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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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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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Having “a talk” with your parents about their long term living situation.

No, we are not talking about the birds and the bees but rather talking about having a conversation with your parents about what their wishes are in regards to their long-term care living situation.  I find in my practice that oftentimes parents will think a lot about where they’re going to live as they age and what type of situation they would prefer to be in.  Unfortunately, many parents do not feel comfortable having the conversation with their children ahead of time for many reasons.  I also find that the opposite is equally true: the kids often wonder what will happen but don’t feel that it’s right to bring it up and don’t want to push mom and dad into having to discuss make decisions about that determination.

I cannot begin to tell you how important it is to discuss these situations early and often.  Both parties are hesitant, but it is better for everybody involved to know what mom and dad think and what their wishes and hopes are for their living situation at the end of the day.  To the extent that mom and dad want to remain home, there are plenty of things that can be done including modifications to the home or purchase of a new home to make that happen.  To the extent that they want to go to an assisted living community and live independently now or to a continuing care retirement community, there are many tours and interviews to take with mom and dad to see where they feel the most comfortable.  The options are plentiful and regardless of what mom and dad are hoping for, it is typically pretty straightforward in finding an option.  

A friend of mine recently told me that she does not want to have the conversation because she is afraid that mom and dad are expecting they will be able to move into her house with her and her family.  My response to her was wouldn’t you rather know that now and have the conversation now with them rather than wait until they need assistance and cause not only them extra stress but you and your family extra stress?  She definitely came around after about a 25-minute conversation explaining that it wasn’t about her and her family but rather about her parents’ wishes.  Just because they wanted to do that doesn’t mean that it would work for her and her family nor does it mean that that is what has to happen, but having the conversation will at least open up the dialogue and allow her to express her concerns and reasons why she doesn’t think that would happen or be able to work and look for another alternative.  Ultimately, she did have the conversation with her family, which is not what they were looking for or expecting, so it was nothing more than a miscommunication.  I urge adult children to have a conversation with their parents about aging and their wishes sooner rather than later. This conversation will avoid lots of heartache and misunderstanding later and allow for plenty of time to plan for the future.

 

If you are interested in learning more about long-term care living, please call our office at 717-845-5390, or click the link here to RSVP to our upcoming workshop to learn more about it.

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