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Matt Leonard

A Delicate Balance

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Developing your estate plan is a delicate balance between asset access and protection. Work with an attorney who can explain to you what your options are and helps you design that reflects your goals.

Probate & Estate Administration During COVID-19

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Probate Challenges and Estate Administration Roadblocks During COVID-19 Corona virus Pandemic

Many of our clients are in the midst of settling the estate of a deceased loved one or have just had a loved one pass away and are wondering what comes next. An event such as this has both personal and legal consequences. Below are observations on issues that may immediately present themselves.

Immediate steps may be limited by circumstance. If someone has just died and the cause of death is unknown, public health officials may limit the immediate steps one would usually take until the cause of death is determined and no known COVID-19 risk exists. Depending on circumstances, there may be some delay in physically getting access to the premises, securing them and searching for a will and other documents if they are not in possession of the family or the decedent’s attorney. It is always wiser to have one’s original estate planning documents safely secured off the premises and make sure a trusted individual has access to the storage place.

Once access is permitted, secure the premises if they become unoccupied. Subject to the necessary steps to ensure everyone’s safety (which may include disinfecting) the nominated personal representative may take steps, such as changing locks, necessary to secure the physical contents and financial documents which may remain in the home. These steps can be taken before one’s official appointment. If additional or condominium fees must be paid to allow enough time for an orderly inspection, appraisal, or the like, this can be treated as an expense of the estate.

The legal process of estate administration can begin and continue. While the probate courts of the states in which we conduct estate administrations have limited or closed off physical access to the public, emergency hearings (conducted telephonically) continue and many routine documents can be e-filed. Routine non-contested wills can still be allowed; while reduced staffing at courts may stretch the time frames somewhat, these processes, at least for the present, continue as before. Where that time frame may cause harm to a beneficiary or in some cases, the assets, if the court deems such circumstances an emergency, a hearing to rush the appointment of a temporary fiduciary, called a “executor” or “special personal representative,” can be requested.

Most financial activities can be conducted. With overnight shipping, and technologies such as scanning, secure e-mail, electronic funds transfers, and electronic document signatures, most financial transactions can be conducted virtually once the identities of the parties are established in a fashion compliant with the financial institution’s practices. Thus assets can be transferred to estate or trust accounts, sold and reinvested if desired in order to properly pay estate expenses and distribute funds to beneficiaries. Notarizations still require physical presence although there is a move afoot to accept signatures performed over a videoconference.

Once appointed, electronic communications are vital. As a fiduciary, personal representatives and trustees must take special care to maintain transparency and good chains of communication with each other and the beneficiaries. In a typical administration, one or more introductory or status meetings may occur between co-fiduciaries and the attorney, some with beneficiaries present. Since these will not occur during this unprecedented time, most communication should be in writing. Email has become the standard, often with multiple co-recipients.

Need to speak to an attorney about issues your confronted with during the Pandemic, call our office 401-274-0300 for a no cost phone consultation.

Estate Planning and the Coronavirus Pandemic

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Estate Planning Amidst the Coronavirus Pandemic

The Coronavirus (COVID-19) Pandemic has impacted every corner of the world at this point. As medical experts, financial advisors, and our colleagues that specialize in healthcare law, employment law, and other related areas are busy advising clients on the best course of action for the weeks and months ahead, we – as estate planners – also want to remind our clients and friends of some important considerations during these uncertain times.

At this point, we would simply promote the following actions to ensure that your estate planning affairs are in order:

(1) Review your existing documents. Make sure that you have copies (either paper or electronic) of your existing estate planning documents, and review them to confirm that they still reflect your wishes. If you cannot locate your documents, consider calling or emailing your estate planning attorney to obtain copies.

(2) Pinpoint any items that require attention sooner rather than later. As you review, take note of any major changes that may have occurred in your family since you last updated your estate plan. These might include child births, deaths, marriages, divorces, etc. And also consider whether the individuals that you previously appointed to serve as your agents are still appropriate.

(3) Follow up with your loved ones and advisors.

  • Make sure that your loved ones know to contact your estate planning attorney in the event anything should happen to you. This includes your named executor (i.e. personal representative under your will, or trustee of your trust), guardian for your minor children, attorney-in-fact under your financial durable power of attorney, and patient advocate under your health care power of attorney.
  • Consider reaching out to your financial advisor, insurance advisor, etc. to ensure that your beneficiary designations are up to date and discuss any new planning opportunities relative to your current financial status.
  • If you require any medical attention in the near future, confirm that your medical provider has a copy of your patient advocate designation and is informed as to who you wish to have access to your confidential health information.

NOTE – If you do not already have an estate plan, now is as good of a time as any to consider the opportunity before you. Having a will/trust, a durable general power of attorney, and a healthcare power of attorney can certainly contribute to a healthy state of mind.

When Should I Update My Estate Plan?

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Estate Planning is time well spent

Preparing an estate plan can be a lot of work, both for the planner but especially for the client. And when that process is over, and the plan has been properly put in place through effective trust funding and asset titling, it is common for the client to not think about the plan again for years at a time.

Generally speaking, we recommend that clients review their planning every three to five years. But, there are very specific family and financial events that may occur during that time that make updating the estate plan crucial. Marriage or divorce, the death of a spouse, the birth (or death) of a child or grandchild, the marriage (or divorce) of a child, significant increases (or decreases) in personal wealth, receiving a substantial inheritance or gift, the sale (or acquisition) of significant business assets, moving to another state, and changes in clients’ relationships with their personal representatives, trustees, or other appointees, are just a few of the most common events that should motivate clients to review their estate planning documents.

Additionally, changes in the law, both at the state level and at the federal level (particularly with regard to the tax code), also should spur a review of the estate plan. We as planners do our best to notify existing and former clients on these types of changes, but it is not feasible to contact everyone that might be affected. For example, the significant changes to the estate tax exemption in the last decade, especially with the passage of the Tax Cuts and Jobs Act in late 2017, have made simplifying estate tax-driven plans much more common.

Overall, the best time to review is when you are worried, concerned or otherwise are wondering if things need to be changed. Most attorneys will not charge for the periodic check in unless and until changes need to be made to your plan. Thus, err on the side of caution and pick up the phone and call. Its better than regretting missed opportunities.

Ready to discuss you plan? Contact us today for a no-cost or obligation consultation.

Protecting Asset for the Healthy Spouse

By Estate Planning

How Can I Pre-Plan Now to Protect Assets For the Healthy Spouse?

Under the Medicaid rules, if either spouse moves to a nursing home, he or she will become eligible for Medicaid to pay for his or her care when the savings have been spent down to $4,000 for the institutionalized spouse and, after no more than $126,420 is deemed available for the community spouse (in 2019). If you took no other planning steps, the balance of your savings would have to be spent down to these levels. However, three approaches can permit you to keep most or all of your savings: (1) purchase an immediate annuity, (2) create and fund an irrevocable income only trust; or (3) spend the excess assets on permissible goods that preserve their value.

Purchase an Annuity

The spouse at home has the option of transforming his or her excess assets into an income stream by purchasing an annuity. The terms of the annuity must be carefully observed, which will be important with respect to the annuity’s passing muster with the Medicaid regulations.

Create and Fund and Income Only Trust

You can make transfers to your children or into trust for their benefit, reserving the ability to live in any real estate transferred and to receive income from the assets in the trust. Doing so would cause up to five years of ineligibility for Medicaid. So you would need to be comfortable with the amount of funds you would keep for yourselves. This option is very popular with many clients as it offers a great deal of protection with a manageable amount of loss of control and access to transferred assets. Understanding the rules of the trust are important before using this trust.

Spend Down Excess Resources

You may also pay off any debts you may have or pay for goods and services you may need or desire. This includes repairs to your house, clothing, personal items, prepaying your funeral, and anything else you may like. Medicaid penalizes transfers or gifts, but not spending if the spending is for the benefit of the Medicaid applicant or his or her spouse.

In addition to taking one or more of the steps described above, if one of you moves to a nursing home, you should transfer all of your assets into the other’s name. He or she should also have a will that disinherits the nursing home spouse. Otherwise, if the healthy spouse passes away first, all of his or her assets will go to the nursing home spouse and have to be spent down to $4,000.

As you can see, there are a number of options available. You cannot choose the best one ahead of time because the proper course of action depends on your situation when one of you moves to a nursing home, which hopefully will be many years away, if it happens at all. At that time, it is critical to meet with an attorney to discuss these options and decide on a course of action that best fits for you while maintaining Medicaid eligibility.

Medicare Update 2019

By Estate Planning

Medicare 2019 – Everything You Need To Know

Medicare is an important piece of the American insurance landscape, not only for people age 65 and older, but for all Americans. That said, this benefit is not easy to navigate. Eligible individuals must be thoughtful about the coverage they need, the timing of enrollment, and coordination with other healthcare benefits, if they want to make the most of the Medicare program.

Attached is a report recently published by Northern Trust that recaps the Medicare program and is a good resource for people wanting to learn more.

It addresses the following questions:

  1. What does Medicare cover? Do I still need Private Insurance?
  2. How much does it cost?
  3. I am thinking about early retirement but I am concerned about health insurance coverage and eligibility. What are my options?
  4. I am turning 65 next year and still working, should I transition from private insurance to Medicare and if so, how do I do that?

CLICK HERE TO READ THE FULL REPORT wpi-medicare 2019

Medicare is a critical component of every persons health insurance portfolio but it does not cover long-term skilled nursing. The Medicaid program covers eligible individuals cost for long term skilled nursing, however, there asset and income limits before someone becomes eligible. Generally, a person must have countable assets below $4,000 and monthly income below $10,000 to be eligible. A person who is on Medicare and then transitions over to Medicaid will be required to maintain their Medicare coverage. Medicaid being a welfare program, is an insurer of last resort, whereas Medicare is a primary insurance for people.

Still have questions about planning for your future healthcare needs including long term care planning? Contact us for a no cost consultation.

Matt Leonard

How Trusts Affect Medicaid Eligibility and Estate Recovery

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Web-Seminar Presentation Materials – Medicaid Eligibility

On March 20, 2019 I participated in a national webinar entitled How Trusts Affect Medicaid Eligibility and Estate Recovery.  The goal was to review the basic tenants of estate planning and specifically around Medicaid qualification. We reviewed the rules to Medicaid eligibility, discussed the difference between countable and non-countable assets, discussed income and what spousal protections are in place. It was a top-line comprehensive review.

The materials were focused around the difference between revocable trusts and irrevocable trusts and reviewed the tenants that revocable trusts do not work for Medicaid eligibility and qualification while properly drafted Irrevocable Trust could accomplish the goal of protection and qualification for Medicaid benefits.

Attached below is a link to a Power Point Presentation of the slides shared with the attendees of the webinar:

How Trusts Affect Medicaid Eligibility and Estate Recovery Slides

If you wish to review and discuss the rules of Medicaid eligibility, how trusts can be used in your estate plan with regard to your specific facts, please contact us for a no-cost no-obligation consultation.

How Can I reduce Capital Gains Taxes?

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Consider Transferring Highly Appreciated Assets to a Parent

If property is held by someone at their death, the “basis” in the property used by the seller to determine taxable gain on its sale is re-set to the fair market value at the date of death.

Income and capital gains tax rates have increased over the last 10 years, and during that time the exemption to avoid estate tax has increased dramatically. This combination (which did not generally exist before now) creates a tremendous opportunity to reduce income tax on property sales. There are many ways to do this. One simple technique is to transfer a highly appreciated asset to a parent. When Mom or Dad passes away, the basis in the asset is increased to its fair market value at the date of death (even though there is no estate tax), which can eliminate income tax on the gain on a sale thereafter, or permit much greater depreciation deductions when re-acquired by the owner.

So for example, if basis is stepped up by $1,000,000, then the tax on sale of the asset will be reduced, which tax savings could easily be $300,000. Note this is an after-tax savings!

There are related issues that should be addressed to protect the asset, account for timing and further enhance the tax benefits.

Medicaid Eligibility Update

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Rhode Island has updated its rules to become Medicaid eligible.

If you are a Rhode Island resident and you are seeking Medicaid benefits, you should be aware of some recent changes approved by the Rhode Island Department of Human Services as to your eligibility under the program. Final rules are expected to be published and release shortly but here is a recap of the expected changes:

  1. Income cap of $9,581 meaning that if the applicant has more than $9,581 in income, then they can never become eligible for Medicaid, nor can they start the penalty period.  If they have income under $9,581 but greater than $6,700 and they want to start a penalty period, they can do so but cannot get community Medicaid benefits, like Rx copays and doctor bills.   If their income is under $6,700, then nothing changes.    This went into effect in September and is effective for applications for eligibility delivered after 10/1/18.   50-00-2.4

    Changes Are Coming

  2. Long term care insurance is not considered countable income for purposes of the above income cap.   However, once on Medicaid, it would need to be spent as part of the patient share.    50-00-6.5.2(B)
  3. Burial Funds & Irrevocable Funeral Contracts have new limits which are helpful and could affect clients.  The new cap on Irrevocable funeral contracts is $15,000 and anything over that would be considered a countable asset.   40-00-3.5.5 A(1)(f)
  4. Life insurance is now exempt up to $4,000 of cash surrender value, with anything over being countable.  40-00-3.5.5 A(1)(h)
  5. Retirement Funds now have a new definition, but as long as they are income producing and the client gets at least the RMD, then they should still be fine. 40-00-3.5.5 A(2)(g)
  6. Penalty Divisor is $9,581 since mid September.

Like any social program, the figures and rules for eligibility are constantly revisited and updated based on changes in federal law, budgets, and program changes and advances. Staying current on the latest rules is the challenge.

If you or a loved one is facing serous medical issues requiring skilled nursing care, the Medicaid program will help pay for those costs for applicants who have assets and income within program limits. Contact us to discuss your estate plan and if your estate plan should be revised so as to become eligible for these valuable benefits.