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asset protection trusts york pa

Why Create an Asset Protection Trust in Pennsylvania?


I was recently at an elder law event in Pennsylvania with some of the most intelligent professionals in my area.  I love going to these events to have conversations with others who are in practices very similar to mine.

I was having a conversation at a bar with a colleague whom I respect tremendously, and whom I often emulate and would like to be like in the future.  We had been talking for a long time and the conversations were varying from the weather to sports to legal-technical elder law questions.

Towards the end of the conversation, my colleague asked a question that at first made me think he was joking, but I quickly realized he was not.  His question to me was: Why would anybody do a trust in Pennsylvania in light of the fact that it is so easy to protect assets for a spouse when a loved one enters a nursing home?

After realizing that it was a real question to which he wanted an answer, I was able to not only to give him the answer, but ultimately have him concede that it absolutely made sense, and he would start implementing it in the future.  

Under current Pennsylvania law, there is a way to protect assets for a community spouse, who is a spouse living in the community, and not in the nursing home. Currently, we are able to protect 100% of assets, whether they were in the name of the husband, the wife, or jointly owned.

I realized that the question that he was asking was coming directly from the fact that we could just wait until it happens, and when it happens protect 100% of the assets for the remaining spouse.  I agree with his statement and also with this philosophy. However, the problem is that it assumes that the community spouse for whom we protected all of the assets won’t need long-term care in the future, and also that the spouse does not care about protecting assets for his or her family.

In the past 15 years, it has become very clear to me that clients work very hard for the assets that they accumulate, and they want to be able to protect that legacy for their future.  I could tell numerous stories of clients that we helped to be able to pass on a legacy to their family members; I related several of those stories to my colleague.

Unfortunately, if a person waits and protects 100% of the assets for the individual who is the community spouse, and that community spouse later also needs long-term care, the best that we could do under current law is to protect 50% of the assets at that time.  

However, if we put their assets into the trust while they are younger, we protect 100% of all their assets, so long as they are funded in the trust for more than five years. After hearing several success stories and horrible outcomes, my colleague realized that while it is advantageous to protect 100% of the assets for the community spouse, to let it later all dissipate and be gone from the family is probably not the objective that the husband and wife are looking for.  

I certainly agree that the protection of 100% of the assets in crisis is a great result, but only if the remaining spouse doesn’t need care in the future. By doing a trust early on we are able to guarantee 100% protection for the entire family, and not a 100% now, but maybe not so much later.

At the end of our conversation, we ultimately agreed that the clients are the ones who decide what is best for themselves. Our job is to educate and to provide different ways to do what they are trying to accomplish and allow the family to decide what makes the most sense.  

My colleague was totally on board and has provided similar success stories since that conversation, and now realizes that the client is the one who should ultimately make the decision, not the attorney representing the client.

My thanks to my friend for an incredible conversation, and for helping me grow in all aspects of my life.

Jeffrey Bellomo

If you want to get started on your estate planning or asset protection planning, join us for one of our upcoming workshops.  Just click here to RSVP.

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pennsylvania asset protection planners

Why would a person ever liquidate retirement funds and put them in a trust?

This is a question that I receive quite frequently from financial professionals with whom we work very closely.  The typical answer is, they would not.  However, there are times when this makes sense, as seen in a recent case where the financial advisor, the accountant and I all agreed that it made sense to do so in light of the individual’s circumstances.

A client was referred to us who had worked with other attorneys and was not pleased with the results, and a friend of theirs mentioned our workshops.  I began by asking the family the simple question of what brought them in to us today and what were they hoping to accomplish?  As I listened, it became apparent that the only reason that the husband and wife were in my office was to make sure that their assets were protected for their children.

The husband explained that both his and his wife’s parents ended their lives in nursing homes and all totaled, the bills were about $750,000.  In both family situations, the parents exhausted their assets and ended up on Medicaid, and there were no assets left to pass on to the children.  The husband was adamant and said repeatedly that this will not happen in my situation and I want a solution.  As we dove into their situation, it became apparent to me that there was approximately $500,000 of assets that were funded in retirement accounts such as 401(k)s, IRAs and 403(b)s. 

At the conclusion of the meeting, I explained to the client that generally we never liquidate retirement accounts during a person’s lifetime, because not only will it trigger significant tax consequences but could also have unintended consequences such as Medicare premiums and other such things.  The client would not accept that as an answer and did not believe that leaving $500,000 exposed was the right decision.  After three meetings with the advisor and the accountant and me, we were able to come up with a plan that was satisfactory to everyone, and with the clients in their early 60s, time was definitely on our side. 

In this situation, we ended up liquidating his retirement account over five years at $100,000 a year, and took the remainder of the assets after taxes and funded them in an Asset Protection Trust.  The downside of this plan was that in year five when he liquidated the last $100,000, in order to have it fully protected, they had to stay out of a nursing home for an additional five years, which would be a total of 10 years.  In light of their age and circumstances, it was certainly a risk that we were willing to take.  Ultimately, this compromise allowed the advisor and the accountant to also be very comfortable that it would accomplish their objective, but at the same time, not exacerbate any unintended consequences such as taxes and surcharges and premiums, etc. 

Although the client wanted the assets to be protected immediately, he understood that at best it would have to be done over five years, as liquidating 100% of those assets in one year would trigger much higher income tax rates, and was definitely not an avenue that any of us really could support.  I was very pleased that we were able to accomplish the client’s objective in this case, while at the same time making the financial professional and accountant happy. 

The father then called a family meeting and we had a phone conversation with the entire family to explain to all of the kids why we did what we did and what the rationale was behind the plan.  Everybody was on board and was excited that we were able to come to a compromise that pleased everybody.

Estate planning and elder law is absolutely not a one-size-fits-all approach.  Every case is very different, and, done properly, works best with a team approach.  We relish working with financial professionals and accountants to accomplish the clients’ goals in a way that is not only acceptable to them, but also to their families. 

Thank you to this family and the many more whom we have helped over the years to accomplish their estate planning goals.  

If you want to get the process started on your estate planning or asset protection join us for an upcoming workshop.  Just click here to RSVP and grab your seat today.

Jeffrey Bellomo

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Your Family Name

What is the most valuable thing you own? Is it your house, a car, or maybe that boat you saved for?

Some things are just more important than any of those material items. My parents gave me this poem when I was just a kid. I cherished that plaque and still keep it in a safe place these many years later. I hope you’ll agree that this gift is among your most valuable.

 

Your Family Name – by Nelle A. Williams

You got it from your father
It was all he had to give
So it’s yours to use and cherish
For as long as you may live

If you lost the watch he gave you
It can always be replaced
But a black mark on your name
Can never be erased

It was clean the day you took it
And a worthy name to bear
When he got it from his father
There was no dishonor there

So make sure you guard it wisely
After all is said and done
You’ll be glad the name is spotless
When you give it to your son

I cherish the plaque with this poem. Thank you Mom and Dad for sharing this with me. I am proud of the Bellomo name and what it means.

Jeffrey Bellomo

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Wall Street

Every evening, many of us settle into an easy chair to watch the news. The anchor usually ends her or his report by telling us how Wall Street did today. Did you ever wonder what and where Wall Street is, and what is the difference between the Dow Jones Industrial Average, the Standard and Poor 500 Index and the NASDAQ Composite?

Wall Street is a street in lower Manhattan in New York City which houses many financial institutions including, the New York Stock Exchange (NYSE), investment banks, stockbrokers and traders. It was named Wall Street in the 17th century after the Dutch built an actual 12 foot high wall to protect the city from pirates and other invaders. The area around the wall became known as Wall Street. The Street runs the width of Manhattan from the East River to the Hudson River. The wall was dismantled in 1699, but the name Wall Street stuck. It is now recognized as the epicenter of the city’s Financial District.   

The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange. It was named after its originators Charles Dow and Edward Jones in 1896. Companies like General Electric, the Walt Disney Company, Exxon Mobile, and Microsoft are now in the Dow. When people say the stock market is up today, they are probably talking about the Dow Jones Industrial Average.    

The Standard and Poor (S&P) 500 Index is a larger index which measures the value of 500 companies, rather than the 30 in the Dow Jones. Companies that trade on the New York Stock Exchange or the NASDAQ are in the S&P 500. Institutional investors seem to prefer using the S&P 500 Index to make investment decisions because of its greater depth and breadth. Companies like 3M, Abbott Laboratories, Aetna Inc., and Apple Inc are represented in the S&P 500.    

The NASDAQ Composite, launched in 1971, is an average of 100 stocks listed on the American Stock Exchange, also located in New York City. The American Stock Exchange is the second largest stock exchange in the world behind the New York Stock Exchange. Companies in the American Stock Exchange and represented in the NASDAQ Composite are often information and technology-oriented companies. Companies like Acadia Pharmaceuticals, Flowers.com, Erie Indemnity Company, and First Trust Nasdaq Retail are companies in the NASDAQ Composite. 

The purpose of these averages, indexes and composites is to give investors a gauge to measure growth of the market. So, by knowing the value of an average today, you can tell if the average value went up or down from yesterday or a year ago. Remember the old adage, buy low and sell high? That’s how you can tell.    

So, the next time your news anchor mentions how Wall Street is doing, you can think, “ I get it!”

Jeffrey Bellomo, Esq.

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Veterans’ Benefits

Thank you to all Veterans for your service. Words cannot adequately express our gratitude to anybody who has served or is serving in our military.

There are a few possible benefits to which veterans are entitled through the U. S. Department of Veterans Affairs (the VA), and the York County Department of Veteran’s Affairs office is an amazing resource. Terry Gengdron and his team are more than willing and able to assist you with all of the benefits available to veterans. They take their jobs very seriously; I am honored to call them my friends, and can’t thank them enough for the service that they do for veterans.

One benefit that we elder law attorneys typically see more than some of the others is the Aid & Attendance benefit, which is available to all veterans who served at least 90 days, one day of which was during active war time, or the surviving spouse of such veteran. The veteran did not have to serve in a combat zone, just have been in the service during the specified periods of war.

There is also an income test, which basically provides that the veteran’s income must be less than the cost they are paying for their care. The final test is an asset test, the basic rule for which is that the assets cannot exceed $80,000 although there are a number of other factors that go into the calculation.  

The amount of a benefit to a veteran is approximately $2200 a month, and the amount to a surviving spouse is about $1100 a month. While these amounts are not huge, they can be very helpful at a time when a veteran needs assistance with in-home care or care at a personal care or assisted living facility or a nursing home. This benefit can help offset some costs of care, and help the veteran breathe a little easier. Veterans are incredible people who have made great sacrifices in defense of our country, and this benefit is just a small way to help repay that service. If you are a veteran and you are starting to get to a point in your life where you are needing assistance, whether it is in the home or in one of those other facilities please contact the VA to learn more.

The full details of these benefits can easily be found on the internet, as well as by contacting the York County Department of Veteran’s Affairs at 28 East Market Street in York, Pennsylvania. We also provide a good bit of information about these benefits at our workshops which we offer weekly at Bellomo and Associates. Our workshop schedule is on our website, or you can call us at 717-845-5390.

If you have questions or concerns regarding your Veterans’ Benefits, consider filling our our simple form here and we’ll be in touch.