Posts By: Jeffrey A. Asher, posted from eCareDiary.com
Question: Can I use an online form for estate planning?
Answer: You could, but you should not.
The problem with online forms, and whatever other form of online estate planning DIY, is that (a) they are not likely prepared with the review of a qualified estate planning attorney, and (b) they are not likely state-specific. Each state has its own idea what a Will looks like, or a Health Care Proxy, or a Power of Attorney. If you are going to sign one of these forms, or any other form for estate planning, within your home state, then you should make sure the form you sign is valid in your home state. These online forms, or estate planning DIY websites, are not always prepared with the state-specific rules in mind. Nor are they prepared with a state-specific attorney’s guidance and review. Most times, these online forms or estate planning DIY websites are made universal because the company thinks the form could be used in any state.
New York, for example, has very specific rules about what a Health Care Proxy looks like and how it is signed. The same goes for a Power of Attorney. In fact, New York has a whole form of a Power of Attorney in the NYS law that MUST be followed. If certain things are left out of the form you sign, then it is invalid. There are instances where people have downloaded forms of a Power of Attorney, signed them, and tried to use them after their loved one became incapacitated, only to find out that the state-specific form was not used. In those instances, the NYS law is clear that there is no way to fix the form. In those instances, you need to start all over again. But what if you can’t? What if your loved one no longer has the capacity to sign such a form? In those instances, you are stuck without a proper form.
Which leads me to the other problem with online forms: you won’t know if your form is executed properly. With these online forms and estate planning DIY websites and kits, there is no way of knowing if you are doing things right until it’s too late and then there is nothing you, your family, or your friends can do about it. Without getting the relevant, specific, information and form from a qualified estate planning attorney, you will probably leave your family and friends with a complete mess.
What would happen if you download a Will, fill it out, and sign it, only for your family to learn (after you are gone) that the form is wrong for NY and the document was not signed in accordance with NY law? A big mess is what would happen.
I know the point is to save money. But, in the end, if the online form is improper or invalid, you will likely cost your family and friends more money. You are better off seeking out a qualified estate planning attorney from the beginning, ensuring things are done correctly, and making sure the attorney tries to work with you regarding fees. You’ll save yourself and your loved ones money in the long run.
Question: What role does life insurance play in estate planning?
Answer: Life insurance can play a tremendous role in estate planning. For example, life insurance can provide liquidity to pay off the mortgage after the death of one of the spouses. Sometimes called “mortgage insurance”, life insurance can help ensure that the surviving spouse won’t have to deal with the mortgage, or other expenses, following the death of a spouse.
When a family has young, school-age children, life insurance can help the working spouse pay for help with the children and the house in the event the stay-at-home spouse dies. In reality, the working spouse would not be able to quit his/her job and take care of the family at the death of the stay-at-home spouse. In that instance, life insurance can help pay for a caregiver, nanny, or other help, for the children and the house, allowing the working spouse to keep his/her job.
Life insurance can also provide liquidity to pay estate taxes for an estate that is cash poor. For example: an estate is comprised of valuable real estate, a business, other tangible personal property, but very little in bank accounts, etc. If there is an estate tax to pay, the family might have to sell the real estate or the business or some of the tangible personal property. But, if there is a life insurance policy, the family could use that money to pay the estate taxes.
Life insurance can also ensure that children and grandchildren have money set aside for school, weddings, the purchase of a first home, or other big expenses. As an investment for future generations, life insurance can provide a very large return on investment, when you accept the fact that someone else is going to be the beneficiary of that return.
In sum, life insurance can play an important role in estate planning. But, that means you must plan for your life insurance. You may not have known it until now, but the value of life insurance may be included in your taxable estate, thus included in the calculation of estate taxes. This means that buying life insurance to pay for eventual estate taxes may, in fact, increase those estate taxes. However, if you create a proper “life insurance trust” and own your life insurance within the “life insurance trust”, your life insurance will not be included in your taxable estate. Thus, potentially saving thousands of dollars in estate taxes. That is why it is important to discuss your estate planning, and your life insurance planning, with a qualified estate planning attorney.
Question: Whom should I appoint as my agent for my Power of Attorney?
Answer: The agent under your Power of Attorney is a Very Important Person. His/her job is to make your financial decisions in the event you are unable to make your own financial decisions because of an incapacity or otherwise. Your agent may be the person who has to pay your bills in the event of your absence or your incapacity, make financial decisions and/or transactions, sell property, if it is in your best interest, and/or perform estate planning or elder law planning, if necessary. Your agent under your Power of Attorney should be (a) someone you trust to make your financial decisions, (b) someone who will work with and treat your family with honesty, respect, compassion, and financial reasonableness, assuming he/she will act for you in connection with bills to pay, gifts, investments, etc., (c) someone who is financially smart or, at least, able to identify the need to be financially smart and will use smart financial advisors, and (d) someone who will work well with others, if you choose to appoint more than one agent under your Power of Attorney.
When choosing an agent under your Power of Attorney, do not be limited by geographic location, age, or relationship. An agent can be anyone, of any age, anywhere. With today’s technology, many financial decisions/transactions can be performed via email, telephone, fax, or by the mail/overnight delivery, so where a person lives has little to do with whether or not he/she can do a good job. And, age should never be a factor in ruling someone out as a possible agent. The question is whether that person can do the job. But, if you are concerned about the age of the potential agent (assuming the person is older), then make sure you appoint successor(s) to act if necessary.
No matter whom you appoint, in addition to the appointment of your agent under your Power of Attorney, you should consider naming additional agents (as successor(s)) in the event the initial agent is unable or unwilling to do the job.
Question: I would like to prepare my estate plan by myself. How will I know if my plan is executed well after I am gone?
Answer: Unfortunately, if you are preparing your estate plan by yourself, without any review by a qualified attorney, then you won’t know if your plan is executed well. You will probably leave your family and friends with a complete mess. That is most often the problem with these Estate Planning DIY websites and kits. There is no way of knowing if you are doing things right until it’s too late and then there is nothing you, your family, and friends, can do about it. I know the intention behind preparing your own estate plan is to save money, but, in the end, you will likely cost your family and friends more money fixing what needs to be fixed. You are better off seeking out a qualified estate planning attorney from the beginning, ensuring things are done correctly, and making sure the attorney tries to work with you regarding fees. You’ll save yourself and your loved ones money in the long run.
Question: My mom’s health is failing rapidly. What should I do to get ready to handle her decisions in the event she becomes mentally incapacitated?
Answer: The best thing to have in these situations is both a Health Care Proxy and a Power of Attorney. A Health Care Proxy is a legal document signed by an individual (called, the “Principal”) that appoints another individual (called, the “Agent”) to make medical, health care, and/or long-term care decisions for the Principal if and when the Principal cannot make his or her own medical, health care, or long-term care decisions.
A Power of Attorney is a legal document signed by an individual (called, the “Principal”) that appoints another individual (called, the “Agent”) to make financial decisions for the Principal. That authority may be effective the moment the Power of Attorney is signed, in what is called a general Power of Attorney. Or, it can be effective in a particular event or for a particular purpose, in what is called a limited Power of Attorney. Or, it can be effective upon the triggering of a certain event, such as the mental incapacity of the Principal, in what is called a springing Power of Attorney.
So, while an Agent under a Health Care Proxy cannot make health care decisions for the Principal if the Principal is able to make his or her own health care decisions, an Agent under a general Power of Attorney can make financial decisions for the Principal even if the Principal is perfectly capable of making of his or her own financial decisions. So, it is important to get the right advice when preparing a Health Care Proxy and/or Power of Attorney. Plus, state laws may govern what a Health Care Proxy and/or Power of Attorney look like, or how each is signed. So, again, it is important to get the right advice from a qualified Estate Planning or Elder Law attorney to help with these forms.
But, for the parent (or other loved one) whose health is failing rapidly, a Health Care Proxy will allow the child (or other Agent) to make medical, health care, and/or long-term care decisions. And, a Power of Attorney will allow the child (or other Agent) (it does not have to be the same child or Agent) to make financial decisions. In the event the parent (or other loved one) does not have the requisite mental capacity to sign a Health Care Proxy or Power of Attorney, then a guardianship may be the only solution. A guardianship is a legal process by which the parent’s (or other loved one’s) incapacity is determined and declared by the Court and a person is appointed by the Court to act as Guardian of the Person and/or the Guardian of the Property. A guardianship is a public proceeding, which may be both time consuming and expensive. So, for these reasons, in most situations, it is preferable to have a Health Care Proxy and/or Power of Attorney executed.
Once an individual is appointed – as Agent under the Health Care Proxy, or Agent under the Power of Attorney, or Guardian, as the case may be – that individual would be able to help the parent (or other loved one) get the medical and/or long-term care help the person may need in the event of their incapacity, but also do the necessary and appropriate asset planning to qualify for government benefits to help pay for such medical and/or long-term care help.
In all cases, and all types of planning, it is important that you get the right advice from a qualified Estate Planning or Elder Law attorney.
If you would like to learn more, and how the Law Offices of Jeffrey A. Asher, PLLC, can help you, please contact us at (877) 207-6803 or firstname.lastname@example.org.
Question: What are estate taxes?
Answer: Estate taxes, or what are sometimes called death taxes, or inheritance taxes, are generally owed and paid on the value of property in someone’s estate when they die. There is a federal estate tax and there are states that impose state estate taxes, although not every state has an estate tax. Some states don’t have an estate tax, but have an inheritance tax, which taxes the beneficiaries of the deceased person for the value of property inherited by them. Some states, like New Jersey, have an estate tax and an inheritance tax. This means that New Jersey potentially taxes the estate of someone who has died (through the estate tax) and the beneficiaries of the deceased person for the value of property inherited by them (through the inheritance tax).
The estate tax (or the inheritance tax) is generally calculated on the date of death values of property owned by the decedent (or inherited by the beneficiaries), although that calculation may be affected by deductions, credits, and/or adjustments in valuation.
The federal government allows an exemption from the federal estate tax. Every US citizen is entitled to an estate and/or gift tax exemption of up to $5,250,000 (in 2013). That means a person can die with property valued at up to $5,250,000 (in 2013) and not pay federal estate taxes. Those states that have an estate tax generally have their own state-level exemption, or they accept what the federal government assumes the state-level exemption should be (called the state death tax deduction). For example, New York State’s estate tax exemption is currently $1,000,000. This means a person who has an estate worth $4,000,000 would not have a federal estate tax (because the estate is less than $5,250,000) but would have a New York State estate tax (because the estate is more than $1,000,000). New Jersey’s estate tax exemption is currently $675,000. There is no exemption from the New Jersey inheritance tax, but certain classes of beneficiaries (such as, spouse and children) are exempt. North Carolina, for example, has a state estate tax, but the exemption mirrors the federal exemption. The federal exemption of $5,250,000, currently, is a lifetime exemption that can be used during life or at death. In other words, a US citizen may make gifts during life of up to $5,250,000, currently, without paying federal gift tax. However, having used the exemption during life there will be nothing left of the exemption at death. Connecticut is the only state that has a gift tax.
The federal estate tax return is due nine months following the person’s death, although extensions may be applied for. However, an extension of time to file the return does not mean also an extension of time to pay the estate tax. Penalties and interest will be owed on the unpaid amount of federal estate taxes. States’ estate tax and inheritance tax returns have their own deadlines. For example, the deadline to file a New York State estate tax return is nine months, unless extended. The deadline to file a New Jersey estate tax return is also nine months, but the deadline to file a New Jersey inheritance tax return is only 8 months. The deadline to file a Connecticut estate tax return is six months, unless extended.
As you can see, the road to navigate between and amongst the federal estate tax, state estate taxes, state inheritance taxes, gift taxes, filing deadlines, etc., is a winding and bumpy one. It is best to seek out a qualified Trusts and Estates Attorney to help you steer the course.”
Question: My parent was just diagnosed with a progressive disease. How do I help protect my parent’s assets?
Answer: Learning that your parent was just diagnosed with a progressive disease, whether it be Alzheimer’s disease, Parkinson’s disease, cancer, stroke, for example, is a devastating and life-changing event. Beside the unknown of what is going to happen, it means understanding levels of care that you never thought your parent would need. It may also mean adjusting your own life to provide that care to your parent. Whatever the diagnosis means to you and your family, getting the legal and financial answers you need – such as in answer to the question you asked – will be the role of the qualified Elder Law attorney. The first step in protecting your parent’s assets is to understand from what are you trying to protect your parent’s assets. Estate planning is the ability to pass your parent’s assets to whomever your parent wishes while minimizing, as much as possible, expenses and estate taxes. Medicaid planning is the ability to exclude your parent’s assets, as much as possible, from being included as available resources for Medicaid purposes when seeking Medicaid paid-for home care services or nursing home care. Assuming you mean protecting your parent’s assets for Medicaid purposes, the second step in protecting your parent’s assets is to know where those assets are, how much the assets are valued at, and whose name the assets are in. Under the right circumstances, some assets are exempt for Medicaid purposes, such as retirement assets (i.e., IRA, 401(k), pension), certain business assets, and your parent’s home. So, knowing what your parent owns, and how, will tell us the extent to which we need to protect your parent’s assets. But, once we understand what your parent owns, and how, the third step in protecting your parent’s assets is to determine what type of help he or she needs. Is it help around the house? Or, does your parent need complete care in a nursing home? There are two different types of Medicaid applications (i.e., home care or nursing home care), and processes for becoming eligible for both types of Medicaid. Working with the doctors we will determine the proper level of care your parent needs and how best to provide that care to him or her. These are, generally, the first three steps in the process to getting your parent’s assets protected and getting your parent qualified for benefits to help take care of him or her.There are many steps in the whole process, but a qualified Elder Law attorney will help navigate these steps with you. Protecting your parent’s assets is not something that can be done with a quick fix, or with a phone call and a change of address form at the bank. And, there are severe ramifications if not done properly. Be sure to fully understand those first three steps discussed above and discuss these steps with your Elder Law attorney to make sure the whole process is done correctly.
Question: Can Medicaid Take My Home Away From Me?
Answer: No. A home is exempt from Medicaid for so long as it has an equity value of less than $750,000, and it is the Medicaid applicant’s primary residence or the primary residence of a spouse, minor child, or an adult child who is certified blind or certified disabled. When a Medicaid applicant is living outside of the home, but has an intent to return home, the home will continue to be exempt for Medicaid purposes, without regard to the applicant’s actual ability to return home. However, if the home has an equity value of $750,000 or more, or if the applicant or his or her family member(s) no longer reside in the home, then the home is deemed a “countable resource” for Medicaid purposes. This means that Medicaid can include its value in the applicant’s list of assets to determine whether or not he or she qualifies for Medicaid. This, still, does not mean that Medicaid or a nursing home can take the applicant’s home. It merely means that Medicaid may have the ability to place a lien on the home to be repaid the cost of its services when and if the home is ever sold. However, there is a different answer when a guardian is appointed by the court to assist in obtaining Medicaid benefits. For example, if you reside in a nursing home and the nursing home is not being paid, the nursing home may apply to the court for the appointment of a guardian in order to pay the bills and/or obtain Medicaid. When this happens, the guardian is typically given the power by the court to sell your assets, whatever they might be, including your home. So, while Medicaid and/or the nursing home cannot take your home, the court-appointed guardian may have to sell your home in order to pay the nursing home and/or qualify you for Medicaid benefits. A proper elder care plan, including planning for a nursing home and/or Medicaid, will typically avoid this scenario. But, it is always good to know ‘what if?’ when it comes to your disability and long-term care planning.