiting period. A senior will frequently give the house to the children, and then a few years later, they need Medicaid. Medicaid has the lookback period, so they look at the past five or three years, depending on the type of Medicaid, to see if you gave anything away for less than fair market value. A house is a non-countable resource for Medicaid, if you have the intent to return home. However, if you transfer it to your children, it could cause a penalty which presents many complications upon qualifying for benefits. If you sell the house and turn it into cash in your name, the home can be taken. It’s a non-countable resource and turned it into cash, which is a countable resource. This must be spent down before qualifying.
5. Getting started. For information on Medicaid and VA pension eligibility, government websites have more information. But understanding these eligibility requirements can be difficult — and an experienced elder law attorney can make certain that you’re taking full advantage to what you’re entitled.

Reference: WRAL.com (July 1, 2021) “The top 5 things to know about Medicaid and VA pension”

Suggested Key Terms: Elder Law Attorney, Medicaid, Veterans’ Benefits, Financial Planning, Pension