What is an estate plan? [img]/assets/resources/heart-with-hands.jpg[/img]
An “estate plan” utilizes a Will, Power of Attorney and sometimes a Trust or Trusts to manage your assets while you are alive and provide for their orderly distribution upon your death. These plans can be quite simple if your financial picture is simple, but can also be more sophisticated where it is appropriate to address concerns about disabled family members, spendthrift beneficiaries, taxable estates and the like.
What happens if you don’t have a Will, a Power of Attorney, etc....?
[img]/assets/resources/sun-through-trees.jpg[/img]If you die without a Will someone will most likely have to apply to the Surrogate for Letters of Administration. He or she will also need to post a bond. This process is more time consuming and much more costly than drafting a Will. Also, if you have no Will your estate will pass under the intestacy statute which means that you lose the opportunity to choose who your beneficiaries will be.
Likewise, if you become ill or develop dementia, someone will need to file a guardianship application to have a guardian appointed at significant cost to you if you neglect to execute a Power of Attorney or designate a Health Care Proxy while you are competent. The Instruction Directive/Advance Directive is drafted at the same time so that the people you appoint know what your wishes are. Guardianships, on the other hand, are far more expensive and time consuming and you do not get to choose who your guardian will be. By having a Will, Power of Attorney, Healthcare Proxy and Advance Directive, all of these situations are easily handled by the people you name in your documents.
What are the fee arrangements?
There are two kinds of fee arrangements in this practice area: flat fee and hourly. A basic set of estate documents for a simple estate can be prepared on a flat fee basis. Consultations are paid at the hourly rate at the time of the consultation, and consultations often run 2 hours. All other legal work is billed on an hourly basis and billed against the client’s retainer which means that clients deposit a retainer with us against which we can bill as services are provided. On protracted matters such as litigation and estate administration, we will ask you to replenish the retainer as needed. ALL TERMS and CONDITIONS are spelled out in a retainer agreement provided for your review before we accept any retainer money.
What is Long Term Care Planning?
[img]/assets/resources/walking-stick-elderly-person.jpg[/img]Long term care planning involves much more than buying long term care insurance although that is a great start if you can afford it. Some simple but very important steps are within reach of everyone. A long term care plan begins with executing a Healthcare Proxy in which you appoint someone to make health care decisions for you if you cannot make them for yourself. At the same time, an Instruction Directive/Advance Directive should be executed to guide your Healthcare Proxy as to what your wishes are for your health care. You should also execute a Durable Power of Attorney appointing a responsible person to handle your finances in case you cannot manage them for yourself. These steps are affordable and within reach even if you can't afford long term care insurance.
If you can afford long term care insurance, different insurers and plans require careful evaluation. Also, if you have significant assets, a long term care plan should seek to provide excellent health care while also protecting some of your assets for future generations. Most of all, a long term care plan provides peace of mind knowing that should the day come when you cannot provide for your own health care, the people you have hand-chosen are in place with the tools they need to provide for all your health care needs.
When does it make sense to hire an attorney to handle your Medicaid application?
[img]/assets/resources/Hire_attorney.jpg[/img]Without a doubt it is counter-intuitive that you can retain an attorney to demonstrate how impoverished you are in your Medicaid application, but in certain situations it makes a lot of sense. An elder law attorney can help you qualify for Medicaid by creating a “spend-down” plan if you have assets that exceed the allowable maximum. An attorney can also be very helpful where one spouse needs nursing home care and the other will be remaining at home by fashioning a plan that protects sufficient assets for the community spouse. If you apply for Medicaid yourself and are denied, an attorney can help you evaluate whether you should appeal that result. If your assets are minimal and you have not gifted away any assets within the last five years, you probably do not need an attorney to assist you. Contact the County Board of Social Services to start the Medicaid application process.
Is it true that Medicaid can take my house?
No, Medicaid does not take anyone's house in the sense that they put homeowners out in the street; however, if you are a Medicaid beneficiary and own your own home, Medicaid will have the option of recording a lien against your home after you die for the dollar value of the services they provided to you. For example, if you qualify for Medicaid and Medicaid pays out $97,000 in medical benefits for you, then when you die Medicaid can file a lien against your home to recover that $97,000 when the home is sold. The remainder of the equity in your home passes to your beneficiaries. If a spouse is living there, Medicaid will not enforce the lien until after the spouse dies. There are certain exceptions to the Medicaid lien rule, and an elder law attorney can assist you in determining whether any steps can be taken to avoid a Medicaid lien in your situation.
Is the house protected if Mom and/or Dad transfers title to their adult children?
The answer to that question depends in large part on whether they transferred the house prior to the five year lookback period and whether Mom and Dad were compensated for the transfer. In other words, if the house was transferred more than five years ago or the adult children paid their parents fair market value for the house, you shouldn’t have a problem qualifying for Medicaid if everything else is in order. An elder law attorney can assist you in determining whether such a transfer is advisable for you and also help you weigh the risks. This strategy of asset preservation is particularly problematic if one of the adult children to whom the parents’ house is transferred the needs to apply for bankruptcy or predeceases the parents. In either instance, the house is an asset belonging to the adult child, and the parents will need to leave.
When is a Guardianship necessary?
A guardian is most often needed when someone becomes mentally incapacitated who never took the time to execute with an attorney two very important documents: a Power of Attorney and a designation of Healthcare Proxy. These two documents allow you to designate who you want to appoint to care for you if you cannot care for yourself. If you do not execute these documents and you become incapacitated, the court will appoint a guardian for you. Guardianships can be expensive and time consuming and can result in guardianship contests if family members do not agree on who should be guardian - all good reasons to execute Powers of Attorney and designate a Healthcare Proxy while it can be easily done.
If someone can sign their name, does that mean they are competent to sign legal documents?
Not necessarily. A responsible attorney will always take the time to make sure that the signer has the mental capacity to understand what he or she is signing, that no one is coercing him or her into signing a document that he or she does not want to sign, that the signer is not under the influence of alcohol or drugs that might cloud the signer’s judgment, and that the signer is 18 or older.
What is a Fiduciary?
A fiduciary is a person or entity to whom property or power is given for the benefit of another. Executors, trustees, and the person you appoint in your power of attorney are your fiduciaries. A fiduciary has a legal obligation to place your best interests ahead of their own. Notably, financial planners are resisting efforts by the legislature to pass legislation making them fiduciaries as well.
What questions should you ask before deciding who to appoint as your Executor, Trustee or Agent under your Power of Attorney?
Your Executor, Trustee or Agent under your Power of Attorney has to be an enormously trustworthy person because they will control your finances if you can no longer do so for yourself, and/or control your estate after you die. In general, you want to avoid appointing people, including family members, who might have occasion to want to “borrow” from you without your consent – people with financial problems, people who are unemployed, people who have addiction or gambling problems, people who carry credit card debt, people whose homes are in foreclosure, or people who you have loaned money to who have not repaid the loan. Grown children who are doctors, lawyers or successful executives are not immune from these problems. This may seem like common sense, but often we have no idea that family members have one or more of these problems when we appoint them because it isn’t discussed. Before deciding who to appoint, think about whether there has been any suspicious behavior, and ask other family members if they are aware of any problems.
Can I probate a Will myself if I am the Executor?
An attorney can help you prepare the application for probate, obtain a tax identification number, assess whether there are likely to be taxes due, prepare estate and inheritance tax returns if needed, settle the estate and prepare an accounting for review by the beneficiaries. A simple estate with few assets and few beneficiaries can often be probated without the assistance of an attorney, although even a small estate can require an inheritance tax return, which executors are usually reluctant to prepare themselves, if there are no exempt beneficiaries.
Who needs to do tax planning in thinking about their estate plan?
[img]/assets/resources/Taxes.jpg[/img] If you are domiciled in New Jersey, there are two kinds of “death taxes” to consider, and everyone has to take into consideration state and Federal income taxes.
Often when people think about taxes, they are thinking about state and Federal income taxes. Indeed where retirement assets are concerned, income taxes can be significant when the account owner passes. These taxes can be minimized with good planning though and a conversation with the attorney who drafts your Will is always in order.
Also, New Jersey no longer has an estate tax for the estates of persons who died in 2018 or later. The Federal estate tax, however, remains in place. For estates exceeding $12,920,000.00 in 2023,the Federal Estate Tax can come into play, and after 2025 the exemption will drop to $5,000,000.00. If you have a high net worth estate, planning is imperative because the Federal estate tax begins at a whopping 40%. Good estate planning can minimize the tax.
Finally, you also may need to consider tax planning if you are leaving assets to a non-lineal descendent or a non-family member as that can trigger the New Jersey Inheritance Tax. Options often exist that will allow you to make sure the beneficiaries of your estate inherit as much and pay as little tax as is legally possible. Planning with retirement assets is part of a thorough estate plan even though the accounts themselves are considered non-probate assets – in other words, in minimizing income taxes they generally do not pass pursuant to instructions in the Will.
Most often many possibilities exist and after a thorough conference, we can design a plan that is appropriate for you. A good estate plan is a small investment that can yield savings of tens of thousands of dollars on even modest estates, and hundreds of thousands to millions on larger estates.
Could I benefit from setting up a trust? [img]/assets/resources/baby-holding-finger.jpg[/img]
Trusts come in many different forms, but their common purpose is to set aside the funds of one person (the grantor), for the benefit of another person (the beneficiary), under the management of a fiduciary (the trustee). A trust is essentially a kind of contract, so it starts with drafting a trust document that outlines all the rules that will guide how the trust functions, and who it is intended to benefit. Then assets are either re-titled in the name of the trust (a deed is drafted transferring a home from John Doe to the John Doe Trust, for instance), or a new bank or brokerage account is created in the name of the trust, and assets transferred into the account.
Trusts can be tax saving mechanisms, or vehicles used to simplify the management of complex estates. Trusts can also simplify the transfer of assets between generations. A trust might protect funds for the benefit of minors until the children are old enough to manage the funds themselves, or the trust might protect funds for the benefit of a disabled person. A trust can also allow you to name one beneficiary now, but another beneficiary for when the present beneficiary dies. Trusts can be simple or complex, but either way they are invaluable estate planning tools.