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Do You Need a Trust?

This question is by far the most asked question that we receive in our office. However, there is absolutely no standard or right answer for everyone. Trusts are typically used for either probate avoidance purposes, tax avoidance purposes, or asset protection. Trusts are often used for disability planning but generally, that is not the sole reason for people’s use of trusts.

Currently, the federal estate tax limit provides an $11.7 million exemption per person. This means that an individual currently will not pay federal estate tax unless their estate, per person, goes over $11.7 million or $23.4 million for a husband and wife. This law is set to go back to $5 million in 2025, set for inflation which predictions are that it will end up being around $5.8 million. Even with the reduction in 2025, most people in our local community will not need to do a trust for tax purposes. Certainly, there are rumors each and every day about Congress changing the laws and lowering the exception amounts, but until that happens, I would not make plans for something that may or may not occur. History tells us that all of the rumors that we are hearing, probably none of them will actually look like the actual law if it is ever enacted, and we have always taken the position to plan for the law as it is in effect, and if and when it changes, then we can pivot. With that said, there is not a high percentage of people who will need to do trusts for tax purposes as we sit here today in May of 2021.

Probate avoidance is usually a situation where there are properties in several different states across the country. While every state has different laws as to whether a person needs to open an estate in their specific state, generally speaking, if the property is in a person’s name alone at the time of their death, the state will require them to go through that state’s probate process. We find that many people like to avoid probate in these situations so that they do not have to hire attorneys in each state to finalize for their families. In a situation where a family does not have properties in multiple states, generally, probate avoidance is not something that people are overly concerned about unless they’re in a state that the probate process is very burdensome and overwhelming, which currently, it does not happen to be in the Commonwealth of Pennsylvania.

Asset protection is one reason that people will often do trusts in the Commonwealth of Pennsylvania, to avoid potential creditor issues and long-term care costs. These are a very specific animal of trusts and the rules are very unique to these trusts alone since they are not being set up for tax purposes. It is our recommendation that you speak to a professional well-versed in these types of trusts before completing one. They are very unique and there are very simple rules; however, it is very easy to make mistakes in this area. An elder law attorney well versed in these types of trusts will be able to provide advice as to whether this type of trust makes sense for you. There is no one size fits all answer to the question of “do I need a trust?”. It is important to get very clear on your personal goals and what your goals are for your family. Once you have a very clear picture of that, then a professional will be able to advise you, based upon your current situation, as to whether it makes sense. We would certainly be honored to assist you through this process, and we offer weekly workshops which will give you insight into the thought process in regards to whether trust is right for you. We look forward to seeing you in the future.

If you are looking for advice in regards to estate planning, please call our office at 717-845-5390 or click the link here and we will contact you.

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Caregiver Agreements and Considerations.

Caregiver agreements are often used in the Medicaid context so that a family member can be paid for their services to a loved one and the payment would not be considered a gift.

In the Medicaid context, payments to family members are considered to be a gift for love and affection, unless there is a clear agreement written prior to services being rendered, preferably signed by the parent receiving the care as well as the child giving the care.

The caregiver agreement will set forth all of the terms of the transaction, including what services will be provided, where will they be provided, how will they be provided, and other typical contract languages.

The significance of this agreement is that the Department of Human Services (DHS) will look at the transaction as an arms-length transaction between third parties and not among family members.

This means that the payments to the child will not be considered a gift, and, therefore payments will be allowed to be counted as a “for value” transfer as part of a legitimate spend-down and not a gift that will trigger a penalty period for Medicaid purposes.

The biggest question that arises in regards to caregiver agreements is what the parent should pay for services. This is often a very difficult question because there are certainly competing interests at stake. For the parent receiving the care, they genuinely would like to pay full market value and as much as they can without there being a penalty created. This will legitimately reduce the value of their estate, but benefit the child who is providing services for their care on a daily basis.

On the other hand, if there are other children who are not providing the care they often feel slighted or that the other sibling is receiving more than their fair share.

This is very difficult because the children who are not providing the care want the amount to be paid to be the least amount possible to potentially raise the amount that will be left for them and their siblings to share.

However, if the parent does not spend down their assets legitimately, the money can be lost to long-term care costs, and there may not be anything left for anybody.

This inheritance rub is one of the most difficult things involved with a family caregiver because of the potential conflict that it may create among the family members.

At the end of the day, fair market value is generally set in, in this context, by what other professionals and people are charging for similar services. As long as you can stay within the realm of what others are charging for similar services, the Department of Human Services will not raise a red flag. However, that does not mean that other children or other family members may not question the motives of their family member providing the services and the amount of the payment.

We believe it is important to have all parties abreast of the information and informed so that we can potentially avoid unwanted conflict in the future. We always advise the advice of a professional to assist with these potential implications, and ensuring that the agreements are written properly to comply with DHS and Medicaid standards.

If you are looking for advice in regards to estate planning, please call our office at 717-845-5390 or click the link here and we will contact you.

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Now is a Good Time to Review Your Estate Plan.

It has certainly been a strange year and it feels as though we are finally heading out of it and things are “getting back to normal”. It makes me very happy to hear everybody talking about all of their upcoming plans for travel and trips to visit family because they missed out on a lot of planned events this past year.

Let me tell you what has really hit home for me, is how painful lack of planning can be and how it can affect your family in many ways. There are far too many lessons that we have learned from the past year, but one, in particular, is how a lack of planning can devastate a family.

Before you head out on all of your great adventures and trips, please take a moment for yourself and put your own oxygen mask on. Please pull out your estate planning and take a quick look at it. Make sure that the documents read the way that you want them to read and that you understand them.

Furthermore, make sure that all of your beneficiary designations on your life insurance and retirement accounts match what you intend for them to do and do not incorrectly believe that your Will controls how those assets are distributed.

As we have stated in many other blogs and articles, the beneficiary designations on these items are the most important thing and will trump what you have in your Will. Just confirm that your plan is the way that you intend it to be and that there are no unintended consequences.

If you have not had it reviewed by a professional in the last three or four years, take the time now to bring it to someone to review to ensure that everything is the way that it needs to be.

We also encourage you to take the time, once your documents are review and updated as necessary, to talk to your family about your planning when you are on your adventures and at family gatherings to make sure that everybody knows what your wishes are and what your planning is for the future.

These simple steps will save heartache and avoid hurt feelings. The time is now to review prior to heading out. Enjoy your travels and please be safe.

If you are looking for advice in regards to estate planning, please call our office at 717-845-5390 or click the link here and we will contact you.

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When are My Powers of Attorney Active?

Powers of attorney are often drafted differently by different professionals. In our office, we draft our powers of attorney to be effective immediately so that the principal is authorizing the power to be used by their agent now. However, we do not have the agent sign the acknowledgment pages, acknowledging that they are going to act in the best interest of the principal and not steal from the principal and not comingle assets of the principal, and only have them do that at the time when they need to act.

At Bellomo & Associates, we have a document signed by the principal, telling our firm only to give out the originals and to only have the agent sign the acknowledgment when and if the agent actually needs to use them, which would only occur if the principal instructs our firm to give the documents to the agent, or the principal is incapacitated. Yes, we do potentially take on liability because it is up to us to ensure that the agent has not received the documents before they are supposed to, but this is the mechanism that protects that the principle that the agent will not have the documents prior to when they actually need them.

Over 20 years of practice I have found that agents always want to do the right thing for the principal and always want to be there for the person that they are acting for. In the cases that I have found that an agent has taken advantage of their power, it almost is always a situation of the agent becoming desperate for one reason or another, and I have always said “desperate people do desperate things”. It is mainly for this reason that we keep the originals of the documents protected in our office so that the agents do not have them to be subjected to the whims of a desperate situation.

In the event that the agents need or want to use the documents, they will have to sign the acknowledgment pagers prior to using the document. We often receive calls from agents wanting to know why they did not sign the acknowledgements yet, and our answer is because you do not need to act on behalf of the principal yet because he or she is still able and willing to do it themselves.

While there is certainly no perfect answer to the best way to handle this situation, we believe that our solution provides the most effective way to get the document in place, but in such a way that it’s still protected as much as possible until it needs to be used.

It is important that you receive advice from a professional about the best way for you and your family to execute into a power of attorney and whether or not the agent should sign the acknowledgments now or only when and if they need to use them.

If you are looking for advice in regards to powers of attorney, please call our office at 717-845-5390 or click the link here and we will contact you.

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What is the difference between a living will and a healthcare power of attorney?

This is the question that I receive at least once a week in my estate planning and elder law practice.  Taken together, a Living Will and a Healthcare Power of Attorney, are an Advanced Healthcare Directive.  Taken individually a Healthcare Power of Attorney allows an individual to make healthcare decisions on another person’s behalf.  A Living Will is a document that only kicks in when a person is “end-stage medical” which means that two qualified physicians have put in writing that the individual has no realistic hope of recovery.  That they will always remain permanently unconscious, vegetative, comatose, and/or terminally ill.  If the document has both of these items in them together, then it is considered an Advanced Healthcare Directive.  

I am always urging people to ensure that they have these documents in place.  My main reason for feeling that way is that I believe that it is imperative to take the burden off a loved one, to spare them from having to “pull the plug” on their loved one.  My experience at my law practice is that when a person’s wishes are in writing regarding what they want or do not want should something to happen, that others are much more comfortable in allowing that decision to stand if they don’t personally have to make it. 

 I remember several years ago a spouse who recently lost her husband came into my office sobbing because her husband did not have an Advanced Healthcare Directive and she did not know exactly what he wanted.  I reminded her that he repeated numerous times in my office in front of her that he did not want to live that way, and that if there is no hope there is no reason to live.  However, all that she could know or remember is that she pulled the plug.  She conveniently did not remember all of those conversations because, in her mind, she told the doctor to pull the plug, and within seven minutes her husband was no longer with her.  There was absolutely no consoling or helping her feel better about her choice.  And, although I am 100% confident she did exactly what her husband wanted because she was the one who had to make the decision she always wonders and always regretted it.  Putting your wishes in writing will allow your family members to be 100% certain that they were your wishes and that they are merely following through on what you wanted, not what they think you want, or making them play “God”.  It is imperative that everyone over the age of 18 have a Healthcare Power of Attorney as well as a Living Will.  

If we can be of any assistance or answer any questions while you make decisions about yourself and your family, please give us a call at 717-845-5390 or click the link here and we will contact you.

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