Garland Law Offices, P.A.

Do You Need a Revocable Trust?

“Probate can be a long, arduous, and costly process—especially in states that aren’t considered probate-friendly. Enter a workaround that is being used by an increasing number of people: revocable living trusts.”

A will lets you determine how your property will be distributed when you die, and a revocable living trust also accomplishes that task. However, the owner of the trust can make strict stipulations about how specific assets should be distributed, says Barron’s in the article “Revocable Living Trusts Can Help Your Heirs Avoid Probate. Here’s How They Work.” Another advantage of a revocable trust—avoiding probate, which gives the trust owner far more control over asset distribution.

Remember, probate is a process that takes place under the supervision of a judge in a court. Things don’t always happen the way the decedent may have wanted.

It’s best for individuals or couples with complex estate planning needs to meet with an estate planning lawyer, who will discuss whether a living trust is the right option. One question couples should ask: does it make sense for them to have a living will, and should it be a joint trust, or should it be two separate ones?

When a trust is created, it needs to be funded. Assets such as real estate, bank accounts, taxable non-retirement investment accounts all need to be retitled so they are owned by the trust. The person who creates the trust has no restrictions as to how the assets within the trust are used while they are alive. The trust can also be revoked during the owner’s lifetime, but it’s more common for owners to make tweaks to the trust.

Trusts are very popular in states like California and Massachusetts, which have more restrictive probate laws than other states. Trusts are very good for people who own property in multiple states and would otherwise have to deal with probate in multiple states. Trusts are also excellent for people who wish to maintain privacy about their assets, since the trust’s contents remain private. A will, once it enters the probate process, becomes a public document.

Someone who does not own his or her own home and has limited assets may prefer to use a will, which is less expensive and simpler than a trust. Once they do own a home and have more extensive assets, they can always have a trust created.

A living trust is part of a larger estate plan. Other estate planning documents are still needed, including a durable power of attorney for finances, an advance health care directive, a nomination of guardianship for families with minor children and a living will.

People who have revocable trusts should ask their estate planning attorney about something called a “pour-over” will. This is a will that ensures that any assets accidentally left out of the trust are added to the trust after the death of the owner. If the majority of assets are in the trust, the probate of the pour-over will should be much simpler and there may even be a “fast-track” option for assets under a certain dollar level.

Reference: Barron’s (February 22, 2020) “Revocable Living Trusts Can Help Your Heirs Avoid Probate. Here’s How They Work”

Your Estate Plan is a “Dynamic Document”

“Failing to ensure that your asset titling and beneficiary designations are coordinated with your estate plan, can lead to unintended costs, taxes and outcomes.”

One of the most common mistakes people make about their estate planning is neglecting to coordinate all of the moving parts, reports the Dayton Business Journal’s article “Baird expert gives estate planning advice.” The second most common mistake is not thinking of your estate plan as a dynamic document. Many people believe that once their estate plan is done, it’s done forever. That creates a lot of problems for the families and their heirs.

In the last few years, we have seen three major federal tax law changes, including an increase in the federal estate tax exemption amount from $3,500,000 to an enormous $11,580,000. The estate tax exemption is also now portable. Most recently, the SECURE Act has changed how IRAs are distributed to heirs. All of these changes require a fresh look at estate plans. The same holds true for changes within families: births, deaths, marriages and divorces all call for a review of estate plans.

For younger adults in their 20s, an estate plan includes a last will and testament, financial power of attorney, healthcare power of attorney and a HIPAA authorization form. People in their 40s need a deeper dive into an estate plan, with discussions on planning for minor children, preparing to leave assets for children in trusts, ensuring that the family has the correct amount of life insurance in place, and planning for unexpected incapacitation. This is also the time when people have to start planning for their parents, with discussions about challenging topics, like their wishes for end-of-life care and long-term care insurance.

In their 60s, the estate plan needs to reflect the goals of the couple, and expectations of what you both want to happen on your passing. Do you want to create a legacy of giving, and what tools will be best to accomplish this: a charitable remainder trust, or other estate planning tools? Ensuring that your assets are properly titled, that beneficiaries are properly named on assets like life insurance, investment accounts, etc., becomes more important as we age.

This is also the time to plan for how your assets will be passed to your children. Are your children prepared to manage an inheritance, or would they be better off having their inheritance be given to them over the course of several years via a trust? If that is the case, who should be the trustee?

Some additional pointers:

• Revise your estate plan every three or five years with your estate planning attorney.
• Evaluate solutions to provide tax advantages to your estate.
• Review asset titling and beneficiary designations.
• Make sure your charitable giving is done in a tax efficient way.
• Plan for the potential tax challenges that may impact your estate

Regardless of your age and state, your estate planning attorney will be able to guide you through the process of creating and then reviewing your estate plan.

Reference: Dayton Business Journal (February 4, 2020) “Baird expert gives estate planning advice”

Retirement’s Big Unknown

“It’s up to us today to be actively funding our future selves.”

The greatest unknown in retirement is your health. Two of the most critical investments that we can make now are to plan to cover uncertain costs and live healthy. Forbes’ article, “The Biggest Wild Card In Retirement And How To Deal With It,” notes that if a married couple retiring at age 65 wants to have 90% certainty that they can cover healthcare expenses in retirement (Medicare Part B and Part D premiums, MediGap premiums, and out-of-pocket drug expenses), they’ll need $265,000 (with high drug expenses upping it to $349,000). These numbers don’t include long-term care expenses. They can be as much as $10,000 a month.

Medicare won’t cover everything, so you’ll probably need MediGap coverage. You should also look out for Medicare premium surcharges, if your income is over $85,000 ($170,000 for joint filers). People say that “health” is the key to a happy retirement, but research shows that it’s also the biggest concern. Americans of all ages say that their top financial worry in retirement is that they or a loved one will have a costly health issue. Nonetheless, there’s a bit of a disconnect even among those who are aware of this cost. Healthcare costs are frequently missing in retirement planning, research says. Fewer than 15% of pre-retirees have ever attempted to estimate the amount of money they might need for health care and long-term care in retirement.  Only 42% of pre-retirees have a health care directive that details the individual who’ll determine how medical care is carried out, if a spouse is unable to make decisions on their own.

There is some positive news. In a recent study, 91% of retirees said they’re willing to make healthier choices now to save money later, and 83% say they’ll review their health insurance plan options. With that in mind, there are some steps you can take right now. Starting a general retirement account can help cover extra health care costs. You should take full advantage of tax-advantaged retirement plans and up your savings.  You should also investigate if your employer has any specialized tax-advantaged healthcare savings options.

Look into a HSA or FSA. If you have a high deductible health insurance plan, you can save in a tax-advantaged health savings account (HSA). If you don’t use the money for current out-of-pocket healthcare expenses, you can invest it and save it as a retirement healthcare fund. In addition, a Healthcare Flexible Spending Account (FSA) helps cut costs on current year healthcare expenses.  Some plans allow you to carry over a $500 balance into the next plan year.

Long-term care insurance.  Only 30% of people believe they’ll need long-term care, but it’s really more than double that number. Seven in ten will need it at some point in their lifetimes and on average, they will need it for approximately three years. If you don’t want to purchase long-term care insurance, you’ll need to be certain that you’ll have resources available, in case care is needed.

Talk to the whole family. Talking money still may be thought of as off-limits, but it shouldn’t be. About 70% of married pre-retirees haven’t discussed healthcare in retirement and how to pay for it with their spouses. The study also found 70% of Americans haven’t had serious conversations about net worth, long-term care, or wills and inheritance with their parents.

Reference: Forbes (February 16, 2017) “The Biggest Wild Card In Retirement And How To Deal With It”

The 411 on Health Savings Account Rollovers

"You can roll over an IRA into an HSA once in your lifetime. You may save on taxes, but the rules are tricky."

Kiplinger's recent article, "Rolling over Retirement Savings to a Health Savings Account," advises that you can make a tax-free rollover into an HSA (health savings account) from an IRA—but not from a 401(k), 457, or other retirement plan.

But if you have a 401(k) from a former employer, you may be able to make the move by rolling it over into an IRA first and then making a tax-free direct transfer from the IRA into your HSA. At that point, you can use the money in the HSA tax-free for medical expenses in any year.

Remember that if you withdraw funds from a traditional IRA to pay medical expenses or anything else, there will be taxes to pay, and you may have to pay a 10% penalty if you're under 59½. You can make penalty-free IRA withdrawals for medical expenses that are more than 10% of your adjusted gross income for the year, or more than 7.5% if you're 65 or older.

Here's the big point to keep in mind: you can make a tax-free rollover from an IRA to an HSA only once in your lifetime. And you must qualify to make new HSA contributions that year. This year you need to have a health insurance policy with a deductible of at least $1,300 for individual coverage or $2,600 for family coverage.

The size of the rollover is restricted to the annual HSA contribution limit, minus any money you've already contributed for the year. For this year, you're allowed to contribute up to $3,350 to an HSA if you have individual coverage or $6,750 for family coverage, plus an extra $1,000 if you're 55 or older anytime during the year.

If you have the extra cash, typically you're better off using the new money for HSA contributions so that you can keep more money growing tax-deferred in your IRA and also take a tax deduction for new HSA contributions.

Reference: Kiplinger's (April 20, 2016) "Rolling over Retirement Savings to a Health Savings Account"

What to Consider when Budgeting for Loved One’s Future

One of the questions that we get asked regularly is what needs to be considered when budgeting for an older family member’s future.  The first things we need to determine are  current monthly expenses; income via pension and social security; and assets.  Once we have this information, then we question whether the loved one was a veteran or a widow of a veteran, who served at least one day during a time of war.  If the answer is yes, then we discuss a VA benefit that could be an option for the future.

Future care costs could include the services of an in-home care provider, assisted living, or a nursing home.  According to the 2015 Genworth Cost of Care Survey, the National Median rate of a home care provider is $20/hour; assisted living is $3600/month; and a nursing home is $220/day.

There are many things to consider when budgeting for the future.  Your interests will be best served by consulting with a Qualified Elder Law Attorney.

What’s the Benefit of Having a Social Worker in a Law Practice?

Garland Law Offices, P.A. is one of a handful of firms across the country to employ a social worker on staff.  One of the questions that we get asked frequently is, “Why?” One of the services that we provide is called Life Care Planning.  Life Care Planning is a holistic, elder-centered approach to the practice of law that relies on an inter-disciplinary team that works to identify present and potential future care needs, locate appropriate care when the time is right, and ensure that the care is high quality.  Who better to offer these services than a social worker?

Dealing with an aging family member can create anxiety, guilt, and fear.  These feelings are prevalent no matter if the loved one is a parent, spouse, or sibling regardless if you’re living around the corner, the next town over, or on the opposite coastline.  The team at Garland Law Offices, P.A. realizes that most people are caught up in today’s hectic pace of living and don’t have a lot of time at their disposal to research answers to the questions of caring for an aging loved one.  Our team works to provide the answers that you need while giving you peace of mind.

With a Life Care Plan, an older adult and his or her family can avoid frantic and costly action should a family crisis arise.  The process incorporates legal planning techniques and changing physical, psychological, and financial needs.  A qualified elder law attorney works with a client to design a customized legal plan that serves as a road map to meet the inevitable changes that we face as we age.  The Elder Care Coordinator, who is a licensed social worker, assesses the older adult’s current situation and then researches possible solutions and answers questions about the type, amount, and quality of care that is necessary while exploring areas of financial assistance.  The bottom line of Life Care Planning is to help the elder and their family find, get, and pay for good care.  Where possible the elder will remain at home and age in place.

Our Elder Care Coordinator is a Licensed Social Worker.  She has many years of working within the long term care industry. She spends hours meeting with health care professionals, touring facilities, and researching long term care options in order to present our clients with the best resources possible.  Our clients know that if our social worker recommends a service or facility that it is regarded highly by professionals within the long term care industry.  Instead of our clients and their families fumbling through the process and learning as they go, our Elder Care Coordinator serves as their navigator and lets them know what options are available and where to begin their search.

Recently our Elder Care Coordinator was working with a Life Care Planning client, who was residing within a local subacute rehabilitation facility and getting ready for discharge.  While our client has family nearby, the family is caught up with working, caring for younger children, and now caring for mom.  Our client had some complicated health issues that were making discharge from the subacute rehabilitation facility to a long term skilled nursing facility almost impossible, and the family was left trying to make sense of a confusing system.  Our Elder Care Coordinator (ECC) intervened on our client’s behalf and reached out to appropriate care facilities regarding our client’s needs.   In addition, our ECC served as a liaison between the current subacute rehabilitation facility, new facility, and the family to make sure that our client’s transfer to the new facility went smoothly.  Our ECC knew which questions to ask, who to talk to, and how to go about making this transfer to the new facility happen.  If it hadn’t been for her intervening on the client’s behalf, the family would have been lost in the shuffle.

So now our question is, “Why wouldn’t an elder law firm have a social worker on staff?”

Welcome to the Garland Law Offices Blog!

Welcome!  In the coming months we will publish useful and informative information for elders, caregivers, and families in general.  In the meantime, we encourage you to peruse our site, and feel free to reach out to us if we can help you or a loved one in any way.

Gary B. Garland