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Considerations For Trust Type

Trusts are a major tool in estate planning.  Trusts can be used for disability planning, probate avoidance, asset protection, and/or tax planning.  Given the high thresholds for federal estate tax planning few individuals are concerned about tax planning.  In this article we want to focus primarily on grantor vs. non-grantor trusts.

When we are educating on trusts and the use of trusts in estate planning, people often get a concept confused. There is a difference between a grantor trust and a non-grantor trust. Simply stated, the assets in a grantor trust remain in the grantor’s Social Security number and are reported on the grantor’s personal income tax return.  For a non-grantor trust a separate tax ID number will be obtained to hold the assets and you will file separate trust tax returns, this return is separate and apart from your personal income tax return. 

We will typically use grantor trusts for asset protection trusts and revocable living trusts.  

However, we often use a non-grantor trusts for VA purposes as well as for estates that have a federal estate tax concern. Currently, a person has a federal estate tax issue if their estate is greater than $12.06 million and for a married couple $24.12 million. It is very rare in our practice to use non-grantor trusts, which require separate tax ID numbers and pay at higher trust tax rates, because not a lot of veterans are doing planning where they have to or want to give up complete control of their assets, and not a lot of estates are big enough to need federal estate tax planning. 

In those situations where we use grantor trusts, we intentionally put language in the trust so that is included in the person’s estate, as well as subject to income tax. We include this language because we want to get a step-up in basis at the death of the decedent, and we also want the parent or client to pay the income taxes, because generally retired clients have a lower income tax burden than their children who are still working. 

There are a lot of other factors that go into what type of trust should be used and under what circumstances, but this provides a basic understanding of the difference between grantor and non-grantor trusts. If you would like to learn more about these and other trust concepts, I invite you to come to one of our free in-house workshops to learn more. We would be more than happy to assist. Just call our office or go to our website to enroll in a workshop at a date and time which is convenient for you.

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Comparing Life Care Planning to Traditional Elder Law

This year, we are getting the word out there about the Life Care Planning we offer that involves a licensed social worker to act as the Client Care Advocate. A question that we keep getting is what is “What is the difference between Life Care Planning and Elder Law and why did you make the change?” The way that I explain it is that a traditional elder law firm prepares documents for an individual and then either waits until the client passes or until they need to go to a nursing home and will qualify them for public benefits.

A life care planning firm is a more holistic approach to providing care. Our licensed social worker, Meg Motter, works with families to assist in figuring out ways to keep their loved ones home and how to receive care in a home or in a less restrictive environment than a nursing home. A licensed social worker will be able to provide different cognitive assessments and evaluate safety and necessity of levels of care, unlike an attorney. The elder care coordinator allows the firm to provide a more comprehensive approach, separate from just estate planning documents or qualification for Medicaid. The care coordinator allows the firm to provide information and advice that was not otherwise available to the firm prior to becoming a life care planning model firm.

We are ecstatic to have Meg Motter onboard as our elder care coordinator and we look forward to assisting you and your family in the future.

Please feel free to give us a call if you have any questions or comments at 717-845-5390.

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How to Help Your Loved One Avoid Isolation

Isolation is something that many seniors experience on a regular basis. However, with the COVID pandemic, that isolated feeling is more common than ever. Today, we want to encourage the individuals who know someone living alone to take some small steps to help your loved one socialize.

We always encourage our clients to incorporate video conferencing or video chat to allow the family member to see their loved ones on a regular basis. This could be on a scheduled date and time each week where you have a conversation and catch up, or maybe schedule meals together where you leave the video on while everybody eats. You have to eat anyway and giving the opportunity for your loved one to spend their mealtime talking with their family and seeing familiar faces is a small gesture that could go a long way! Not only will it help them, but it will also give you the chance to assess whether your loved one is having any hearing or sight issues that should be addressed.

Encourage your loved one to join clubs. Many of them are now virtual to allow as many people possible to partake. Having them be a part of these groups will give them interactions outside of your conversations and have stories to bring you when you visit or call.

Although these are very minor suggestions, they can go a long way in helping your loved one not feel so isolated. Please feel free to give us a call if you have any questions or comments at 717-845-5390.

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Keep Our Loved Ones at Home

I have never had a client tell me that they want to go to a nursing home. Almost daily in my practice I hear that my clients want to remain in their home as long as possible. Unfortunately, some clients do not want to bring outside caregivers into the home for a myriad of reasons. The old days of the children taking care of the parents needs to make a comeback. Caring for parents to keep them home is extremely rewarding for both the child and the parent.

Being a family caregiver is one of the most rewarding, amazing experiences that children can provide to their loved ones. I have heard time and time again from children who are able to provide caregiving how rewarding it is, particularly in cases when it keeps their loved ones out of a nursing home.

For a number of reasons, children who provide caregiving should enter into a written caregiver agreement with their parents.

First, it is the best way to ensure that there are not mis-expectations and hurt feelings later.

Second, if done properly, it will actually provide, for both VA purposes Medicaid purposes, a legitimate spend-down of resources which would otherwise go to the government, and the monies paid will not be considered a gift. Therefore, no penalty will be assessed for the money paid to the child.

The one thing to remember is for the child caregiver monies that are received will be income taxable to the child; it is very important that the child claim those monies as income on their tax return so that it clearly shows that it was not intended to be a gift.

However, family caregiving is certainly not without its downsides to caregivers. In most cases the caregivers could make more money if they stayed in the workforce and did not leave to provide care. In a situation where they are trying to continue to work and provide care, the increased stress added to the caregivers can be detrimental their physical and/or emotional health.

There are often cases where family dynamics become an issue, either because one child is doing the caregiving and that child feels like they’re being taken advantage of, or others feel as though that child is taking advantage of Mom and Dad because they are getting paid.
Either way, a lot of times it provides an additional stress to family members that they weren’t expecting. There are times where a caregiver will be out-of-pocket as well for certain costs, and getting reimbursed may surely be an allowable thing under the law, but having other children understand why money is being distributed to one child versus them is often not an easy conversation.

There is no doubt that for those people who are able to provide care to their loved ones, care in the home it is a wonderful gift. However, I highly recommend that everything be put in writing for all of the reasons stated above, but mostly so that there are no missed expectations among the people receiving the care, the people providing the care, and the other family members.

To those who have been able to keep their family members home, thank you for everything, all that you do is appreciated. To those who are considering it, give it a try. It could be the best decision you have ever made.

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The Bellomo Name

Growing up Italian is something I am very proud of. I love my family with all of my heart. The last name Bellomo means the world to me. I can see my Grandpa Bellomo in my head like it was yesterday saying our last name “Bellomo” like it was worth a million dollars. That sense of pride has certainly continued down through my parents as well. 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.

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