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 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 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.
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.
TODAY IS THE DAY! Over 350 attorneys and paralegals across the country have registered for today’s seminar! Can’t attend? Call for a personal consultation to discuss your Estate Plan.
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:
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.
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.
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:
- 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
- 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)
- 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)
- 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)
- 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)
- 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.
My mother is in a nursing home. Can she still deduct this expense?
Yes. For 2018, in certain instances nursing home expenses are allowable as medical expenses.
- If you or someone who was your spouse or your dependent, either when the service was provided or when you paid them, is in a nursing home primarily for medical care, then the entire cost including meals and lodging is deductible as a medical expense.
- If the individual is in the home mainly for personal reasons, then only the cost of the actual medical care is deductible as a medical expense, not the cost of the meals and lodging.
To determine if your mother qualifies as your dependent for this purpose, refer to Whose Medical Expenses Can You Include and Nursing Home in Publication 502, Medical and Dental Expenses.
- Deduct medical expenses on Schedule A (Form 1040), Itemized Deductions.
- The total of all allowable medical expenses must be reduced by 7.5% of your adjusted gross income.
This write-off is only available to filers who itemize. People who qualify for it can deduct insurance premiums paid with after-tax dollars, plus many costs not always covered by health insurance—such as for long-term care, prostheses, a wig after chemotherapy and more.