Elevatus Wealth Management

Estate Planning/Asset Protection

An estate plan gives you the opportunity to leave important instructions regarding what will happen to your children, property, and health care if anything were to happen to you. The goal of an estate plan is to designate beneficiaries, ensure that your possessions will pass to them when you pass away, outline how you will get medical care and what decisions will b.e made for you if you can’t make them for yourself and indicate who will care for your minor children.

Elder Law/ Medicaid

Elder care planning is an important part of a senior's long-term care. The intent is to help seniors enjoy a healthy life as they age. Also referred to as geriatric care, it includes topics like long-term life care planning, estate planning, life-sustaining treatment, among other issues. Medicaid planning is about planning for the future to prepare for the costs of nursing home care without spending down all of your assets.

Will/POA/HCP

Creating a will is important for protecting your property and making sure that your intentions are honored. A will is a document in which you clearly express your wishes regarding the disposition of your assets after your death. Wills are essential because they provide an orderly means of ensuring that the terms of your will are carried out precisely.

Business Succession

A succession plan is important because it grants the owner and their employees a guide for conducting business after the current owner leaves the company. By establishing and implementing a carefully designed succession plan, business owners, partners, and minority investors should be able to derive several benefits.

Estate Planning FAQs

At Elevatus, we believe informed clients make the best decisions about their estate plans. That's why we want to break down complex terms and clarify confusing principles so that you make the right choices for your estate, too.

What is estate planning?

Estate planning is a process allowing you to arrange how you want your assets to be managed and distributed upon your death. Sometimes, if you have limited assets, limited beneficiaries, and limited instructions on how to distribute your assets to the beneficiaries, planning is pretty straightforward. On the other hand, the more assets, the more beneficiaries, and the more instructions may require an estate plan that is more complex and varied.

Generally, there are two components of estate planning with one involving the legal aspects of it and the other involving the non-legal aspects of the plan. Your estate planning attorney can help with both. Legally speaking, your lawyer will review your personal and financial situation and create documents that address the latter. Non-legally speaking, your lawyer will develop an investment strategy for retirement purposes.

What goes into an estate plan?

An estate plan will include the documents that accommodate your specific needs. It may involve some or all of the following:

Last will and testament
Living trust
Irrevocable trusts (e.g., life insurance trusts, gift trusts, special needs trust, charitable trust)
Conservatorship
Guardianships
Asset protection from divorce, creditors, others
Health care directives, including medical powers of attorney, living wills, health care proxy, do not resuscitate (DNR) or do not intubate (DNI) orders
Succession plan for business
Charitable planning

What is probate?

Probate is the legal process of transferring the property from a deceased person's estate to their heirs or beneficiaries. It is overseen by the local probate court.

What happens if I die without a will?

Dying without a will means you die intestate. Your assets and belongings will get passed to your heirs according to your state's intestacy laws.

What happens to my will if I move to a new state?

In rare cases, the differences in state laws could make it invalid. More commonly, if you moved to a state that views marital property differently from your former state of residence, the change in laws could result in complications. It is wise to revisit your will with an attorney in your new state after moving.

Do I need a lawyer to write my will?

While you do not need a lawyer to write a will, doing so is a considerable risk. A last will and testament that was not written by a lawyer or that was created using an online form are more likely to be challenged, deemed invalid, or leave significant assets unaccounted for, which can create confusion and unforeseen outcomes.

Can you write a will if you have Alzheimer's or dementia?

People need to have testamentary capacity to make a valid will. This often requires an understanding of the property being devised in the will, who is going to receive it, and the purpose and function of a will. People with Alzheimer's or dementia may struggle with testamentary capacity. The best way to make sure they have a will in place is to hire a lawyer to help.

Do I need a will if I have no children?

If you die without a will, your estate will pass to others through your state's intestacy laws. If you have no children, then property will be disbursed to family members. If there are no heirs according to your state's intestacy laws, then the state may acquire the property. So, even if you do not have children, you still need a will if you do not want the state to make decisions for you about who gets what from your estate.

Keep in mind you do not have to create a will to benefit only family. A will allows you to pass your estate in a way that will serve what matters most to you: this could be preserving the financial wellbeing of your partner, parents, or siblings, but also setting money aside for the care of a pet, or assisting a charitable organization aligned with your values.

Does my will automatically change if I divorce?

No. It is crucial to update your will after getting a divorce so that your most recent wishes are reflected in it.

Does my will automatically change if I have a child?

It depends on the language in the will. If your will specifies an action that will happen to unnamed offspring (for example: “All of my property equally to my children”), the interpretation would be different than if you made a specific bequest to a named child or children. You should always revisit your will after having a child.

What is the difference between a will and a living will?

A will – also called a last will and testament – comes into effect when its creator dies and directs the executor on how to transfer the property in the estate. A living will, on the other hand, comes into effect when its creator is alive but incapacitated – it tells others what the creator's preferences and medical decisions are regarding their healthcare.

What is a trust?

A trust is a pool of assets that is set aside to be managed by a trustee, for the benefit of someone else, called the beneficiary.

What is the purpose of a trust?

A trust sets aside some assets for a trustee to manage for the sake of a beneficiary. The assets set aside in the trust do not go through probate, simplifying and expediting its transfer out of the estate. The trustee must follow the instructions set out by the trust.

Can I have both a will and a trust?

Yes. Many trusts are testamentary trusts, and are created in the decedent's will. Lots of other trusts are made during the person's life to set aside some assets outside of their will.

Are trusts only for rich people with lots of assets?

No, trusts can be created by anyone who wants to set aside money for someone but who does not want to give them the money in a lump sum. They are especially common when the beneficiary is underage or is unable to manage their own affairs.

What happens to jointly owned property when one spouse dies?

When spouses jointly own property and then one spouse passes away, the property is automatically passed to the surviving spouse. An example would be the marital home owned by both spouses.

What is a guardian?

A guardian is a person who is responsible for someone else's well-being. People often appoint a guardian for their underage children in their will or for their adult children with special needs. These legal guardians can make legal decisions on behalf of their charges, much like a parent.

How can I designate a guardian for my children?

Naming a legal guardian for your underage children is a common provision in a will. You also have the ability to appoint a conservator for adult children who may be unable to make certain decisions.

If you do not appoint a legal guardian via a will, the court will appoint one upon your death. For this reason, it is important even if it seems like commonsense to make sure you designate a guardian in your will.

How can we make sure our special needs child is cared for after we die?

A common way to ensure a special needs child continues to receive the care they need is to appoint a guardian for them and to create a trust fund in their name.

How can I make sure my pet is cared for after I die?

A common way to care for pets after their owner passes away is to state in the will who is to care for the animal and then create a testamentary trust for the benefit of the pet.

When do I need a power of attorney?

A power of attorney is essential for people who are unable to make important medical or financial decisions on their own behalf, usually because they are incapacitated or suffering from a medical condition. There are five types of powers of attorney, each with their own purpose:

Durable power of attorney
Medical power of attorney
General power of attorney
Limited (special) power of attorney
Springing power of attorney

Conservatorships

Estate planning is much more than figuring out the distribution of assets to beneficiaries but can be a means to protect yourself and your children when you can no longer do so. One way you can protect yourself and any children is through the creation of a comprehensive estate plan that takes into consideration the role conservatorships could play in your life and the lives of others if you do not plan appropriately. But conservatorships are often misunderstood and because of that, people tend to avoid them.

What Constitutes a Conservatorship?

Conservatorship is a process a court uses to grant someone (the conservator) legal authority to make decisions on behalf of another person (the conservatee or ward––depending on your jurisdiction) regarding finances and personal care or to manage the conservatee's estate. The term, however, is confusing because it is used for multiple purposes and different states substitute it with the term guardian, which is a term more often used when speaking of minor children.

There are two basic types of conservatorships: (1) limited; and (2) general conservatorships.

Limited Conservatorship

A limited conservatorship is created for a person who has a disability like autism, epilepsy, cerebral palsy, or other developmental disability and has had it prior to their 18th birthday. These conservatorships are “limited” because they require less supervision and care than conservatees of a general conservatorship. Conservatees of limited conservatorships require less supervision because they are able to maintain a certain level of care on their own.

In these situations, parents should really consider a will that appoints a guardian for a minor child and a conservator for an adult child (which is sometimes referred to as adult guardianship––depending on your jurisdiction). When you die, and your child is still a minor, you want to make sure the person caring for that person (if the other parent is deceased as well or otherwise unable to care for the child) is someone you both trust. Plus, through an estate plan, you can do other things, like setting up a trust that will help ensure your child (whether a minor or adult) is financially secure for as long as the trust allows. Plus, if drafted right, an estate plan can also make sure your child benefits from public assistance in addition to trust funds.

General Conservatorship

A general conservatorship is created when an adult (typically an elderly person but can be a younger adult person) cannot manage their finances or health due to deteriorated mental capacity or impairment caused by an illness or injury. While they recover from the illness or injury, a conservator may be appointed by a court to address their medical and financial needs. If you think you are too young to have a conservatorship affect you, then think of this famous case: Britney Spears and her father.

Examples of when a general conservatorship may be needed include but are not limited to the person (conservatee or ward), regardless of age:

falls into a coma due to an injury or illness
develops a neurological disease, like Alzheimer's, Parkinson's, or dementia
suffers from a physical trauma––like a head injury, a fall, or a stroke––that impairs their ability to think or express their wishes
suffers from any other type of mental or physical incapacitation, even if for a short period

One word of caution: People who suffer from any of the above can become vulnerable to bad actors who may try to manipulate the situation for their own financial gain. These bad actors may, for example, attempt to divert your disability payments (fraud) or coerce you into changing a will (undue influence). Here, think of Britney Spears again and the allegations against her family misusing the conservatorship for their financial gain.

This is why it is ever-important to draft an estate plan as soon as you can regardless of your age or job because when it comes to your children or your own health, it's nice to know someone you trust is taking care of matters for you while you can not.

To avoid a court-appointed conservator when or if you become ill or incapacitated in some way, you should ensure your estate plan includes things like a living will or durable power of attorney. What type of document you have will depend on your life circumstances, so speaking with an estate planning attorney is important.

What Does a Conservator Do?

A conservator or adult guardian has the power to make important decisions on their conservatee's or ward's behalf. Some common duties they may be permitted to undertake include:

Changing legal rights, generally

Fixing the conservatee's residence or dwelling
Accessing the conservatee's confidential records
Consenting or withholding consent to marriage
Entering into contracts on behalf of the conservatee
Giving or withholding medical consent on behalf of the conservatee
Selecting the conservatee's relationships
Make decisions to educate the conservatee

Of course, not all of the above duties will apply to each individual case. In fact, the specific powers of a conservator can be limited. Moreover, a person may have a different conservator for each separate issue. For example, one person may have a conservator to specifically handle financial matters (also known as a conservator of the estate), and another conservator to address health care and other personal matters (also known as a conservator of the person).

How are Conservators Appointed?

Conservatorships are appointed by a court. The exact process for becoming a conservator depends first on the procedures set out by the specific court overseeing the process. Unique circumstances also impact how a conservatorship materializes: are you the one seeking to become a conservator or are you the one who needs a conservator?

In the first instance, you would file a petition with the court. The filing must be served on the potential ward, called the respondent, and must set forth why the respondent's condition results in the inability to make important decisions. A hearing will be held, and the judge will examine the evidence and make a decision.

In the second instance, absent a pending petition, and in lieu of a family member, living will, or another relevant document, the court will appoint a conservator. The conservator can be any number of people, like a:

Friend
Social worker
Neighbor
Church member
Attorney
Nurse
Another qualified person.

The court takes these matters seriously and will attempt to award the conservatorship to the best person, but that person may not always be available.

Can a Conservatorship be Contested or Terminated?

A petition requesting the court to award a conservatorship over you or someone you love can be contested. When the petition is filed and served, you can respond, contesting it. Also, to prevent a specific person from being appointed as a conservator, you can file competing petitions. The rules vary according to jurisdictions, so speaking with an attorney is your best way to avoid delays and errors in the process.

As for termination, conservatorships are typically made as a permanent arrangement. They are terminated upon the conservatee's death or recovery from the illness or injury that had incapacitated them.

There are times, too, when a court will remove a conservator when cause is found (like abuse). That said, simply because the conservator is removed does not remove the conservatorship. Another conservator will be appointed unless the reason for the conservatorship no longer exists.

Understanding Healthcare Directives

No one wants to think about their own death or dying, but it's a reality. An accident can happen any day. You could be diagnosed with a terminal illness. If you do not have a plan established on end-of-life care or medical treatment preferences for when you are incapacitated and cannot speak for yourself, decisions will have to be made by family members. That can be a source of in-fighting and guilt. You don't want that.

What Can Healthcare Directives Do?

A healthcare directive, also known as an advance directive, is a set of medical instructions for what to do when someone is unable to make important medical decisions on their own. Each state has its own respective forms related to healthcare directives, though many common components are present throughout each state.

The underlying function of an advance directive is to make a patient's healthcare wishes known before the medical issues arise. Some examples of healthcare directives include:

Living wills
Do-not-resuscitate orders
Do-not-intubate instructions
Organ donor registration
Designation of a healthcare proxy, or someone else to make medical decisions on the patient's behalf
Designation of a medical power of attorney

In sum, healthcare directives do a lot for such a small part of an estate plan–they save your family the emotional pain of making healthcare decisions for you when you no longer can, and they secure your medical treatment preferences so that care you do not want is not provided while care you want is provided.

Creating a Healthcare Directive

Different states have very different rules regarding how healthcare directives are created and what goes in them. Some states require healthcare directives to be fairly particular and specific while others allow them to be quite vague and wide-reaching––though regardless of where you are, the more specific you are, the less confusion there will be. You can talk to your doctor about what you might want to go into the healthcare directive, and you can speak to an attorney to make sure you complete the right forms.

In any event, upon creating a healthcare directive, you want to :

Keep the originals in a safe, accessible place.
Provide a copy to your doctor, health care agent, attorney, and/or loved ones.
Be sure to log who has a copy of the directive so in case one is lost, you have a backup.
Talk to family members about the decisions you made in the advance directive. It's good to establish boundaries and an understanding of your preferences.
Keep with you (in your purse or wallet) and a condensed version of the directive with a note where a copy may be found––this is important for unexpected emergencies.

Changing Advance Directives

Every few years, you should review your advance directives and make changes accordingly. This is true for all your estate plan documents. There are two events that particularly prompt a need for an update:

A new diagnosis, a terminal illness or disease that will alter your way of life; and
Marriage or divorce, i.e., you may want to change who you appoint as your healthcare proxy or agent.

The Benefits of Having a Healthcare Directive

Creating a healthcare directive is not something that people like to think about––most people do not want to plan for serious medical problems. However, even young and healthy people stand to benefit from having a healthcare directive in place.

Like an insurance policy, a healthcare directive helps them in a time of need, foreseeable or not. It also drastically reduces confusion at a moment when quick decisions need to be made. It can also remove the uncertainty and guilt that other people can feel when they have to make important decisions on someone else's behalf.

Understanding Beneficiary Designations for Your Estate Plan

Your estate plan can include several documents, many of which may require beneficiaries, like any trusts you may have set up or intend to set up and non-probate assets like 401(k), IRA accounts, life insurance policies, and pensions. Assets from these accounts will go to the beneficiaries upon your death. It is important, therefore, to make sure you choose your beneficiaries carefully.

You may think it's a simple thing to do: choose those closest to you whom you want to benefit from your estate and your life's work. Sometimes, however, it is not as easy as that. There are many different factors to consider and different types of beneficiaries to identify.

What are Beneficiary Designations?

A beneficiary designation involves naming the person who will directly receive an asset in the event of the death of its owner. Assets that allow for beneficiary designations include insurance policies, retirement accounts such as 401(k) plans, annuities, and other financial accounts. Trusts also require beneficiary designations. You can also choose beneficiaries in your Last Will and Testament.

To note, beneficiaries are slightly different from heirs. Beneficiaries are chosen while heirs (though they can be chosen) are those who inherit the property of a person who dies intestate, or without a will.

The designation process ensures the named beneficiary directly receives the asset, rather than it passing to the estate and going through probate, which can cost significant time and money.

Common Types of Beneficiaries

Common categories of beneficiaries include eligible designated beneficiaries, designated beneficiaries, not designated beneficiaries, and contingent beneficiaries. Different eligibility rules may apply to different types of beneficiaries.

Eligible Designated Beneficiaries

Eligible designated beneficiaries include:

Spouses
Children under 18 years of age
Individuals with a disability
Chronically ill individuals
Individuals within 10 years of age of the deceased

Eligible designated beneficiaries have additional rights to designated beneficiaries.

Designated Beneficiaries

A designated beneficiary is any living person who does not fall into the above categories. This may include a friend or extended family members, such as elderly parents or a sibling.

Not Designated Beneficiaries

A not designated beneficiary is a non-living beneficiary, such as a charity, trust, or estate.

Contingent Beneficiaries

A contingent beneficiary is a “backup” beneficiary who receives the asset in the event the primary beneficiary is unable to.

Factors to Consider When Choosing a Beneficiary

When choosing a beneficiary, here are some points to keep in mind.

Age

A beneficiary typically must be over 18 years of age. If you want to gift an asset to a minor upon your death, you may need to set up a trust and designate the trust as the beneficiary.

Financial Support

Your financial dependents are a good starting point when considering who to designate as a beneficiary. This may include your spouse, children, or other extended family members.

Insurable Interest

A beneficiary generally must have an insurable interest in the insured person. This means there must be a legitimate financial interest between the two, such as in the case of dependent children or a spouse.

Policy Specific Rules

Some life insurance policies or pension funds set rules for designating a beneficiary. Make sure you are aware of these before making your decision and seek legal and financial advice about your options.

Revocability vs. Irrevocability

Depending on the document and the terms of the contract, some beneficiaries may be irrevocable. This means you cannot revoke their rights unless they agree to it. At first glance, you may wonder why you would want to designate beneficiaries as irrevocable, but there are benefits. An estate planning attorney can illuminate the reasons and situations where irrevocable beneficiary designations may be most appropriate (or not).

What Challenges Can Arise with Beneficiary Designations?

The best way to avoid most potential issues when it comes to beneficiary designation is to speak with a lawyer to ensure your designation is valid.

Here are some common challenges that may arise when designating a beneficiary.

Fixed Dollar Amounts

When designating a beneficiary, it is possible to set either a fixed dollar amount or percentage they will receive. However, a fixed dollar amount can cause issues if the value of the asset is insufficient (or if it increases in value, leaving a portion of the asset to probate). To avoid this, assign a percentage value instead.

No Contingent Beneficiary

Failing to name a contingent beneficiary may result in your asset going through probate. To avoid this, identify a contingent beneficiary who will receive the asset in the event the primary beneficiary cannot accept it––for example, where they have passed away.

Naming the Wrong Beneficiary

The identity of a named beneficiary may not be clear––for example, if several people in the family share the same or similar name. Names may also change as a result of marriage or divorce. Always confirm the correct legal name of your intended designated beneficiary and ensure you update the document to reflect any name changes.

“All My Children”

Designating “all my children” can create challenges. For example, if a child beneficiary dies before their parent, it may be unclear as to how their portion should be distributed. It may be divided between the surviving children, or instead, pass to their offspring. To avoid this issue, be specific when naming a beneficiary.

Estate Taxes

Estate taxes are paid by a decedent's estate, which means heirs to the estate lose out of benefits. There are ways to reduce or avoid estate taxes, but they do not always apply. Speaking to an experienced estate planning attorney is the best way to create a plan that benefits you today and protects your loved ones tomorrow.

What is an Estate Tax?

Some states have an estate tax that must be paid when a person dies. This tax applies regardless of who inherits. Typically, the executor files a single estate tax return and pays the tax out of the funds of the estate.

An estate tax differs from an inheritance tax in that the beneficiary (or person inheriting from the decedent) is responsible for paying an inheritance tax. An estate tax and an inheritance tax are both different from a gift tax, which only applies to transfers that are made during the giver's lifetime.

Understanding Estates: State versus Federal Estate Taxes

Some states have an estate tax, while others have an inheritance tax, and still others have neither. However, there is a federal estate tax that is applicable to all states. Fortunately, the exemption amount is so high most people do not have to pay a federal tax.

For the year 2022, the federal exemption for an individual is $12.06 million, which means that they may leave their beneficiaries up to $12.06 million in property without having to pay any estate tax.

Who Pays the Estate Tax?

When someone dies, there is a person that is appointed in the decedent's Will, or by the court if there is no Will, that is in charge of administering the estate of the deceased. In some states, this person is known as the personal representative while in others they are known as the executor.

No matter what they are called, this is generally the person that is responsible for handling the payment of the estate tax. It is paid from the estate prior to its being distributed among the beneficiaries.

How to Avoid Estate Taxes

There are different ways to avoid having to pay an estate tax, including:

Gifting property to family members
Creating a trust
Donating property to a charity

Which of these ways, if any, can apply will depend on the state and circumstances of each individual situation.

Benefits of Hiring an Estate Planning Lawyer

An estate planning attorney is a lawyer that focuses their practice on helping clients create comprehensive estate plans that meet their short- and long-term goals. Benefits of having an estate planning lawyer on your side include:

You have the peace of mind in knowing that your plans are compliant with local, state, and federal law.
Your initial thoughts on what you desire in your estate plan may not be the best for your situation, and an estate planning lawyer will know this and explain better options to you.
When you hire an estate planning attorney, your estate plan will be customized to address your unique needs.

Spending some money up-front on an estate planning lawyer can end up saving significant time and money down the road.

Guardianship

When parents of a child are no longer able to care for the child, a guardianship is needed. Unfortunately, so many people are unprepared and do not designate a guardian for their child, so the court must. We want what's best for you and your family, and preparing for the future through a guardianship is critical to that end.

What Constitutes a Guardianship

Guardianship is legal authority provided to a specific person to make decisions for another person, typically a minor child when that child's parents are unable to care for the child. This person with legal authority is referred to as the “guardian.” The subject (child) of the guardianship is referred to as the “protected person” or “ward.”

Endowed with legal authority, the guardian is responsible for the wellbeing and care of the child and can make decisions about the child's:

Healthcare
Residency
Education
Religion

Guardianship may also be needed over the child's estate when the child has inherited assets. The guardian will manage these assets until the child is an adult.

Reasons a Guardianship Might be Needed

Parents almost always have the legal right to make decisions for their children unless parental rights have been terminated. When parents cannot make those decisions, someone must step in to do it. This often happens when both parents have died or when both parents are incapacitated in some way by illness or injury. It can also be a situation where one parent has died or has no parental rights while the other parent is incapacitated.

Who Can Be Appointed a Guardian

Who the guardian is will often depend on whether or not a guardian was designated in a living will or last will and testament. If neither of the latter was created, the court will appoint a guardian.

A Will Controls Who Can Become a Legal Guardian

By naming a legal guardian in a will or a living will, a parent can ensure that their child is raised in a way of which they would approve. While this is obviously far less desirable than raising the child on their own, parents can keep the decision from being made by someone like a judge, who does not have a full understanding of their family.

Factors to Consider a Person as a Guardian

Choosing who to be a child's legal guardian is not easy. Parents often consider the following factors:

Their personal relationship with the guardian
How trustworthy and reliable the guardian is
The age of the guardian
Cultural or religious traits that the parent shares with the guardian
Geographical proximity
Whether the guardian already has children

Factors that Disqualify a Person as a Guardian

Not all people can be guardians. Examples of when a person does not qualify as a guardian include but are not limited to people who:

Are incompetent (e.g., cannot care for themselves properly)
Are also a minor
Have filed for bankruptcy in the past (e.g., within 7 years)
Have been convicted of a felony (unless the court states otherwise)
Have committed violent crimes or offenses involving some type of abuse against a child, spouse, parent, or another adult
Have been suspended or disbarred from a profession that requires a state license and involves the management of money

Naming a guardian in a last will and testament, however, can have a complication for parents who each have their own will, rather than a joint will. If both parents pass away – especially if they pass away at the same time – and their respective wills each name someone different, it can create confusion and may require court intervention.

Courts Appoint a Guardian in the Absence of a Will

In cases where the child's parent has become incapacitated or has died and there is no will stating who will become the child's legal guardian, a court will appoint one. It will usually choose a close relative, although other people, like family friends, can ask the court to appoint them, instead.

If there are no close relatives or family friends, the child will become a ward of the state and enter the foster system. Most parents would not want this situation placed upon their child, and in part, that alone is a critical reason to prepare a will designating a guardian.

How Long Does a Guardianship Last?

Guardianship usually last until the child becomes an adult at the age of 18. The exception to this rule is when the child will turn 19 before they graduate from high school. The guardianship will last throughout high school.

A guardianship may also be terminated under other circumstances, like when/if:

The guardian or child dies
The guardian becomes incompetent
A parent who had been incapacitated no longer is
The guardian requests termination and the court approves

In cases where the protected child is not yet an adult, the court will appoint another guardian unless the will indicates an alternative guardian.

Family Limited Partnership

If you have or intend to create a family business, it is a good idea to consider forming a limited partnership as one of your options. A limited partnership is a great way to secure a family's business or real estate portfolio. It can also be important when planning for taxes, seeking protection from creditors, and planning for business succession.

What Is a Family Limited Partnership?

A family limited partnership (FLP) is a business structure involving two or more partners who are family members holding an interest (i.e., shares) in a business.

The establishment and operation of an FLP are governed by relevant state laws and the partnership agreement.

There are two types of partners in an FLP: general and limited.

General Partners

General partners are the operators of the partnership who have a controlling interest in an FLP and who are responsible for its day-to-day management. Typically, the senior family members or general partners (who are most often senior family members) hold the largest proportion of shares.

They also have unlimited liability, meaning they can be held personally liable for the partnership's debts.

Limited Partners

Limited partners are passive owners and, as such, have no managing interest or responsibilities in an FLP. Rather, they are passive owners and receive profits from the partnership. Dividends are an example of how profits are allocated.

Limited partners are often the children or younger generation of the family. Unlike general partners, their liability is usually limited to their investment in the partnership.

When Is a Family Limited Partnership Used?

Due to their tax status, FLPs are often used in estate planning to protect generational wealth.

Similarly, they can also be used to implement the succession plan of a family-owned business, ensuring it remains in the family upon the retirement, incapacitation, or death of an owner.

FLPs can also be used for investment purposes, where a family member is seeking an injection of cash to fund a business or to pool resources to invest in joint real estate or property development.

Regardless of the reasons for setting up an FLP, it must operate as a proper limited partnership, serving a valid business purpose. While the structure offers some tax advantages, it cannot be used for tax avoidance.

Benefits of Family Limited Partnerships

FLPs offer several benefits that families can use to manage, protect, and grow their business and their assets.

Potential Tax Advantages

The tax rules that apply to FLPs can make them an attractive option for families looking to gradually transfer generational wealth. Federal gift tax exclusions and favorable valuation discounts reduce the overall tax burden of an FLP.

In addition to this, FLPs do not pay federal income tax. Instead, partners include their FLP income on their personal returns and are then taxed according to their individual tax rates. This may be a lower tax bracket for limited partner children or grandchildren.

The returns on an FLP's assets are also excluded from estate taxes, as they do not form part of the general partners' estates.

Preserving Control

An FLP enables the general partners to manage and retain control over the FLP's assets and limited partners' interests. The general partners can set rules around the transfer of interests, like preventing a limited partner from selling their shares for some time or deciding what will occur to a limited partner's interests in the event of divorce.

Asset Protection

When assets are transferred to an FLP, they are no longer the assets of the partners. This may offer some additional level of protection against the limited partners' creditors.

Succession Planning

An FLP can be a way to educate younger generations and prepare them to manage the family wealth as part of a broader succession plan.

Alternatives to Family Limited Partnership

An FLP may not be suitable in every situation. There are downsides to them. For starters, they can be quite expensive and complex to set up and maintain. FLP can also expose general partners to unlimited liability. Plus, there is a real risk that members will incur debt, and this debt can detrimentally impact others of the FLP.

In some situations, you may want to explore alternative structures to an FLP, which include a limited liability company or a trust.

Limited Liability Company

A limited liability company (LLC) is a simple company structure where a business is owned by one or more members, who can be individuals, partnerships, groups, or other LLCs.

Unlike an FLP, all members have a managing interest in an LLC. Each member also has limited liability, compared to an FLP, which only limits the limited partners' liability.

Trust

A trust is an alternative way to protect generational wealth. It holds assets for its beneficiaries, protecting them from events such as divorce, estate tax, and creditors.

Trusts are often used where a family wants to make charitable gifts, as well as a division of assets between family members. A trust can be used independently from or in conjunction with an FLP.

To help you choose the best structure for your circumstances, you should seek professional legal and accounting advice.

Medicaid Planning

Many senior citizens need long-term care at some point. Some senior citizens do not have family members who can give them the kind of care they need, and because of that as well as many other factors, they will need nursing home care.

But nursing home care and other long-term care arrangements are expensive. Medicaid can help fund these things, but you must meet the financial qualifications. Estate planning is critical for many people to be able to qualify.

What is Medicaid?

Medicaid is a federal program that provides healthcare coverage to individuals as well as families that are low income. Costs of this program are typically covered by a combination of federal and state funding. Services are provided to those with limited financial means so that they can obtain the medical care they need with limited out-of-pocket costs.

Medicaid also provides coverage to disabled people in some situations. It can assist the elderly with paying Medicare premiums.

Planning for Medicaid

Before submitting an application for Medicaid, many people go through a process known as Medicaid planning. Medicaid planning is assessing a potential applicant's ability to receive Medicaid and taking steps to improve their chances of receiving it.

Why People Plan for Medicaid

There are multiple reasons why people engage in Medicaid planning in order to qualify for the program. Three common reasons are:

To obtain coverage for the cost of long-term care that they would not otherwise be able to afford;
To preserve assets that may otherwise become part of Medicaid's estate recovery program; and
Because the Medicaid application process can be confusing, getting assistance from someone who understands how it works can prove very beneficial in the long run.

Medicaid planning benefits people who really need the services provided but fear they may not qualify. If you do not have the financial resources or family members who are able to care for you when it becomes harder for you to do it yourself, you should speak to an attorney to plan your estate. Qualifying for Medicaid can be a big help just when you need it.

Medicaid Eligibility & Coverage

Medicaid planning exists to provide medical coverage to those people who need it most. Following are some of the main qualifications that must be met.

Income-Based Eligibility

Income is one of the primary factors considered in a Medicaid eligibility determination. For most children, pregnant women, parents, and adults, their income must be below a certain threshold. This amount is calculated using taxable income and tax filing relationships.

There are cases where people who wish to qualify for Medicaid give their possessions to their children or other family members so that they may qualify for benefits. There are rules established to prevent this from happening, and it may not be in your best interest to give away your property. Thus, the reason it is important to speak with an estate planning attorney in State.

Non-Income Based Eligibility

There are ways to qualify for Medicaid even if you are unable to qualify under the income requirements. Blindness, disability, or age (over the age of 65) are other ways to qualify. Veterans may also qualify for Medicaid benefits.

Coverage Services Provided by Medicaid

Federal law mandates that certain services be covered by Medicaid, while other services are decided by each state. Typically, Medicaid covers the following:

Inpatient and Outpatient Hospital Visits
Home Health Services
Physician Services
X-Ray Services
Laboratory Services

You will need to check with your state to determine what other services may be covered.

How a Medicaid Attorney Can Help

If you or a loved one is in need of the long-term care that Medicaid helps cover, but you are unsure if you will be able to qualify, a Medicaid attorney in your area can help. They will know what the threshold amount is for qualification. If your income exceeds that amount, they will be able to work with you to formulate a plan to help you become qualified. One of the ways to accomplish the latter is through shielding your assets so they are no longer considered when your financial situation is assessed to determine Medicaid eligibility.

Philanthropy and Charitable Planning

If you have a large estate and want to find a way to benefit it while doing something good, then charitable giving may be the perfect option. Charitable giving as part of your estate planning is a great way to satisfy the desire to give to a cause you care about and take advantage of tax perks. But knowing how to do it smartly is another thing altogether.

What Is Charitable Giving?

Charitable giving involves a donation of cash or property to a non-profit organization. Property donations include things like:

Vehicles
Real estate
Stocks
Works of art
Jewelry
Household appliances or other items

A charitable gift isn't an investment––the donor doesn't receive anything in return for it from the donee. It's an altruistic gift made to support the objectives of the organization.

You can benefit, though, from a charitable gift. Charitable giving often attracts a range of tax exemptions. For these to apply, a charity typically must be a qualified organization.

What is a qualified organization?

The IRS defines qualifying organizations as “nonprofit groups that are religious, charitable, educational, scientific, or literary in purpose, or that work to prevent cruelty to children or animals.”

Qualifying organizations include:

Community chests, corporations, trusts, funds, or foundations created for the above purposes
War veterans' organizations
Domestic fraternal societies, orders, and associations, if created for the above purposes
Some nonprofit cemetery companies or corporations
Religious organizations, like churches, synagogues, temples, and mosques
Nonprofit schools
Nonprofit hospitals
Nonprofit organizations like Salvation Army, Red Cross, Goodwill, and United Way
Federal, state, and local governments, if the funds are for public purposes (like public parks and recreation facilities)

The definition of a qualified organization does not include gifts to individuals or political donations.

Charitable Giving and Estate Planning

Charitable giving often comes up in the context of estate planning, when someone wishes to donate part or all of their estate to a charitable organization. Regardless of whether it's a small or significant donation, there is a range of ways to incorporate charitable giving in your estate planning.

Charity Giving as Part of a Comprehensive Estate Plan

One of the simplest ways to provide a charitable donation as part of your estate planning is to include a cash donation to a specific charity in your will.

However, there are several other ways to do it. Choosing the right one for your circumstances can minimize the tax liability of your gift, maximizing its impact.

Charitable Lead Trust

A charitable lead trust is an irrevocable trust that exists for a set period. It can be created during the life of a donor or upon their death.

A donor transfers their assets to the trust. The charity is named as a beneficiary and receives payments during the life of the trust. At the end of the trust, its balance is transferred to other beneficiaries, such as family members.

The potential benefits of this structure include exemptions and reductions on income, estate, and gift taxes.

Charitable Remainder Trust

A charitable remainder trust is the inverse of a charitable lead trust. Family members (and the donor, during their lifetime) can be named as beneficiaries, receiving payments for the term of the trust. When the trust ends, the remaining assets are transferred to a charitable organization as the designated beneficiary.

This trust enables a donor to earn income from their assets before leaving them to charity.

Retirement Plans

You can name a charity as a designated beneficiary of your individual retirement account (IRA, 401(k)s, or 403(b)s). In certain situations, this may be classed as a charitable tax deduction to help offset income and/or estate taxes.

Use Life Insurance

Like IRAs, many life insurance policies allow you to name one or several charities as the beneficiary of your life insurance so they receive funds under the policy.

Charitable Gift Rider

Some life insurance policies allow policyholders to add a charitable gift rider that pays a percentage of the policy's value to a qualified charity. Insurers generally have rules around charitable gift riders, including capping the distributed amount.

Gift Through Community or Private Family Foundation

A community foundation receives, manages, and distributes charitable gifts from a range of donors in a specific local area. A private family foundation is funded by family assets, and the donors have control over how much is given to a charity and how the gifts can be used.

Gift Appreciated Stock

Giving your appreciated stock (i.e., a stock that has increased in value) to a charity rather than selling it may reduce your capital gains tax liability.

When Should You Consider Giving Charity for Estate Planning Purposes?

If you're passionate about supporting an important cause, a range of ways exists to incorporate charitable giving into your estate planning.

Regardless of the size of your gift, if you are considering donating some of your estate to a charity, it's best to speak to an estate planning lawyer as soon as possible. They can review your situation and advise you on how to structure your gift to maximize its impact, as well as assist you to make the necessary arrangements.

Portability

In November 2022, the IRS issued a new procedure that simplifies the process for taxpayers who want to make a Portability election. Since it can be very impactful for estate planning, let's take a look at what it is and how it can be used.

Prior to the introduction of portability, spouses only enjoyed the individual exemption for their estates. This was at odds with the standard deduction, which allowed married couples to treat themselves as a single economic unit. Also, no gift or estate tax was imposed on transfers between spouses. With the new rule, all of the property owned by one spouse after their death can pass to their surviving spouse without any estate or gift implications.

Portability can help the surviving spouse's estate by allowing all of the assets held by one spouse to pass to their surviving spouse without any estate or gift implications. For instance, in 2022, a married couple with $20 million in assets would not have to use the $12.06 million exemption when the first spouse passes away. However, the surviving spouse then dies with a taxable estate of around $20 million, and the estate tax rate is 40%.

This situation led to the development of credit shelter trust planning, also known as bypass trusts. When a spouse passes away, their assets are placed into a trust, which is then controlled by the surviving spouse. This type of trust can help preserve the first spouse's estate exemption, and it can also prevent the assets from being included in the surviving spouse's estate.

In 2013, the federal tax law known as Portability was made permanent. This made it easier for married couples to carry out estate planning.

Portability was used to allow the surviving spouse to take advantage of the deceased spouse's unused exemption. For instance, in this example, the surviving spouse had $24.12 million of exemption after the first spouse passed away in September 2022. Without owing taxes, the surviving spouse now has a total estate of $20 million.

The implementation of permanent portability and the concept of treating married couples as a single unit brought about the same level of estate taxation as the unlimited marital deduction. As a result, there are still some estate planning items that can be addressed permanently.

One important note about portability is that it only works in federal law. In the states that have their own estate taxes, only Maryland and Hawaii allow for the same portability between spouses. This means that estate planning in these states can be affected by additional tax planning techniques. For instance, credit shelter planning can be very effective for individuals who are planning on using credit to preserve their assets.

Although credit shelter planning was the "go-to" technique for many individuals before the implementation of permanent portability, many estate plans still feature various aspects of it that are no longer necessary. For instance, if a client's estate plan has several components that are not related to portability, it is important that they review and update their plans to accommodate the new legislation.

One of the key components of portability is that it requires the surviving spouse to make the election. In the IRS Revenue Ruling issued in November 2022, it allowed the surviving spouse to make the election on the estate of the deceased spouse that was large enough to require a Form 706.

Although the threshold for filing was not met for deceased spouses' estates, the surviving spouse was allowed to make the election up to five years from the death of the spouse. This new window is very important for individuals who have potential estate tax liability. It is also important to note that the current exemption levels will expire in 2025.

Same Sex Estate Planning

Estate planning is a daunting task, but it's essential for everyone who wants to protect their loved ones and assets following their death. Even after the Supreme Court ruled in 2015 that same-sex couples have the right to marry, it could still be very important for LGBTQ families.

Since same-sex marriages became legal in 2015, there were many new tools and tax-savings that were previously unavailable to heterosexual couples. However, same-sex couples still have many special planning needs, such as adopting non-biological parents or dealing with complicated family dynamics.

A survey conducted by the Pew Research Center revealed that over four in ten adults in the LGBTQ community have been rejected by their friends or family due to their sexual orientation. This could affect their estate planning.

The survey also revealed that over four in ten adults in the LGBTQ community have been rejected by their friends or family due to their sexual orientation. This could affect their estate planning. Unsupportive family members could sabotage the plans of same-sex couples.

In the event of the partner's death or incapacity, their wills could be contested by a family member who doesn't recognize the couple's relationship. This could affect their ability to make financial and medical decisions for their partner.

Although it's not necessary for same-sex couples to create estate planning documents, they should regularly review their existing ones to make sure that they're in compliance with current laws. This can help ensure that their wishes are carried out properly. Having the right language in these documents can also help protect both partners' loved ones and ensure that their wishes are carried out properly after they die. Keep in mind the following estate planning considerations for same-sex couples:

Make Sure Your Assets Transition According to Your Wishes

A study conducted by the Harris Interactive revealed that the percentage of LGBTQ investors who have a will is lower than that of heterosexual individuals. For instance, only 56% of investors with a net worth of less than $100,000 have a will. On the other hand, 70% of non-LGBTQ investors have one.

In most states, the rules regarding the distribution of assets vary significantly. For instance, if you have a will in a state that doesn't allow domestic partners, then your assets could be divided among the surviving family members.

A will can help determine the distribution of assets following your death. It can also help protect both partners' loved ones from potential legal issues.

One of the most important factors that people should consider when it comes to their wills and beneficiary designations is to make sure that they're up to date. For instance, if you have an ex-partner as a beneficiary on an IRA, then that person can collect the asset regardless of who you left it to in your will.

If you're worried that your partner's family will not contest your will, then you might want to consider creating a trust. This type of trust can help protect both partners' assets from potential legal issues. It can also help minimize the stress and pain of a contested estate planning process.

Unfortunately, creating a trust can be very expensive. If you're not sure that this is a viable option, then you might want to consider adding a "no contest" clause in your will. This type of document can help protect both partners' assets from potential legal issues. For instance, if Jane Doe wanted to leave her estate to her partner, then she would have less chance of having it contested.

You should also keep a record of all of your estate planning documents, as if they were ever contested, it would be harder to prove undue influence or fraud.

Go Beyond a Will for End of Life Care

Although wills are commonly thought of as the main documents that people should have when it comes to estate planning, same-sex couples should also consider other documents. This is because, unlike heterosexual couples, gay individuals often face challenges when it comes to making financial and medical decisions for their partners who are incapacitated. Having the proper documents can help minimize the stress and pain of a contested estate planning process.

A durable financial power of attorney can be a type of document that people can use to manage their financial affairs if they become incapacitated or ill. There are different types of powers of attorney that can be used, and the requirements vary depending on the state.

A health care power of attorney is a type of document that can be used to make medical decisions for an individual who is too ill or incapacitated to make their own decisions. This type of document is especially important for gay couples who are in domestic partnerships or unmarried.

One of the most important types of documents that people can use to manage their health care is a privacy authorization form, which allows doctors and other healthcare providers to access their patient's medical records. This type of document can be used to establish a trustee or health care power of attorney for the purpose of managing their estate.

A health care directive is a type of document that people can use to ensure that they have the necessary health care at the end of their lives.

Take Advantage of the Unlimited Marital Exemption

Before same-sex marriage was legalized in the US, many couples who are in a domestic partnership or an unmarried relationship would have purchased life insurance policies to help cover their partners' estate taxes.

Since same-sex couples were allowed to enjoy the same federal estate and gift tax exemption, many couples who are in domestic partnerships or an unmarried relationship would have purchased life insurance policies to help cover their partners' estate taxes. With the new law, gay and lesbian couples can now enjoy the same level of financial success that heterosexual married individuals have enjoyed.

Previously, same-sex partners were not allowed to roll over assets from their partners' retirement accounts to their own accounts without a required minimum distribution or lump-sum.

With the new law, gay and lesbian couples can now enjoy the same level of financial success that heterosexual married individuals have enjoyed. They can now revisit their estate and financial plans to free up more liquidity. This type of action is an ongoing process, and it can require the roll-back of previous plans.

Close the Loop for your Children

When it comes to planning for their children, gay and lesbian parents have unique concerns. They need to be able to clearly identify their children, either born or adopted, in the estate planning documents.

In your will, you can also designate a guardian for minor children. Without a will, the courts can't make a decision regarding the child's future without taking into account the biological parents' wishes. The court can only choose the best possible guardian based on the child's needs and the wishes of the biological parents.

Non-biological parents should also consider adopting their children to avoid potential conflicts with the biological parents. This type of action can help prevent the child from going through a custody battle if the couple gets married. In most states, a legal relationship between a non-biological parent and a biological parent can be established without having to go through a court battle.

In addition to being able to pass on their assets to their children, adoption can also play an important role in the estate planning process for gay and lesbian couples. Since it's more common for same-sex couples to have only one biological parent, adoption should be considered.

Consider Real Estate Ownership

Before getting married, gay and lesbian couples should also thoroughly review their real estate documents to make sure that the ownership of their properties is listed according to their wishes.

A common type of property ownership arrangement for gay and lesbian couples is called tenants in common. It gives both partners a share of the property, but allows them to pass their shares to another person in the event of their death.

A joint tenancy agreement is also a type of legal document that allows gay and lesbian couples to share ownership of their properties. If one of them passes away, the other will get sole ownership.

In some states, couples can also enter into a tenancy by the entirety ownership arrangement, which is similar to a joint tenancy agreement. This type of legal document provides additional protection for one partner against creditors.

Before making any binding decisions, you should get sound legal advice to take into account your unique situation.

Tie-Up Loose Ends from Before Marriage Equality

Despite the legal recognition of same-sex relationships in all 50 states, many LGBTQ individuals still face challenges when it comes to planning their estate.

Some couples who got married in states that recognized their unions before the Supreme Court ruled in 2015 were then forced to move to other states that didn't recognize their marriages. They may have mistakenly thought their unions didn't count as valid in the other states.

Some states have also started to recognize civil unions or domestic partnerships as legal marriages. This means that people who got married in these unions may not have known that they were officially married.

To protect their interests, LGBTQ individuals should also resolve their various legal relationships, such as civil unions and domestic partnerships, from before marriage equality was allowed.

Work with Professionals for Comprehensive Financial Planning

Estate planning is also important to ensure that your wishes are carried out properly and that your assets are distributed in the manner that you want them to be. This can be a more complex issue for the LGBTQ community.

It's also important for same-sex couples to work with professionals to ensure that their financial situation is handled properly. A comprehensive financial planning service can help couples manage their assets and ensure that their needs are met.

Special Needs Planning

It's a daunting task to put together an estate plan for yourself and maybe even a spouse. When you add children to it, it can become a little more complex. If one of those children has special needs, it's not only more complex but imperative—because you may be their only source of support socially, emotionally, and financially.

What Constitutes Special Needs

Special needs is also referred to as “disability,” "handicap,” or “incapacity.” Each term is differently defined by state and federal law. Under the Americans with Disabilities Act (ADA), special needs is cited as a disability, and is defined per 42 US Code §12102 as

A physical or mental impairment that substantially limits one or more major life activities of such individual;
A record of such an impairment; or
Being regarded as having such an impairment.

The meaning of the above definition gets further broken down by the ADA and then narrowed by case precedent. The definition matters if you want your child to get federal and/or state assistance and/or protection. Our estate planning attorney can help you understand what your child may qualify for and how to get it, as well as how to arrange and distribute your own assets upon your death in a way that will best benefit your child.

In the end, though, if your child has special needs––however significant they are or are not––you want to make sure your child is safe and financially stable throughout their life. You can do this through a comprehensive estate plan.

How an Estate Plan Helps a Child with Special Needs

It's simple, an estate plan can help make sure your child has all the necessities they need. Of course, it all depends on how you put your estate plan together to ensure they have what they need and more. If planned correctly, you can help provide:

Money management that benefits the child for their lifetime
Protection for public benefits
Funds set aside for the future in case public funding is disrupted or restricted

Your tailored-made estate plan can incorporate things like identifying care providers, appointing a guardian, creating a trust and designating a trusted trustee, and finding housing.

Guardianship
Trust
Care providers
Housing

The most important elements of your estate plan, however, will be the guardianship and creating a trust.

Appointing a Legal Guardian to Look After the Child

One of the most important aspects of estate planning for parents of special needs children is choosing a guardian to look after the child once both parents have passed away. This can be done in the parents' last will and testament. If the parents do not make a joint will, they should make a point of ensuring that they both name the same person as their child's legal guardian.

For underage children, this legal guardian would have many of the rights and responsibilities of the child's biological parents, allowing them to make some of the most important decisions in the child's life. Oftentimes, a close relative will be appointed because the child is familiar and trusts that person.
For adult children with special needs, parents can appoint a conservator to make important decisions about the child's medical care and to manage the child's finances.

In either case, parents should choose someone who is trustworthy, reliable, and professional.

Testamentary or Special Needs Trusts

Children with special needs are rarely able to earn a living on their own. Instead, they rely on their parents for financial security.

Parents can continue to provide that financial security by establishing a testamentary trust or a special needs trust. Both set aside assets from the parents' estate to fund a trust that would be professionally managed by a trustee of the parents' choice. The principal in that trust would create interest payments that can be used to cover the child's ongoing needs and care. Also, if drafted properly as a spendthrift trust with strict limits on the trustee's ability to give money to the child, the child may still qualify for public assistance––if desired and necessary.

When selecting the trustee for the trust, you want to consider seriously about who you want the trustee to be, especially if the trust is not set up as a spendthrift trust. If the trustee, like a family member, views the trust's assets as family assets, they may spend the money themselves, too. In lieu of a family member of a trust, you could also consider the following:

Your attorney
A trust company
A financial institution
A nonprofit organization with experience or specific to special needs

You can also opt to have co-trustees where one trustee is a family member and the other is not. There are, of course, pros and cons to all of these options, so speaking to a special needs lawyer works in your favor.

Avoiding Mistakes Estate Plans with Special Needs Children

When parents have the assets and want to leave them to their children, including a special needs child, there are a few mistakes often made.

Disinheritance. Some parents make the mistake of thinking that they can disinherit their child so that they will qualify for public assistance. Public assistance, however, cannot cover all the necessities the child needs even though it provides great benefits, like vocational rehabilitation, job coaching, shared housing, etc. This decision is not recommended.
Sibling's promise. Parents think they can simply leave their estate to their other children with their other children promising to care for the special needs child. This also is a mistake. Promises come and go. Life happens. There are no assurances, and your special needs child can suffer because of a failure to properly plan.
Inheritance. Here, parents do leave an inheritance to the child, but if it meets a certain threshold, it will negatively impact the child's eligibility for public benefits. If your child will need both to live comfortably, then this is a mistake.
Taxes. Sometimes, parents fail to consider taxes. Taxes matter, especially when considering if the special needs trust should be revocable or irrevocable because the implications will vary accordingly.

In the end, it is always best to speak to an estate planning attorney to make sure you set up the estate in your special needs child's best interest.

What is Asset Protection

An asset protection strategy is a set of legal techniques that protect the assets of individuals and businesses from various types of claims, such as debts and taxes. For instance, it can help minimize the amount of money that a person can lose due to an automobile accident.

People with significant assets are most likely to benefit from asset protection. Business owners, as well as individuals with employees, are more prone to getting sued for damages. Professionals such as doctors and real estate investors are also at risk.

In addition, asset protection can help prevent a person from losing money due to a divorce. This is especially true for married individuals.

Unfortunately, asset protection can be very costly and complex. It can also be less beneficial for people with few or no assets. In addition, it can't protect against various types of liens, such as taxes.

10 Asset Protection Strategies

The various aspects of asset protection are highly individualized. However, there are a finite number of tools that can be used to create a customized strategy.

One of the most important steps that people should take when it comes to asset protection is to plan ahead. Usually, it is not possible to protect assets after a lawsuit has been filed or a tax bill has been issued.
A simple and effective asset tool people can use is to establish a limited liability company. This type of company can protect them from various types of claims, such as lawsuits. Besides protecting assets, an LLC can also help manage taxes.
An asset protection trust is an irrevocable trust that can be used to store the assets that have been removed from the original owner. It can also be used to protect against various types of claims, such as lawsuits. In the case of the Cook Islands and the Commonwealth of the Bahamas, asset protection trusts can provide even more protection.
A family limited partnership is a type of partnership that allows people to set themselves as general partners of a group of companies that they want to protect. Family members can also be made limited partners. This type of arrangement can help manage estate taxes.
Another way to simplify inheritance is tenancy by the entirety. This type of arrangement allows married individuals to maintain their survivorship and shared ownership while protecting their assets from creditors.
Establishing a retirement fund is another form of protection. This type of arrangement can provide them with significant tax advantages and is safe from debts and lawsuits.
One of the most effective asset protection strategies people can use is to purchase insurance. This type of insurance can provide them with financial support while protecting their assets from creditors. Life insurance can also help people maintain their financial security while also protecting their assets from creditors.
Life insurance can also help people maintain their financial security while also protecting their assets from creditors. Although certain states provide limited protection for certain types of insurance, others provide unlimited coverage.
State laws protect home equity. The exact amount of this type of protection varies depending on the state. Some states provide only limited protection, while others provide unlimited coverage.
Discretion is another essential tool for avoiding losses due to lawsuits. An individual living a lifestyle with the perception to have substantial assets are more likely targeted by torts and other claims.

Understanding the Probate Process

When a person passes away, their assets must be disbursed according to their estate plan and, when applicable, state laws and probate.

What Constitutes Probate?

Probate is the process by which a deceased person's assets and belongings, known as their estate, are passed on to their heirs and successors. It depends on your jurisdiction, but most matters related to wills, estates, conservatorships, and guardianships are handled by probate courts.

Both the probate process and outcomes can look very different, depending on whether the decedent had a valid Will at the time of death.

The Early Stages of Probate

The probate process begins when the decedent passes away. A petition is filed with the proper court to have probate opened. The next step is to identify the executor or personal representative of the decedent's estate.

If there is a Will, an executor will likely be named in it.
If there is not a Will, a probate judge will nominate one.

Once the executor is approved or appointed by the court, the executor must:

Notify the heirs;
Publish notice for any creditors;
Take inventory of the estate (e.g. bank accounts, retirement accounts, stocks and bonds, real estate, personal effects); and
Secure all assets.

How probate proceeds depends on whether there is a Will or not.

Probate with a Will

If the decedent died with a Will, the Will must be found, filed with the court, and authenticated before its terms are put into action. This process often involves a court hearing where parties named in the Will and parties not named but who would have inherited but for the Will are in attendance. During this hearing, an interested party may contest the Will.

If there are no challenges to the Will, the executor must first pay off all debts of the estate. Once creditors are paid, the executor distributes the remainder to the beneficiaries in accordance with the Will.

If the Will is challenged, then another hearing may be set. The challenger has the burden to prove the Will's invalidity. Challenges are often based on allegations of undue influence, fraud, or misrepresentation. Challenges are also brought forward when there is believed to be another Will invalidating the Will offered to probate court.

If the court decides the Will is valid, the executor can pay debts, bills, and applicable taxes, and distribute assets. If the court decides the Will is invalid, it will apply the state's intestacy laws. On the other hand, if the court determines the other Will is valid, it will allow the executor to apply the valid Will (as opposed to the invalid Will).

Probate without a Will

If there is no Will, the decedent is said to have died intestate. This does not mean their assets will not be inherited, it just means their property will pass to their heirs through their state's intestacy laws.

Once the executor has located all the decedent's assets and notified and paid the creditors, the probate judge will apply the state's laws of intestacy and distribute the estate to the decedent's heirs.

The End Stage of Probate

Once debt and bills are paid and the remaining assets are distributed, the executor will submit receipts and records of everything to the court. At that time, the executor will ask the court to close the estate and release the individual from the role of executor.

Do You Need a Probate Lawyer?

Whether you need a probate lawyer depends on how well the estate plan was set up. Regardless, a probate lawyer offers important services that can help speed up the probate process. A probate lawyer can help with the:

Collection of proceeds from life insurance policies
Identification and securing of estate assets
Appraisals for the decedent's real property
Payment of bills, debts, and applicable taxes
Resolution of any income or estate tax issue
Preparation and filing of all documents required by a probate court
Management of the estate checking account
Transfer of assets to beneficiaries

How to Avoid Probate

Wills

A last will and testament is a document you create to instruct how you want your property distributed upon your death. Who gets the house? Who gets which antiques? Who gets a bank account? Who takes care of the pets? These are just some of the questions upon which a will answers and instructs, and just some of the information we will obtain to draft a solid last will and testament that can stand up in probate and prevent challenges to its validity.

What is the Purpose of a Will?

The person creating a Will is known as a testator. The testator devises property and assets to named beneficiaries in a Will. This gives testators far more control over assets – both while they are alive and after they pass away.

As such, the Will serves four general but important purposes:

They allow property owners to control what happens to their belongings, even after they die.
They incentivize productivity by allowing people to control what happens to their property after death.
They protect the decedent's heirs, including minor children by appointing a guardian.
They allow you to appoint who you want to oversee the estate.

In order for the Will to work as intended, it must adhere to proper procedures in accordance with state law.

General Requirements of a Will

Each state's requirements of a Will and what makes it valid may differ somewhat, but all states have four requirements that are true no matter what.

The testator must have testamentary intent, meaning the testator subjectively intended to create the Will.
The testator must have testamentary capacity, meaning that they understood they were creating the Will at the time of its execution.
The Will must have been executed without the interference of fraud, duress, undue influence, or mistake.
The Will must have been duly executed through a proper ceremony––for example, signing the Will and having witnesses per your state's law were completed properly.

Intestacy: The "Default" Method if You Die Without a Will

If someone dies without a Will, this is known as dying "intestate." Should a person die intestate, the state will step in and distribute any property. There are two key reasons to create a Will, rather than relying on intestacy laws to devise your property, and the reasons relate to family and probate matters.

Family

Intestacy laws aim to pass property in a way that most people would want it to pass, which basically means any property is passed to immediate family members first, like children, then parents, siblings, grandparents, and so on. Intestacy laws only benefit you if you are happy about your hard-earned property going to your immediate family member.

The problem here is that if you have stopped a relationship with a family member, that may not be taken into consideration when the State steps in to disburse your assets. This could result in property, (or even the custody of a minor child) passing to a relative whom you would not wish to be a beneficiary and/or guardian.

Probate

Property governed by intestacy law must pass through probate court, first, which can be expensive and time-consuming, leaving fewer benefits and more burdens for your loved ones. That said, a valid Will also goes through probate to implement its provisions. The only difference is a well-crafted last will and testament will go through probate rather quickly and without incident because it's harder for someone to challenge it.

Further, there are other ways to distribute property according to your wishes while also avoiding probate completely. Speaking with an estate planning lawyer will help you determine what will work best in your specific situation and with your specific assets.

The Risks of “Do-It-Yourself” Wills

The expense and lack of control that comes from dying intestate, coupled with the perceived costs of hiring a lawyer to write a will, has led to a huge increase in the use of “do-it-yourself” wills. These forms, often found online for a fee, claim to be just as good as a traditional will prepared by an experienced attorney.

These "one size fits all" documents, however, are not tailored to your unique circumstances. The process to create a DIY will is often accompanied by mistakes that open the door for challenges to the validity of a Will upon your death. In fact, a court may dismiss the Will completely.

If you decide to try a DIY Will first, keep the following five tips in mind:

Define who your family members are. For example, if you brought children into a second marriage, make sure who constitutes “family” in your Will.
Assign and direct the executor to pay debts and expenses, including anything from credit cards to personal loans to funeral expenses.
Make specific bequests or gifts so that there is no confusion about who gets what.
Provide a catch-all clause for assets that you do not specifically give away.
Finally, be specific about people and property as much as you can. Wherever there is any ambiguity there is also room for a challenge.

That said, in the least, it is a good idea to have an attorney review your last will and testament to make sure it's in compliance with state and federal laws.

Powers of Attorney

A power of attorney (POA) is an estate planning tool where you appoint a person, known as the agent, to manage your affairs. Typically, the POA is appointed to manage financial or medical matters when you cannot do so yourself because you are incapacitated by illness or injury.

What Constitutes a Power of Attorney?

A power of attorney is the legal authorization for one person, the agent, to act on behalf of another person, the principal. Often called a letter of attorney or just a "POA", they are a common element of estate planning as they let a person who is losing their ability to manage their own affairs choose someone they trust to make decisions for them.

There are six types of POA, described below.

Durable POA

A durable POA takes effect immediately upon your signature unless the POA states otherwise and allows your agent to continue acting on your behalf even when you are incapacitated. A durable POA terminates only when you die or when a revocation of POA form is issued.

Non-durable POA

A non-durable POA takes effect immediately upon your signature unless the POA states otherwise. It does not allow your agent to continue acting on your behalf when you become incapacitated. In the latter scenario, only a court-appointed guardian or conservator can make decisions on your behalf.

Medical POA

A medical POA is sometimes referred to as an advance directive because it allows you to appoint a health care agent to make medical decisions for you when you cannot do so. It is limited by your specific medical preferences and any other directive you may have as part of your estate plan, like a living will or a Do Not Resuscitate (DNR) form.

General POA

A general POA allocates broad powers to the agent to act on financial, business, real estate, and legal matters. This POA is limited only by the terms set out in the POA or by any relevant state statute.

Limited (Special) POA

A limited (Special) POA allows the agent to act for a specific purpose and once that purpose is accomplished, the POA expires.

Springing POA

A springing POA takes effect if/when a certain event or medical condition occurs as specified in the POA. It ends at a specified time as outlined in the POA or if/when you become incapacitated or die.

When is a Power of Attorney Necessary?

A power of attorney is a useful tool for people who are planning their estate but who are losing the ability to understand the repercussions of their decisions and actions. By giving an agent the power to make those decisions, a principal can rest assured that someone is taking care of them.

A POA is common in the following situations:

The principal is suffering from a worsening medical condition that impacts their mental capacity, like Alzheimer's or dementia
The principal is physically disabled and cannot sign important documents
The principal wants to give someone else the power to make specific decisions on their behalf

There are, of course, other reasons why you may need or want a power of attorney created. Speaking to an estate planning attorney in State is the best way for you to identify and determine what will work best for you.

How is a Letter of Attorney Created?

Each state has its own requirements for creating a letter of attorney, though most are based on the parties and witnesses signing a power of attorney form. Because having the power to make financial and medical decisions for someone else is such a serious matter, each state incorporates formalities that must be followed to:

Ensure the power of attorney is legitimate; and
Confirm the person relinquishing their rights is doing it knowingly and voluntarily.

Many states require a witness along with notarization. Contact us to find out exactly what the process is so that you don't make mistakes that could prompt delays or problems.

Healthcare Proxy

A healthcare proxy, also written as health care proxy, is a means to ensure that––in the event you become incapacitated––someone you trust carries out your wishes regarding medical treatment. This document is a great comforting tool that you can use, knowing someone you trust will make the right medical decisions on your behalf.

What Constitutes a Healthcare Proxy?

A healthcare proxy is a legal document that allows you to appoint a person of your choosing to act as your healthcare agent and make healthcare decisions for you in the event you become incapacitated. Many people choose their partner or spouse, adult child, or sibling to act as their healthcare proxy. Whoever you choose, make sure it is someone that is able to make important decisions swiftly in emergency situations.

A healthcare proxy is only effective when you are no longer able to make decisions for yourself, and this has been verified by a physician. You always have the ability to change or revoke your healthcare proxy as long as you are competent.

Other names for a healthcare proxy, depending on the jurisdiction you reside in, include health care surrogate and medical power of attorney (POA).

How Does a Healthcare Proxy Differ from a Living Will?

A Living Will is a document that allows you to specify what your wishes are regarding end-of-life care and life-prolonging procedures. It is not addressed to anyone in particular but makes your medical care wishes clear to your family, friends, and medical personnel. This differs from a healthcare proxy in that the proxy is actually appointing a person to make your healthcare decisions on your behalf. A healthcare proxy is extremely helpful as it allows the person you appoint to make decisions for situations that were not anticipated and addressed beforehand (like in a Living Will).

There is a document known as an Advance Directive that is available in some jurisdictions that combines properties of the Living Will and the healthcare proxy.

Why Have a Healthcare Proxy?

Having an appointed healthcare proxy can not only bring peace of mind in knowing you have someone looking out for your interests even when you are unable to do so, it can also prevent strife and unnecessary delay in care. For example, family members often disagree on what type of medical care a loved one should receive, and valuable time is spent arguing. By appointing a specific person to make your healthcare decisions, you are able to avoid this.

Without a healthcare proxy, medical establishments will look to state law to determine who can make medical decisions on your behalf. With that said, you especially want a healthcare proxy when any of the following situations are present:

You have been diagnosed with a serious or terminal illness
You have reached an age where illnesses are more prevalent
You are in the process of drafting or updating a Will or other advance directive documents

But again, it's important to stress that you do not (and should not) wait until the last minute to create a healthcare proxy because we never know with certainty when something might happen, like a serious car accident.

Living Wills

An accident or sudden illness can leave you incapacitated. What happens when there's a question about the medical treatment needed to keep you alive? People have strong feelings about these things, like life support, pain management, and organ donation. You may want one thing while family members want another thing. Without a living will, your preferences may not be known, and if not known, those choices will be made by someone else––typically a close family member, and what they want may differ from what you would have chosen.

To maintain control over your medical treatment in the event life-threatening illness or injury leaves you without the ability to speak on your own behalf, you should consider drafting a living will. Living wills can be an integral part of anyone's estate plan.

What Constitutes a Living Will?

A living will is a type of an advanced healthcare directive that tells doctors and loved ones what a person wants to happen in the event that they become incapacitated and need ongoing medical care. They are pre-written medical decisions that provide guidance when the patient is unable to make the decisions at the moment.

A patient's healthcare wishes are only triggered when the patient is unable to make decisions on their own. This can happen when the patient:

Is in a coma
Is unconscious
Suffers from dementia or Alzheimer's
Is in a vegetative state

A living will allows doctors and the patient's loved ones to provide the treatment that the patient would have wanted, rather than having to guess what the patient would want. The medical preferences in the living will can be specific or general but should consider most if not all of the following:

Cardiopulmonary resuscitation (CPR), which restarts the heart when it has stopped beating
Mechanical ventilation, which is a device that breathes for you
Tube feeding, where fluids and nutrients are delivered either intravenously or by a tube in the stomach
Dialysis, a method to remove waste from your blood and manage fluid levels if the kidneys do not function properly
Antibiotics or antiviral medications, which are used to treat all sorts of infections
Palliative care, which is basically comfort care to manage pain
Organ, tissue, or body donations, which could mean that you are treated with life-sustaining care temporarily.

You should also come up with a timeframe to emerge from a coma before ending life support or to determine how long you want any of the above medical treatments.

To note, you do not need a living will for directives indicating: do not resuscitate (DNR) or do not intubate (DNI). You can simply tell your primary care provider and they will write the orders for the same and document it in your medical record. If you put your preferences for DNR and DNI in your living will, it is still a good idea to inform your doctor of the same.

The Benefits of a Living Will

A living will helps with the confusion and uncertainty that comes from caring for someone who is unable to decide what treatments they want to receive. It can also eliminate the guilt that a patient's loved ones can feel when they have to make a medical decision that could end the patient's life. Likewise, it can prevent disagreements or disputes among family members if they have to decide your fate. Again, everyone has their own opinion, but in these situations, you want yours to be the deciding factor.

Living Will vs Last Will and Testament

Living wills are different from a last will and testament in two important respects:

Living wills take effect when the person is still alive, while a last will and testament only applies when the person has passed away.
Living wills direct healthcare decisions, while last will and testament directs how the deceased person's property is to be distributed.

A single person can have both a living will and a last will and testament. In fact, you should have both.

Pour-Over Wills

People work hard for the wealth they have obtained, and so for many, it is hard to give up control over it while they are alive. Even more so, they still want to have a say in what happens to their property upon their death. In the meantime, a living trust is established and funded with some assets. Suppose you want to retain the same trustee to administer your estate and benefit the same beneficiaries upon your death. In that case, a pour-over will may be a possible solution.

What Are Pour-Over Wills?

To understand what constitutes a pour-over will, it is important to understand revocable living trusts. A living trust holds the assets of the trustor, or person creating the trust. A trustee is a person with the fiduciary responsibility of managing the assets in the trust for the benefit of the beneficiaries. Living trusts are revocable, and to be valid, they must be funded. In other words, they must actually hold assets. When the trustor passes away, there may be assets that have not yet been transferred into the living trust. That is where the pour-over will becomes relevant.

A pour-over will is a type of will stating that any assets or property owned by the trustor at their death will transfer (or pour over) into the trust. The transfer is automatic, as the living trust and pour-over will were created prior to the death of the trustor.

Who Needs a Pour-Over Will?

Anyone who wants all their assets to go into a living trust at the time of their death should consider a pour-over will. Even with the best-laid plans, life can be unpredictable, and one or more assets may not be transferred into the trust while the testator is alive. A pour-over will can be viewed as a safety net, catching all the assets that the testator did not transfer into the trust while they were living, and transferring them after they pass away.

Motor vehicles are one asset that it is usually best to not include in a trust, for several reasons. First, in case there is an accident that leads to litigation, the details of the trust may be brought up in court. Also, many insurers will deny coverage for vehicles titled in the name of a trust.

There are other times when a testator simply forgot about an asset or was not aware of the asset. For example, they may have inherited the asset shortly before their death and had not yet been made aware of its existence. A pour-over will is able to move all of these assets into the trust.

What is the Difference Between a Will and a Pour-Over Will?

A regular Last Will & Testament (“will”) is a way for a testator (the person creating the will) to leave final instructions on how they want their assets distributed. It is a way for them to name who they wish to receive their belongings after they are gone, as well as who they desire to have custody of their minor children. The testator appoints a personal representative (also known as an executor in some jurisdictions) to distribute the assets as directed by the will and according to the law.

A pour-over will is a much simpler document whose purpose is to transfer any assets owned by the testator at the time of their death into the living trust.

Probate and Pour-Over Wills

Probate is a court-supervised process wherein the decedent's estate is administered. It includes paying creditors and distributing assets. It can be a tedious, time-consuming process, which is also a public process. One of the reasons so many people choose to use living trusts in their estate planning is because of their ability to avoid probate. However, all wills, including pour-over wills, must go through the probate process.

Depending on your circumstances, it may be a good idea to have a pour-over will in place if you want all your assets handled through a trust when you die. However, in most cases, it is best to still transfer most if not all assets into the trust while you are alive and have the pour-over will in place just in case it is needed. The reason is twofold:

Assets placed in a trust avoid probate while those that go through a pour-over will might not be able to avoid probate; and
A pour-over will can be challenged, creating costly and time-consuming litigation.

Keep in mind though that some jurisdictions allow some assets (especially those that do not satisfy a certain threshold amount in terms of value) to avoid probate. In this situation, some people may transfer their larger assets into the trust, leaving out smaller assets that do not meet the threshold, thus, avoiding probate. For example, if your jurisdiction requires any estate with a total value of $100,000 to go through probate, but your assets outside the living trust do not exceed $100,000 in value, then these assets will not go through probate.

An estate planning attorney knows the laws and rules of your jurisdiction and will help you determine if a pour-over will is necessary and, if so, what assets are best transferred into the living trust.

Do You Need an Estate Planning Lawyer for Pour-Over Wills?

A pour-over will is typically executed at the same time other estate planning documents are, such as a living trust. Because these legal documents must adhere to certain rules and legal standards to be valid, it is in your best interest to consult with an estate planning lawyer. An attorney experienced in this area can review your particular circumstances, and if a pour-over will is needed, can prepare it for you.

Execute a Will

To execute a will, you must follow proper procedures as outlined by the laws of your city or county. Mistakes can lead to an invalid will or will contestations. You do not want either of those outcomes because it means your wishes will not be fulfilled upon your death, your heirs may not receive what you intended them to receive, and your heirs may suffer a lot of headaches to fight for what is rightfully theirs.

What is an Executor of a Will?

An executor is a person whose primary role is to settle the estate of the decedent. In some states, this person is known as the “personal representative.” If the decedent died with a Will in place (testate), then the executor is to follow the wishes of the decedent as stated in the Will. If the decedent died without a Will in place (intestate), then the executor must follow the intestate rules for the state and jurisdiction of residence for the decedent.

What is the Process of Executing a Will?

Executing a Will requires that the executor perform certain tasks shortly after the decedent dies.

Filing in Probate: A Will needs to be filed in the probate court. There may be other paperwork the decedent needs to file at the same time.
Gathering Information: The executor needs to begin gathering information, such as identifying the heirs of the decedent as well as the decedent's assets and debts. There may be an attorney or financial planner used by the decedent that can help with the collection of this information.
Establish Estate Account: The executor will need to set up a bank account in the name of the Estate. This account can be used to hold the decedent's money and pay the decedent's debts.
Keep Meticulous Records: It is important that the executor keep an accounting of any actions taken on behalf of the estate, including the disbursement of any funds.
Distribute Assets: Once the debts have been settled the executor is responsible for distributing the remaining assets to the heirs as stated in the Will.
Communicate with Probate Court: From the beginning of the process, until the executorship ends, the executor needs to keep an open line of communication with the probate court, as there are certain conditions that must be met peculiar to each jurisdiction.

Mistakes to Avoid while Executing a Will

Being an executor of a Will can be a tedious and time-consuming task. It is also a job that must be taken seriously to avoid complications.

Some of the more common errors of executors include:

Failure to properly identify all heirs of the decedent
Failure to locate the Will of the decedent
Failure to understand or try to learn how the probate process works
Failure to start the process within a reasonable time after the decedent's death

Errors such as the ones listed above can lead to an estate being tied up in probate for years. Beneficiaries have even been known to sue executors that did not properly execute an estate. In these cases, the courts have been known to remove the executor and replace them with someone else. Also, in some cases, the executor has been held personally liable and responsible for damages incurred. Of course, this depends on the jurisdiction.

How to Change a Will

A last will and testament is a legal document instructing what should happen to your assets and property (known as your estate) at the time of your death. But it does not stop there. You can assign a guardian for children and appoint an executor for your estate, and much more. Over the course of a lifetime, however, many events create circumstances that require you to change your Will. You remarried. You had a falling out with a family member. You started a business. Your partner died. You got a divorce. You had another child.

Whatever the event is, you should change your Will to reflect the new circumstances. At Elevatus, we believe in updating Wills on a regular basis so that they reflect the current situation in your life. If you have a Will and need to make changes to it, contact us at 585-565-4456 to learn more. In the meantime, here's generally what you should know about changing Wills.

How Do I Change My Will?

People who have a Will that no longer reflects their intentions can change it. There are two basic ways to change a will: (1) by writing a new Will; or (2) by amending a current Will with a codicil.

Creating a new Will has become the preferred way to change an estate plan. However, creating a new Will without regard to the old one makes the Will vulnerable to court challenges. The old one must be emphatically revoked. To revoke a Will, you have a few relatively simple options:

Create a subsequent Will (in other words: a new Will), and in the new Will, you should stipulate that you revoke all previous Wills. This method also allows you to revoke a provision of the old Will while maintaining the rest of the Will. Remember, too, that all requirements of the first Will remain the same for the subsequent Will, i.e., the testator must have testamentary intent and testamentary capacity, the Will must have been created with undue influence, fraud, or duress, and the proper signatures and witnesses must comply with the law.
Physically destroy the old Will (and all copies) by any means necessary, like burning it, shredding it, or ripping out the signature. This method does not allow you to simply tear out one or more provisions that you want to change or terminate. Destruction by physical act destroys the entire Will.

Codicils have all of the legal requirements of a regular will, meaning they must show testamentary intent and must satisfy all of the other requirements of validity in New York. Codicils are not intended to be a complete Will, and that's why this method is not preferred: it leaves the testator with two valid testamentary instruments floating around, and if one is lost, it opens the door to challenges to the Will.

What Should I Do After I Change My Will?

Like with the first Will, you should take a few steps to secure and protect the Will.

Keep the original and all copies in a safe place, like a lockbox at home or a safe deposit box at a bank.
Inform the executor so that they know the location of the Will.
Keep the original Will and the copies of the Will separate.
Copies of the Will should be marked as such. You can make a note on the copies as to the location of the original Will.
Give a copy only to one or a few trusted people. You do not have to give anyone a copy, however, it is a good idea to leave a copy with the attorney who drafted it.

When Should I Change My Will?

Estate planning is an ongoing process. People should at least revisit the terms of their will every year, even if only to reaffirm them.

However, there are some life events that should lead people to make a change, which include:

Divorce
Marriage, remarriage
A new child, grandchild, or stepchildren
A serious and permanent falling out with someone who is to receive property in the will
Receipt of a significant amount of property or money since you last wrote your will
Relocation to a state that sees marital property as community property to one that sees it as common law property, or vice versa

Any of these events can drastically alter your final testamentary intentions or can make the current terms of your will unworkable.

How Wills Are Challenged

A Will must be specific––ambiguity creates space for challenges. Likewise, a Will must be executed properly, or else it again creates a situation where it can be challenged in probate court. Further, if there is more than one Will because prior Wills were not properly revoked, there again is a situation where a Will can be challenged after the death of the testator.

Challenges to a Will take up a lot of resources, particularly time and money. Sometimes a challenge is not genuine while other times, the challenge to a Will's validity, meaning, or purpose, is viable and worthy.

What is a Will Contest?

When a person dies, their Will is offered for probate. The Will proponent––the person asserting the Will's validity––has the burden to prove the Will was duly executed. When a person challenges the validity of the Will, the burden shifts to the person challenging it, who is known as the contestant or caveator. The remedy for the challenge is what's known as a Will contest.

Who Can Challenge a Will?

Not everyone can challenge a Will, and the precise groups of people who can depends on the state. However, most states recognize the following “interested parties” as people who can challenge a Will in probate court because, given the circumstances, they have legal standing to contest the Will.

Interested parties include:

Beneficiaries of the will, or people who actually received property in it
Beneficiaries of a prior will, but who have received nothing in the current one
Anyone who would have inherited through intestacy law, but who received nothing in the will
Creditors with a claim against the estate

To note, beneficiaries do not have to be family members but could be friends or organizations.

Grounds for Contesting a Will

An interested party who wants to challenge a Will must have a valid legal reason to do so. The grounds for challenging a Will can include:

The Will does not comply with the state's legal requirements by, for example, not having enough witnesses or having a witness that was also a beneficiary
Ambiguous provisions exist
The Will was revoked
A new Will exists
Undue influence, fraud, or duress altered the testator's decisions in the Will
The testator lacked the necessary mental capacity to write a will
Claims the testator suffered from insane delusion, which occurs when the testator believes something that does not exist except in the testator's mind, and the delusion affected the testator's disposition of property

When an interested party contests a Will, that party has the burden to prove the allegations.

How to Challenge a Will

An attorney can help you challenge a will by filing a lawsuit in the probate court that has jurisdiction in the place where the testator died. These challenges have to be made quickly: The state's statute of limitations usually begins to run when the testator dies, and once it expires the will cannot be challenged.

However, many wills are written with no-contest clauses, also known as no-contest “in terrorem”. While these do not completely prevent challenges from being made, they do strip a beneficiary of what they received in the will if they mount a challenge and then lose their claim in court. Testators make frequent use of these clauses when they want to deter challenges.

Power of Attorney

What Constitutes a Power of Attorney?

Durable POA

Non-durable POA

Medical POA

General POA

Limited (Special) POA

A limited (Special) POA allows the agent to act for a specific purpose and once that purpose is accomplished, the POA expires.

Springing POA

When is a Power of Attorney Necessary?

The principal is suffering from a worsening medical condition that impacts their mental capacity, like Alzheimer's or dementia
The principal is physically disabled and cannot sign important documents
The principal wants to give someone else the power to make specific decisions on their behalf

How is a Letter of Attorney Created?

Ensure the power of attorney is legitimate; and
Confirm the person relinquishing their rights is doing it knowingly and voluntarily.

Many states require a witness along with notarization. Contact us to find out exactly what the process is so that you don't make mistakes that could prompt delays or problems.

Healthcare Proxy

What Constitutes a Healthcare Proxy?

How Does a Healthcare Proxy Differ from a Living Will?

Why Have a Healthcare Proxy?

You have been diagnosed with a serious or terminal illness
You have reached an age where illnesses are more prevalent
You are in the process of drafting or updating a Will or other advance directive documents

Testamentary Capacity

What happens sometimes is a person procrastinates and does not prepare a last will and testament until the last minute when they are aging and health-wise, more vulnerable. This person may or may not have the testamentary capacity to fulfill the requirements of a valid Will. On the one hand, they may be more susceptible to undue influence, fraud, and duress, which would––even if the testator has testamentary capacity––invalidate the Will. On the other hand, upon the testator's death, even though the Will is offered to probate as valid, the question of testamentary capacity makes it vulnerable to a Will contest. All of this makes it harder and longer for heirs to receive their benefits and inheritance.

Testamentary Capacity as a Requirement of a Valid Will

To make a legally valid Will, the testator must have testamentary capacity. A four-prong test guides us on how testamentary capacity may be determined:

Did the testator appreciate the nature and consequences of creating the Will?
Did the testator know the extent and nature of their property?
Did the testator know the relationship between the testator and the proposed beneficiaries?
Was the testator unaffected by any disorder of the mind or insane delusion?

It is presumed that when a Will is offered to probate, it is valid. That presumption, however, is rebuttable and so, it is contestable.

Indeed, challenging a will based on the testator's testamentary capacity is rather common. The challenger has the burden to show the testator lacked capacity. If it is shown that the testator did not have capacity, it is invalid and will be disregarded. The decedent's estate will then likely pass to their heirs through probate.

Distinguishing the Difference between Testamentary Capacity and Testamentary Intent

Testamentary capacity is directly linked to another requirement of a valid Will: testamentary intent. Testamentary intent considers whether the testator, at the time the Will was executed, subjectively intended the contents of the Will. Here, too, there is a presumption that the testator is familiar with and knows what the contents of the Will are since they presumably prepared it or directed its preparation.

Intent comes into question when there are allegations of:

Undue influence, where another person improperly substitute's their wants in place of the testator's will
Fraud, when a person knowingly makes a will but its terms are based on material misrepresentation of facts made to the testator by someone who will benefit from the misrepresentation
Mistake, where the testator intended to execute their Will but made a mistake and signed another document (e.g., another draft of the Will that no longer represents the testator's intention)

If it shows that the testator lacked testamentary intent, the probate judge may invalidate the Will.

In sum, testamentary capacity is about the testator's ability to understand the will while testamentary intent is about the testator's intentions reflected properly in the Will.

A Lack of Testamentary Capacity Can Invalidate a Will

As mentioned, people who think that a testator lacked the legal capacity to make a Will can contest the Will in court if they have legal standing. If they can prove that one of the elements of testamentary capacity was not present at the time the testator created and signed their Will, the court can invalidate the Will.

If a will is invalid, property listed in the Will will pass to the decedent's heirs through the state's intestacy law.

Protect a Will against Challenges Based on Lack of Testamentary Capacity

Testators must be very clear that they possess testamentary capacity, especially when the Will is created at a later stage in life. Testators can take an extra step to forestall a contested Will by creating “self-proving” wills.

Self-proving wills are sworn statements signed by witnesses affirming that the testator was coherent and lucid at the time the Will was signed. These “self-proving” Wills help defeat challenges based on testamentary capacity.

Undue Influence

Testators have the right to dispose of their property as they please. Sometimes, though, a Will appears to be unjust to people whom you naturally assume should be the object of the testator's Will. When that happens, a question of undue influence arises. Has someone pressured the testator to create or change a Will so that it favors the person doing the pressuring? If so, this could be a case of undue influence. Undue influence can invalidate a Will.

What Is Undue Influence of a Will Made?

Undue influence refers to coercive or intimidating conduct that makes a person alter the terms of their Will or trust to benefit the person committing the misconduct. If the influence overcomes the testator's true intent, the resulting Will can be contested and subsequently invalidated. The property would then pass through intestacy law.

People exert undue influence over a testator by using misconduct to make the testator change the terms of a Will in a way that does not reflect the testator's true intent, but rather benefits the person exerting undue influence. Examples of such misconduct can include:

Isolating the testator from friends and relatives
Lying to the testator about the circumstances surrounding his or her beneficiaries and/or his or her estate
Keeping the testator from consulting a preferred attorney

Keep in mind that undue influence is more than mere persuasion or advice even if the latter favors the person doing the persuading or giving the advice.

Examples of Undue Influence

Undue influence is often the result of an imbalance in a relationship. Common examples include:

Stepparent coercing the spouse to increase their inheritance or trust assets, which takes away assets from other heirs, like stepchildren.
Adult children threatening their elderly parents to give them more via their Will.
Caregivers who threaten an elderly person left in their care.
Service providers, like doctors, dentists, therapists, and others, who use their positions to get assets intended for others.

Signs of Undue Influence Estate Planning

Signs of undue influence can vary, but common things to look for include:

Isolation from friends, family, or a social support system
Dependency upon the abuser
Abuser's use of the victim's financial assets
Psychological abuse, threats, and intimidation
Physical violence, including threats of physical violence
Often the abuse is perpetrated against someone with diminished mental capacity or physical abilities.

Contesting a Will and Proving That There Was Undue Influence

You can contest a Will in probate court if you expected to be a beneficiary or are a beneficiary but did not receive as much as you should have and suspect undue influence is the reason for it. They have the burden of proving that there was undue influence that altered the results of their inheritance. Typically, you want to be able to show the following with adequate evidence:

The vulnerability of the testator
The influencer's apparent authority
The influencer's actions (or inaction)
The resulting inequity.

Evidence you can gather to prove the undue influence includes:

Statements from the testator, abuser, loved ones, neighbors, friends, service providers
Digital communications, e.g., text messages, emails, social media posts

If probate court determines that there was undue influence over the testator's Will, the Will is invalidated and thrown out. Depending on your jurisdiction, there are three possible ways the court can disperse property after the Will is thrown out.

Revive an old Will. If there was another Will that was written earlier by the testator and was not tainted by undue influence, that earlier Will can be revived. The testator's property will then be distributed according to the terms of the revived Will.
Apply the state's intestacy laws. If there was no previous Will, the testator's property will be distributed under intestacy law, as if the decedent died without ever writing a Will.
Strike undue influence provisions. In some rare cases, the court may be able to strike out the part of the Will that suffered from undue influence, while maintaining the other portions.

Keep in mind that the alleged wrongdoer has the right to defend against claims of undue influence in estate planning.

DNR Orders

A DNR order, or a do-not-resuscitate order, is a pre-written healthcare directive made by a patient concerning life-saving medical interventions. As the name implies, DNRs tell doctors not to resuscitate the patient in certain circumstances – usually if the heart stops.

What is Resuscitation?

Resuscitation is treatment given when a person's blood flow or breathing stops. Doctors and physicians have several ways of resuscitating patients, the most common of which include:

Cardiopulmonary resuscitation (CPR), which involves mouth-to-mouth breathing and pressing on the chest
Advanced cardiac life support (ACLS)
Defibrillation
Assisted breathing machines, like a ventilator
Medicines

In some cases, these resuscitation methods save the patient from death but leave them in poor condition. People who want to avoid the latter outcome can create and sign a Do-Not-Resuscitate order, preventing doctors from resuscitating under certain or any circumstances.

How DNRs Work?

A DNR is a legally-binding, dated order, written and signed by your physician with the patient's name. The doctor can only write a DNR order after consulting with you (the patient), your appointed representative, or a member of your family. The order, once executed, instructs medical providers to refrain from resuscitating the named patient. Each state varies somewhat with specifics about the DNR order. For example, some DNRs expire over a certain period of time while others remain indefinitely.

Like an advance directive or a living will, DNRs allow you to express your preferences regarding end-of-life care. Unlike these other forms of healthcare directives, though, DNRs are very straightforward: they tell doctors not to resuscitate the patient. CPR and other forms of resuscitation are automatically performed to save a person's life in the absence of an appropriate DNR order.

A DNR order can be a stand-alone document, or it can be a smaller part of an advanced directive. An advanced directive is a collection of all legal orders surrounding a patient's medical care, like health care proxies and living wills.

Can Anything Override a DNR Order?

Once a doctor writes a DNR order upon your request, no one can override it––including family members. If you change your mind about the DNR, however, you can always speak to your doctor and have it revoked.

Things to Consider Prior to Signing a DNR

There are a few things to consider prior to signing a DNR. Here's a short list.

Do you have any religious, ethical, or moral beliefs opposed to resuscitation? Some religions oppose resuscitation methods while some people are simply opposed to the idea on moral or ethical grounds.
Why do you not want to be resuscitated? Are you seriously ill or have you been diagnosed with a terminal illness? Sometimes a person who is not terminally ill may want a DNR order if their health generally is deteriorating.
Do the side effects worry you? Side effects can be serious even if resuscitation is successful. If chest compressions were used, you could end up with broken ribs, punctured lungs, or a damaged heart. For an older person, these physical injuries are significant.
Do survival rates concern you? People over the age of 70 who are revived through resuscitation often do not have good survival rates. Though statistics vary, for most elderly persons, outcomes can be depressing, and so for some, it feels like they are prolonging the inevitable. It is important to keep in mind, though, each person is different, and you could have a good prognosis even when the statistics indicate otherwise.

Understanding Do Not Intubate Orders

Many people get scared of the idea of being intubated in the event of a medical emergency. There is good reason to be worried about it: it can cause injury or other health issues. The potential consequences of intubation, however, are not very common. What's more common is the life-saving impact of it. But in the end, it's the choice of the individual – you have to weigh the benefits and the risks and determine what you prefer. You want to be proactive, though, and not wait because in the event a medical emergency occurs, you may not have a choice.

What Is Intubation?

Intubation is a medical procedure to help someone breathe when they cannot do so on their own. A tube is inserted through a person's nose or mouth into their trachea to keep their airway open. This tube is then attached to a ventilator which pumps air into it.

Intubation is often performed in emergencies, such as when a patient is in cardiac arrest or has low oxygen levels or a traumatic neck, abdomen, or chest injury. It's also done routinely before surgery due to the effects of general anesthesia.

Types of Intubation

Based on the location of the tubing, three main types of intubation exist.

Nasogastric intubation, which involves the tube passing through the nose and into the stomach to remove air or feed/medicate a person;
Endotracheal intubation, which involves a tube passing through the nose or mouth into the trachea to assist a person's breathing while under anesthesia or in a distressed airway; and
Fiber-optic intubation, which involves the tube passing through the throat to examine the throat or assist with endotracheal intubation.

The intubation process varies based on its purpose and whether it is an emergency situation or a planned operation.

Risks of Intubation

Like any medical procedure, intubation carries risks that you should know. These risks are more likely to occur in an emergency situation and include:

Incorrect tube placement, where the tube enters the esophagus or lung bronchi instead of the trachea, leading to serious complications including a collapsed lung or even death
Infections, like pneumonia
Injuries to the mouth, teeth, or vocal cords
Trauma to chest cavity tissues, which can also cause a collapsed lung

Generally speaking, there is a small level of risk associated with intubation, especially when compared to its potentially life-saving effects.

Common Reasons to Have a Do Not Intubate (DNI) Order

Given the minimal risks compared to the life-saving benefits, what are the reasons why someone might decline intubation, especially in medical emergency situations? Though there are many reasons, including religious beliefs, there are three primary situations where people often opt for DNI orders.

Terminal illness. When someone has a terminal disease, they may decline intubation because it may only prolong the discomfort, pain, and the inevitable. Examples of terminal illnesses include cancer, liver disease, and dementia.
Advanced chronic illness. When someone has an advanced chronic illness, they may be living in a lot of pain and know that, when they are at the end-of-life stage of the disease, their heart or breathing may stop, and they may choose not to prolong their pain and suffering. Examples of advanced chronic illnesses include heart disease or COPD.
Personal preference. As already indicated, intubation has inherent risks. It is also very uncomfortable. Older adults particularly may choose that they prefer to be intubated even if for lifesaving purposes.

How DNIs Work

A DNI order instructs medical professionals that a person does not want to be intubated, even in an emergency or life-threatening situation.

This means if someone with a DNI has difficulty breathing or stops breathing–and mouth-to-mouth or manually assisted breathing doesn't work–they will not be intubated.

How to Obtain a DNI

The process for obtaining a DNI is state-specific. Typically, a DNI is a form completed by the individual (or their healthcare agent) and their doctor. The form or a note about it is then placed on the individual's digital and paper medical records, alerting medical professionals that they do not want to be intubated.

When you are in need of hospitalization, you can sign a DNI. When not in need of hospitalization, you can proactively prepare one as part of your estate plan. The most common ways are to do so via any one of the following:

Advanced directives, which are legal documents explaining your wishes on medical care in the event you are incapacitated
Living will, which is another legal document outlining the medical treatments, procedures, and medications you want or do not want in life-saving situations when you are incapacitated
Durable power of attorney for healthcare, which is another legal document granting someone the ability to make decisions for you if you are incapacitated – the appointed person can express your preferences and enact a DNI order

Any one of the above can become part of your estate plan. The one you choose may be dictated by your jurisdiction's requirements. That is why it is important to speak to an estate planning attorney in State to make sure your estate plan, including any DNI order, is adequately drafted and executed.

DNI vs DNR

A DNI order is separate from a do-not-resuscitate (DNR) order. A DNR instructs medical professionals that in the event you stop breathing or your heart stops, you do not want the following administered:

Chest compressions, also referred to as CPR
Defibrillation, using electricity to try to restart the heartbeat
Intravenous (IV) medications, like cardiac drugs
Intubation

It's possible to have either a DNI or DNR or both. If someone has a DNI but not a DNR, medical staff may use chest compressions and cardiac drugs to try and resuscitate them but cannot intubate them.

Can Anything Override a DNI Order?

When prepared properly, a DNI is a legally binding document. Medical professionals or family members cannot override it.

However, you can withdraw a DNI order at any time should your situation or feelings towards it change. If someone is receiving long-term care, the treating team may periodically confirm with them whether they wish for their DNI to remain in place.

Depending on the circumstances, when someone has a DNI their treating team may be able to use measures other than intubation, like oxygen therapy or a BiPAP machine (a machine that pushes air into a patient's lungs through a face mask or nasal plugs).

Factors to Consider Prior to Signing a DNI

Signing a DNI is a serious matter that potentially involves the refusal of life-saving treatment. For these reasons, it is important to discuss it carefully with your doctor. They are familiar with your medical history and current condition and so are best placed to answer any questions you have.

Before signing a DNI, you may wish to discuss with your doctor:

Whether you want a DNI, a DNR, or both?
What the risks of intubation might be with specific reference to your condition?
What is the process for withdrawing your DNI, should you wish to do so?

You can also discuss a DNI and other related health documents, such as a DNR or living will, with a lawyer in the context of estate planning. It is a significant part of a comprehensive, proactive plan that makes sure all aspects of your life are safeguarded.

Wills FAQ

There's a lot to know about Wills. You need to understand the difference between a Will and Living Will, how Wills should be executed and how they can be modified or challenged. You also need to understand the probate process and how that can affect the outcome of your estate planning goals.

Who Should Have a Will?

Many people assume that only the wealthy need to have a Will. However, the truth is that many people, with and without great wealth, need to have a Will in case the unexpected occurs.

People who should have a Will include but are not limited to:

Those who are married
Those who have children
Those who own assets
Those who have a special needs family member

Only people who do not have assets, a spouse, and/or children may not need a Will.

When Should I Make a Will?

A Will needs to be created and often updated when certain events occur:

When you turn 18
When you marry, divorce, or remarry
When you have children
When you start a business
When you buy a home

Whenever you have a major life change, it is time to make or update your existing Will.

What Goes into a Will?

A Will states who should inherit your assets when you die. If you have children, you can designate who you want to have custody of your children if you pass away. A Will also allows you to appoint an executor (known as a personal representative in some jurisdictions) for your estate. This person will be in charge of administering your estate according to the terms of your Will when you die.

What Should I Avoid in a Will?

There are certain things that are best dealt with through other means rather than a Will. Things that are not appropriate and should be avoided in a Will include:

Retirement plan proceeds
Life Insurance
Living trust property

An estate planning attorney can advise you on the best way to handle these matters. Many of them can complement your Will and work well in an estate plan.

Can My Parents Leave Me Out of Their Will?

Whether or not your parents are able to leave you out of their Will depends on which state you live in. Most states allow this to occur, while in others a parent must leave at least a token amount, such as $1, for the Will to be considered valid.

Can Someone Challenge My Will after I Die?

There is always a possibility someone will challenge your Will after you pass away. Whether or not that challenge is successful is a different question. Some of the most common reasons Wills are challenged include:

That the testator was under undue influence or lacked the capacity to make a Will
That the Will is a fraud/forged
That the Will lacks the formalities required to be valid, such as being signed and correctly witnessed

Having a lawyer help with the process of creating your Will can help prevent successful challenges.

Can I Make a Will without a Lawyer?

It is possible to create a Will without the assistance of a lawyer. However, states can be very specific regarding what is required for a Will to be considered valid. If you create the Will on your own, and it does not meet the legal requirements for validity, it may not be enforceable.

Business Succession

Succession planning is an often overlooked aspect of business ownership. This is a problem because it creates unnecessary risks. When key employees leave the business for whatever reason, the business can be detrimentally affected and go downhill quickly. But with a succession plan in place, leadership remains intact and harm to the business can be avoided.

What Is Business Succession Planning?

Business succession planning involves developing a strategy for what happens when an owner leaves the business, retires, or passes away. It sets out step-by-step instructions for what to do, specifically when it comes to a transfer of ownership. Business succession plans are most critical for small and family-owned businesses and should be included in the owner's estate plan.

Effective business succession planning ensures an organization continues to function following the exit or death of an owner, minimizing the associated costs and disruptions to the business while ensuring its longevity. In sum, business succession plans – if drafted with the right language – minimize risks.

Common Risks Businesses Face without a Succession Plan

Knowing the risks can help you avoid them. Many risks exist when business succession plans are not created for a small or family-owned business. Some of the more common risks include:

Diminished value of the business. A business's success is often based on the relationships that are nurtured over the years. When a trusted owner dies or exits the business, clients and customers want assurances that the business will maintain the same level of quality services, or else they will leave, too.
Loss of trust. If you do not have a business succession plan in place, transitioning from one owner to another will take more time. But time is money, and the longer it takes to recover from the loss of the owner, the more likely clients, customers, employees, and investors will lose their faith in the business and go elsewhere.
Loss of experienced and skilled employees. If leadership fails due to a lack of a succession plan, you put your greatest resource at risk: specialized employees. Skilled and experienced employees are in high demand and so they may look for professional opportunities elsewhere.
Vulnerable to competitors. If a succession plan is not in place and a hungry competitor becomes aware of the situation, they could plan to take over your business to increase their market share.
Potential for conflict. When a business owner dies or exits a business without a succession plan in place, the core values and mission of the business may be questioned. Without the right leadership and quick decision-making necessary to keep the business intact, conflicts may arise among personnel, employees, and others.
Unqualified new leadership. In the absence of a succession plan, mistakes may be made in the rush to fill the gap. If the new person hired to fill the loss is not capable and qualified, it can facilitate all of the above risks.

Again, these risks are just a few examples of what a strong, solid business succession plan can help you avoid.

Types of Business Succession Plans

There are two main types of succession plans: long-term and emergency.

Long-term Succession Plans

Long-term planning involves proactively looking ahead and preparing for an eventual transfer of ownership, such as when an owner retires. It often requires identifying and developing talent over an extended period to prepare individuals to step into key leadership roles.

A long-term business succession plan should be reviewed and updated regularly based on the company's changing needs.

Emergency Succession Plans

An emergency succession plan manages a sudden change of ownership. For example, an owner may die unexpectedly, and this event can send the business into a downward spiral.

An emergency succession plan considers the legal transfer of ownership and interim measures to follow while longer-term plans are developed, such as the appointment of an acting successor.

How to Choose a Successor for Your Business

Choosing a successor for your business often depends on the type of business you own and its legal structure.

A succession plan for a family-owned business may identify a younger family member as the successor. In this case, family dynamics often come into play, on top of practical business considerations.

If the business is not family-owned (or to account for various family dynamics), a succession plan may provide for the sale of the deceased's business interests to another partner, an employee, or a third party, like a competitor.

Tips for Choosing a Successor

When choosing a successor for your business, start by looking carefully at the strengths and weaknesses of any potential successors, as well as their desire to move into an ownership or senior leadership position.

Relevant considerations include assessing and identifying training and mentorship opportunities for potential successors to ensure they are prepared to take on the role when the time comes.

You may also want to seek professional advice from a lawyer as to your options. It's best to do this as soon as possible, as business succession planning can be a complex and time-consuming process requiring detailed consideration.

Documents You May Need for a Business Succession Plan

Business succession planning can be complex, involving the preparation of a range of documents.

It may require existing governing documents – like a partnership or operating agreement or articles of incorporation – to be updated. It may also involve drafting new documents including:

Appraisals or business valuations
Entity purchase agreements, where a company takes out insurance policies on each partner so that in the event of a death, the insurance payout is used to purchase the deceased partner's shares
Buy/sell agreements, enabling the surviving partners to buy the deceased's partners shares from his or her family
Employee stock ownership plans, allowing employees to purchase the departing owner's interest via shares
Management buyout plan, allowing the management team to buy the company

The circumstances of a business and its specific succession plan will determine the documents needed to execute it. A business succession lawyer can advise you on the relevant paperwork in your situation and draft any technical documents for you.

Key Elements of a Business Succession Plan

Business succession plans will and should be unique to your business and your needs. That said, there are some common, key elements that should be included in any and all business succession plans.

Strategic Plan. A strategic business plan explores the current state of the business and its future, including potential risks that should be considered and proactively addressed.
Financial Plan. This plan should determine financial goals and resources as well as financial assets, cash flows, taxes, and projected growth, among others specific to your business.
Ownership or Leadership Transition. Multi-year strategies are needed to address who will own the business in the future and how the transition of ownership will be handled or proceed.
Successor Identification. Three potential outcomes for a transition exist: (1) family member(s); (2) employee(s); or (3) a third party. A strategy must be put into place for the option you choose. Things like skills, impact on the business, resources, and more must be considered.
Governance. If your business is a family-owned one, you want to address what governance will look like: does it involve an advisory board or board of directors or is it more like a family council?

Challenges to Business Succession Planning

Business succession planning is not without its challenges, especially when it comes to family-owned businesses. Issues for consideration include:

Family dynamics
Lack of a competent heir within the family
Tax issues, such as the transfer of ownership within a family, can generate large tax liabilities
Conflicting family goals or ambitions, where family members hold different visions for the future of the business

By obtaining professional advice when creating your business succession plan, you can consider these issues and find out how best to manage them in your situation.

Get a Smart Business Succession Plan: Contact an Estate Planning Attorney Today

Risk reduction is what a smart business succession plan is all about. A business succession planning attorney will take the time to build a solid succession plan intended to significantly reduce risk.

Charitable Giving

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Trusts

In general, people establish a trust for their own financial purposes or to financially protect their family members. Many different types of trusts exist that can accommodate the different reasons people have.

Trusts as Part of an Estate Plan

A trust is a way for a property owner to pass their assets to someone else to protect the assets and to avoid the probate process, if applicable. The trustor, also referred to as the settlor or trust maker, is the owner of the property and transfers it to the trustee. The trustee is the one who manages the property for the benefit of someone else, known as the beneficiary. The beneficiary is a person or entity whom the trust was established.

Trusts can have multiple trustors, trustees, and beneficiaries. Further, for some trusts and some situations, can also be the trustee and/or beneficiary.

As part of an estate plan, a trust can be used to minimize estate taxes (for someone with high assets). But they offer other benefits, too, if well-crafted. A trust can keep your assets private even when you die because a trust does not need to go through probate, and probate is a matter of public record. Further, a trust can protect assets from creditors or help beneficiaries who cannot manage money well. Whatever you need is for a trust, our estate planning lawyer can help make sure the trust you choose and the way it is drafted benefits you and the intended beneficiaries.

Types of Trusts

Specific types of trusts that people can use to protect their assets or pass their property on to someone else come in many forms. However, all of these trusts are either revocable or irrevocable.

Revocable trusts, also known as living trusts, allow the trustor to continue to alter the property in the trust. They can even revoke the trust entirely. This gives the trustor far more control over their property. With that control, though, comes a downside: because the trustor still has access to the property in the trust they created, their creditors can often reach into the trust to satisfy debts owed to them.

Irrevocable trusts, on the other hand, cannot be changed or revoked once the trustor creates one. The trustor relinquishes control over the assets in the trust. Creditors cannot touch those assets once they are removed from your estate. Often, the trustor gains in terms of tax and probate avoidance.

Examples of Different Types of Trusts

Just to give you an idea of what types of trusts there are to address your specific needs, here's a list of some of the most common.

Asset protection trust
Charitable trust
Constructive trust
Special needs trust
Spendthrift trust
Tax by-pass trust
Totten trust

You can also create a trust specifically for your pets, farmland, and even your gun collection.

Benefits of a Trust

As mentioned, trusts are beneficial to avoid probate and taxes. By using a trust (in addition to a will or in lieu of a will), the trust's assets pass directly to the trust's beneficiary when the trustor dies. This means that the assets do not go into the trustor's estate – they are transferred inter vivos, or between living people. As a result, certain estate taxes do not apply to trusts. Using a trust to pass property to your heirs can have tax advantages and can avoid the potential legal complications of dividing your estate or a contested will.

A trust also gives you the ability to create instructions and conditions for asset distribution upon your death–giving you control over your assets even when you are not here. So, if you have a beneficiary whom you want to finish college before disbursement of funds or if you want only a certain amount of funds disbursed at different times of the beneficiary's life, you get to decide those things. Further, you can identify a successor trustee––someone you know who can manage the trust according to the terms and conditions.

Administration of Trusts

What Is Trust Administration?

When trusts are created, the terms for their administration are contained within them. The person who creates the trust is known as the trustor, and the person whom the trustor appoints to administer the trust is called the trustee. The trustee administers the trust by following the terms of the trust and acting in the best interest of the beneficiary (or beneficiaries).

Often, trust administration begins when the trustor passes away, but this is dependent on the trust and its terms and conditions.

How Is a Trust Administered in State?

There are certain steps and procedures that should be followed in order to properly administer a trust. While they may differ by jurisdiction and pursuant to the terms of each trust, some of the more common elements of the process are described below.

Know Your Trust

A trustee needs to be aware of everything there is to know about the trust they are tasked with administering. Reading the terms of the trust is a good place to start. The trustee will also need to gather all documentation they can obtain that will help them to know exactly what they are managing. This can include:

Bank statements
Rental agreements
Life insurance policy
Certified copies of the trustor's death certificate

There may be other documents the trustee needs to understand the trust. The trust itself should clarify what these are.

Secure Trust Assets

After ascertaining what the trust assets are, the trustee will need to secure them. This may entail ensuring the assets are properly titled, as well as taking an inventory of the assets. The trustee will also need to determine what the assets are worth.

Trust assets come in a variety of forms, including life insurance proceeds, real property, investment accounts, and personal property (such as jewelry).

Trustees are often required to open a bank account in the name of the trust. This bank account can hold assets while the trust is administered. It will also provide a way for the trustee to show that they properly handled the assets of the trust.

Notify Beneficiaries

Part of the trust administration process is notifying any of the beneficiaries who are named in the trust. Beneficiaries need to know who the trustee is and the terms of the trust. Jurisdictions vary, and it may be that there is a timeline that must be adhered to for notifying beneficiaries. An estate planning lawyer in your area can advise you on this and other state-specific issues.

Notify Creditors and Pay Debts

The trustee should try to determine to whom the trust may be indebted, and notify them of the trust and that they are the trustee. The trustee should obtain copies of any and all claims against the trust and investigate them to ensure they are a valid debt that needs to be paid. Then, they should take the proper steps to pay the debts, including any funeral or cremation expenses.

Distribute Trust Assets

At this point, it is time for the trustee to distribute the assets of the trust. Generally speaking, before that happens, the beneficiaries must be provided with an accounting of the trust. If they agree with how the trust was administered, they will need to sign off on the accounting. Then, the terms of the actual trust will dictate how the trustee administers the assets. There may be some room for discretion given to the trustee, or the trustee may not have any discretion. It all depends on the way the trustor set up the trust.

Choosing a Trustee to Administer the Trust

Because the trustee has quite a lot of power, it is important to choose a trustee whom you can trust. That said, a trustee cannot refuse to carry out the terms of the trust and cannot act in bad faith. Consider these factors when choosing a trustee:

Time. It will require a lot of the trustee's time to administer the trust. A trustee is tasked with many different responsibilities specific to the trust, like filing income and estate tax returns, selling real estate, maintaining property and records, and finding and notifying creditors and beneficiaries, among other things.
Skills. Is the trustee equipped with the right skills or expertise? Mistakes and mismanagement can happen when the trustee does not quite or fully understand what to do and how to carry out their responsibilities.
Cost. Some trustees, like corporate trustees, charge fees. You need to know what those fees are and how they will impact the trust. But also, a family member appointed as trustee may not charge a fee but may have to hire an attorney, and that will cost them. These and more are things to consider. The burden could be a lot.

Many times people choose close friends or family members as trustees, but you may want to consider someone with the time and expertise even if that will cost more than a family member. In the end, it may save you and your loved ones time and money.

Common Problems with Trust Administration

Unfortunately, problems frequently occur in trust administration. Some of the more common issues are described below. The fundamental issue creating these problems, however, is typically poor drafting of the trust.

Beneficiary Death or Incapacity

Beneficiaries may have passed away or become incapacitated since the trust was created. The trustee needs to ensure all beneficiaries are still living and able to receive their distribution. If not, the trustee will likely need advice from the court on how to proceed. But also, it is a good idea to put into place contingent beneficiaries so that if a beneficiary dies, there is another beneficiary in place to benefit from the trust.

Irrelevant Provisions

When trusts are not reviewed and their terms are not kept current, it is possible that some of the language used will become irrelevant. When this happens, the trustee will typically seek court direction on the best way to proceed.

Beneficiary Disagreement

Beneficiaries may not agree with some of the decisions made by the trustee. This is especially true when the trustee has discretion over the distribution of assets and a beneficiary disagrees with how the trustee uses that discretion. Another example is when a beneficiary does not agree with the actual terms of the trust and contests it. Litigation could ensue.

With all these problems, delays occur. Delays are costly. It is best to avoid these problems by making sure your trust is drafted properly and in compliance with the law.

Charitable Trusts

Charitable trusts are trusts that provide a great way to give back to the community. They are, however, typically irrevocable once created. You must weigh your purpose and needs against the benefits and disadvantages.

Understanding Charitable Trusts

A charitable trust is a way for a person to donate certain assets to a tax-exempt charitable or non-profit organization. There are two different kinds of charitable trusts.

Charitable Lead Trusts

A Charitable Lead Trust (CLT) has a certain amount of its income set to go to a charitable organization. The amount that remains will either stay in the trust or be disbursed to the trust's beneficiaries (designated by the trust grantor). These types of trusts are most beneficial to beneficiaries that do not depend on the trust as a main source of income.

Charitable Remainder Trusts

A Charitable Remainder Trust (CRT) operates differently than a CLT. Beneficiaries are paid a certain predetermined amount, and the remainder is then paid to the charitable organization. These types of trusts are a better choice when the beneficiaries depend upon the money from the trust as a main source of income.

Benefits of a Charitable Trust

There are several reasons why people choose to place their assets in charitable trusts because it's not only the charity that benefits. Here is a brief overview of these benefits.

Tax Benefits

There are certain tax benefits that may be available immediately to donors of charitable trusts, and additional benefits when it comes to reducing the estate taxes.

Asset Protection

Placing property in a charitable trust can be a valuable way to protect assets from creditors.

Creation of Income

Placing assets in a trust and then selling them may be a way to create income without incurring any tax liability.

Disadvantages of a Charitable Trust

There are several reasons why people decide against placing their assets in charitable trusts. Here are a few of those reasons, but it is always best to speak to a charitable trust attorney in State to know for sure what will work best for your needs.

Unable to Amend

Charitable trusts are irrevocable, which means that once it has been established, the terms are unable to be easily amended (if at all). For some, the unpredictability of their financial future and the inability to change the trust should they need the income at a later date is enough to prevent them from choosing a charitable trust.

Cost Effectiveness

Establishing and operating a charitable trust includes costs and fees that are enough to stop some people from using them.

Family Matters

Some family members may not understand how trusts work or do not like the donations being made to the charitable organization, creating tension among family members.

Terminating a Charitable Trust

A CRT is terminated when the income stream that is designated for the beneficiaries (not the charity) ends. The remaining property in the trust is then disbursed to the charitable organization.

A CLT has a certain set term in which it is to operate and then when it ends, the remainder is distributed to the beneficiaries (not the charity).

Sometimes circumstances arise which cause the need or desire for a charitable trust to be terminated early. Nevertheless, as it is irrevocable, it is highly unlikely that early termination is possible.

Spendthrift Trust

Not all of us are good with money. Some of us are just poor managers of it while others just spend it on gambling, other addictions, or whatever the case may be. If this describes someone whom you love and might want to help out financially through a trust, you may not want to risk them spending it all in one night. Fortunately, there are ways to help these loved ones through your estate plan.

Understanding Spendthrift Trusts

A trust is a fiduciary relationship in which a party, known as the trustor, gives another party, known as the trustee, control over a group of assets. The trustee is responsible for managing and distributing those assets for the beneficiary, or beneficiaries, pursuant to the terms of the trust.

A spendthrift trust is a type of trust where the beneficiary's access, as well as the access of any creditors of the beneficiary, to the assets is limited. Spendthrift trusts typically include a variation of the following clauses:

The interest of any Beneficiary of this Trust in the income and principal shall not be subject to claims of his or her creditors, or others, or be liable to attachment, execution, or other process or law and no Beneficiary shall have the right to encumber, hypothecate, or alienate his or her interest in any of the trust in any manner except as provided herein. Nor may a creditor compel a trustee to make a discretionary transfer to a beneficiary. Where the trustee is also a beneficiary, restraint on transfer is invalid against transferees or creditors of the Trustor. In no case shall a disclaimer by a beneficiary be considered a transfer to that Beneficiary.

The interest of the Beneficiary is held subject to a spendthrift trust. No interest in the Trust Funds established pursuant to this Agreement will be transferable or assignable, voluntarily or involuntarily, or be subject to the claims of Party A or its creditors, PNM or its creditors, or SJCC or its creditors other than as provided in the Mine Reclamation Agreement.

There are many other ways in which a spendthrift clause may be worded, but it is important that this language makes it clear the trust is a spendthrift trust. Without a properly worded trust, creditors could try to get the funds or beneficiaries may try to take out more than allowed.

A properly worded clause will clarify that the beneficiary does not have any say in how the trust funds are handled and distributed––any distribution of funds must be carried out strictly in accordance with the instructions provided by the trust.

Two important points about spendthrift trusts exist, and they are:

Beneficiaries cannot give away or take loans out against the trust funds or assets; and
Creditors cannot access trust funds or assets.

These two points are the reason why so many opt for spendthrift trusts because other trusts do not provide the same combination of benefits and controls.

Who Creates Spendthrift Trusts?

You may have assets that you want loved ones to inherit, but the beneficiaries of these assets may not be the best managers of finances. Spendthrift trusts, in such situations, are created by people who want to protect their estate from poor or negligent spending habits while providing financial security to beneficiaries.

Who Are Good Beneficiaries of Spendthrift Trusts?

Though anyone can benefit as a beneficiary of a spendthrift trust, it is best suited for someone who:

Cannot manage money well
Cannot be trusted with a large sum of money
Spends way more money than they should
Has a disability as an adult that interferes with their ability to manage finances on their own
Has a mental illness that interferes with their ability to manage finances on their own and/or induces bad judgment, especially in terms of money
Has an addiction, like gambling, drugs, and/or alcohol

The beneficiary of a spendthrift trust is someone whom you want to help financially but who cannot responsibly manage finances, so you need to protect their inheritance for them.

How Does a Spendthrift Trust Work?

Instead of a beneficiary receiving full access to their funds all at once, under the terms of a spendthrift trust, they receive them in increments over a specified period. The pay structure can be set up in a number of ways.

Speaking to an estate planning attorney is the best way to determine the best pay structure to satisfy all your concerns while meeting the intended goals of the trust.

Choosing a Trustee of a Spendthrift Trust

The trustee is in charge of the trust funds and disburses the funds according to the terms of the trust. This person typically has complete control over the trust funds and assets over the life of the trust. This means you want to make sure you can count on the trustee to do what is fair, what is expected, and what is in accordance with the terms of the trust.

Pros of a Spendthrift Trust

Many advantages of a spendthrift trust exist, and most of those benefits have already been addressed. Here is a summary of the benefits to keep in mind when deciding what you want to do:

When a beneficiary exhibits negligent spending habits, the spendthrift trust can prevent them from squandering their entire inheritance at once.
A spendthrift trust can protect the beneficiary's inheritance from creditors.
A spendthrift trust may bypass the need to go through probate.
The terms of each spendthrift trust may be customized, as allowed by state law, to meet the needs of a particular situation.

Cons of a Spendthrift Trust

There are some disadvantages to using spendthrift trusts in some states. Below are some of the disadvantages to keep in mind as you determine how you want to set up your estate plan:

Some debts, like alimony or child support, may not be exempt from a spendthrift trust.
A spendthrift trust may be irrevocable, meaning that the trustor is not able to make changes whenever they wish.

It is important to speak with an attorney in your state regarding the laws and provisions that regulate spendthrift trusts in your jurisdiction.

Testamentary Trusts

Planning for the future well-being of your loved ones is important. Part of that process is creating a comprehensive estate plan. A testamentary trust can be a great tool for most estate plans but not necessarily all estate plans. It depends in part on your purpose.

Understanding Testamentary Trusts

A testamentary trust is created by and contained in the terms of a person's Will. The trust is not actually created until the person that created the Will dies. Upon their death, the trust is created and funded.

Generally speaking, testamentary trusts are typically created for loved ones with special needs, minor children, and anyone else who inherits a large sum of money when the trust funds.

Pros of a Testamentary Trust

There are advantages to creating a testamentary trust, including:

Costs

Unlike living trusts, which are created while the trustor is still alive, a testamentary trust can be less costly and more simple to create.

Ease of Funding

It is possible to create the testamentary trust in a Will and have it funded by a life insurance policy that pays when the creator of the Will dies. This makes funding the trust a relatively simple matter.

Control

A testamentary trust allows its creator to retain control of their assets while they are alive. Until they die, the creator may change the terms or altogether revoke a testamentary trust.

Asset Protection

A testamentary trust must be administered according to its terms. This means that it can last for as long as the creator wishes, and it allows for the protection of assets that are passed from one generation to the next.

Cons of a Testamentary Trust

There are disadvantages to testamentary trusts that you should consider. Some of these disadvantages are described below.

Trustee Matters

When the trust is created, a trustee is named. The trustee is responsible for administering the trust according to its terms and on behalf of the beneficiaries. There is a lot of responsibility placed on a trustee, and it can be for an extended period of time. It is important that the person chosen is trustworthy, dependable, and willing to perform the duties required of them. Also, should they fail to properly carry out their responsibilities, it can be difficult to have a trustee removed or replaced.

Probate Process

Unlike some other types of trusts, a testamentary trust must pass through probate. Probate is the process of going through the courts to administer a deceased person's estate. It is often tedious and time-consuming.

Public Knowledge

Testamentary trusts are public, unlike some trusts that are administered privately. If it is important to you that the terms of your estate be kept private, a testamentary trust may not be for you.

Testamentary Trust Revocation

While alive, the trustor is able to change the terms of the testamentary trust whenever they choose to do so. However, because a testamentary trust is not actually established until its creator dies, once it is established, it is typically irrevocable, and the trust must be administered by the trustee in the way the trust requires.

Trust Contests

Trusts are a great tool for estate planning purposes. You can continue to control what happens to certain assets through a trust established for loved ones or others, even a nonprofit organization whose mission aligns with your values and beliefs. Trusts are meant to be carried out in accordance with the terms and conditions. Sometimes, though, challenges arise. You may not think that is possible, but it is. There are certain situations that could raise questions due to allegations of undue influence or mental competency.

Can a Trust be Challenged?

Trusts can be challenged, much in the same way that wills can be challenged. The person(s) challenging the trust should have an interest in the trust or would have had an interest under the rules of intestacy.

Typically, trusts may be challenged in whole or in part. In other words, if someone who has an interest in the property only disagrees with a portion of the trust, they may challenge that part alone. If they disagree with the trust in its entirety, they may challenge it in full. The ability to challenge the trust varies by jurisdiction. The same is true for amendments to a trust. It's also important to remember that courts like to honor the intent of the trustor.

In order to discourage their friends and family from contesting the terms of their trust after they pass away, some trustors include no-contest clauses in their trusts. A no-contest clause generally states that any person who contests the trust and is unsuccessful in that contest, will not receive anything from the trust or in the way of inheritance. No-contest clauses are only enforceable in some states.

How Are Trusts Contested?

Depending on the jurisdiction, there may be a statute of limitations on the amount of time allowed to contest a trust. It is important to verify whether a time restriction exists, and, if so, exactly what that time restriction is.

There are also restrictions on who is allowed to contest a trust. In order to contest a trust, an individual must have a stake in how the property is dispersed. Proper parties include:

Beneficiaries of the trust
Persons who would inherit under the rules of intestacy
Trustee after the trustor passes away

When contesting a trust, most people obtain the assistance of an estate planning lawyer in their state. This attorney will know the laws and rules on how to properly contest the trust. At Law Firm Name, our estate planning attorney in State handles all types of trusts and can assist when a trust is contested.

Common Grounds for Trust Contests

You must have grounds to contest a trust in State. Different grounds to challenge a trust exist, and they vary by jurisdiction and the particulars of each trust. However, there are some grounds that are more common than others, including undue influence, lack of mental capacity, and fraud.

Undue Influence

Undue influence occurs when a person creates a situation in which a trustor's ability to act of their own free will is impacted. The person using undue influence may use actual force, coercion, or duress to have the trustor act in a way that is favorable to them. Courts will look at the circumstances to see if there was a relationship between the parties and if the person accused of undue influence abused that relationship.

An example of this could include a father who remarries. At one point he may have told his children from a previous marriage that he was leaving all his assets to them, but then – without telling the children – he creates a trust for the new spouse. Upon his death, the children find out about the trust. They could challenge the trust, arguing that the spouse unduly influenced his decision.

Mental Incapacity

A person must be of sound mind and have the cognitive ability to create a legally enforceable trust. When there is evidence that they did not have the mental capacity to create the trust, the trust may be challenged and subsequently invalidated.

An example of this could include a decedent who, prior to their death, executed an amendment to the trust. The amendment significantly alters the contents, terms, and conditions of the trust. At the time the decedent executed the amendment, however, they were suffering from dementia. This amendment could be successfully challenged based on a lack of mental capacity.

Fraud

When there is proof that a trustor was “tricked” into signing the trust document, it is unlikely that the trust will survive a challenge.

An example of this would be if a close relative told the trustor they were signing a document needed for the sale of a vehicle, and they were actually signing the document establishing the trust.

Other Grounds

There are other grounds that could be viable reasons to contest a trust.

Forgery occurs when a trust or an amendment to it is fraudulently signed by someone other than the decedent.
Elder abuse occurs when a trustor is an elderly person, and that person was the subject of financial, physical, or psychological abuse that played a role in the trustor executing a trust or an amendment.
Revocation occurs when the decedent revokes a trust by executing a new trust that modifies or destroys the old one.
Mistake occurs when the decedent executed a trust by mistake or was mistaken about the laws – this is why it is very important to have an estate planning attorney in City or County who is knowledgeable about trusts to help you create and execute a proper trust.

There may be more than one ground to contest a trust, too. Making sure you provide all grounds to contest a trust will increase your chances of success.

Three Ways to Protect a Trust from Challenges

There are steps that a trustor can take to reduce the risk of their trust being challenged, or if it is challenged, from being modified or eliminated. Some of the best ways to be proactive in protecting a trust include establishing capacity, demonstrating legal compliance, and procuring a second opinion.

Establishing Capacity

One of the most common challenges to trusts is that the trustor lacked the capacity to understand what they were doing when the trust was created. To prevent this from happening, it is a good idea for a trustor to take steps to prove their competency. This may involve having a complete medical exam, both physical and mental.

Ensuring Trust Is Legally Compliant

It is imperative that a trust complies with all governing laws and regulations. If it does not, the floodgates for someone to challenge the trust are opened. The best way to ensure compliance is to obtain representation from a lawyer with experience in estate planning.

Obtaining a Second Opinion

While one licensed attorney is all that is needed to execute a compliant trust, having a second licensed attorney review the trust may be a good idea. This is not because there is a lack of confidence in the first attorney, but because a court is much less likely to find a flaw in a trust that two independent estate planning attorneys have stated is valid.

What Happens to Trust Assets after a Successful Challenge to a Trust's Validity?

Typically, two possible outcomes could result from a successful challenge to a trust:

Trust assets will be distributed according to the terms and conditions or provisions set forth by a previous estate plan; or
Trust assets will become part of the intestate estate if a previous estate plan does not exist.

Whoever are the beneficiaries or heirs of the estate plan or intestate estate will benefit from the successful trust contest.

Trustee Duties and Liabilities

Trusts are a common tool used in estate plans. Wills are no longer the dominant method to secure property and assets for loved ones. Trusts, in fact, provide a number of benefits to the settlor or trustor – the person who creates the trust – while they are still alive, so in many ways, it makes sense to create a trust. The problem is this: appointing a trustee who will comply with the law, fulfill the terms of the trust, and always act in good faith. Appointing the right trustee is critical because they have many obligations to uphold.

What Are Trustees?

A trustee is a person, or an entity, that acts as a custodian for assets placed in a trust. A trustee may be responsible for administering, managing, and distributing trust assets. A trustee has a fiduciary responsibility to conduct their duties in a way that adheres to the rules of the trust and benefits the beneficiaries of the trust. A trustee must typically be at least 18 years of age and of sound mind. They cannot be the sole beneficiary of the trust. A trustee may also be an entity, such as a bank or corporation.

What Are the Duties of Trustees?

Being a trustee is a major responsibility, and it should not be taken lightly. A trustee has certain duties they must fulfill. These obligations are generally listed in the terms of the trust itself and may include a number of tasks as described as examples below.

Document Management (Record Keeping)

A trustee should keep records of everything they do in their role as trustee. They must keep copies of all receipts and proof of all debits and necessary expenditures.

Accounting

A large amount of money can pass into and out of a trust. The trustee is responsible for keeping a detailed accounting of all income and expenses. These records are essential to appropriately undertake tax requirements and to protect the trustee in the chance their handling of the trust is ever scrutinized.

Asset Distribution

A trustee is responsible for distributing the trust assets pursuant to the terms of the trust. In some cases, this will require the trustee to use their discretion to determine which beneficiaries (if there is more than one) should receive a distribution and in what amount. In other cases, the terms of the trust will dictate how and to whom the assets should be distributed.

Trustee Meetings

When a trust has more than one trustee, they must meet to ensure they are on the same page with the trust administration.

File and Pay Taxes

Some trustees must file and pay taxes. The trustee is responsible for ensuring this is taken care of and typically does so by hiring a CPA.

Asset and Property Management

Trusts often contain a mixture of assets, from cash money to real property. A trustee is responsible for protecting and preserving these assets. Sometimes, this duty includes collecting on debts that are owed to the trust, such as rent. It may also require the trustee to obtain the necessary insurance for trust assets.

Common Breaches of Trustee Duties

Too often, trustees breach their duties. Some of the most common ways they do this include breaches of trust, funds misappropriation, poor management, fraudulent acts, failure to act, and engagement with a competitor.

Breach of Trust

Trustees owe a fiduciary duty. They must never act in a way that is contrary to the best interest of the beneficiaries of the trust. When they do, they may have committed a breach of trust.

Misappropriation of Trust Funds

When a trustee uses trust funds for any purpose other than for which the funds were intended, the trustee may be held liable for misappropriation of trust funds.

Bad Management

Trustees have responsibilities, such as asset distribution. When they fail to follow through with those responsibilities or do not follow through with them correctly, they may be held liable for bad management.

Fraud

A trustee who engages in an intentionally bad act that benefits them but is contrary to the interest of the beneficiaries may be held liable for fraud. An example would be a trustee stealing funds from a trust.

Failure to Act

A trustee cannot choose to take no action in administering the trust. They must carry out certain tasks, like:

Gathering and reviewing all estate planning documents if they are connected to the trust
Reviewing the trust agreement to understand everything about it
Consulting with an attorney or financial advisor when they have questions
Transferring assets into the trust as required or upon the settlor's death
Creating an inventory, identifying the location of assets and their value
Establishing a bank account for tax purposes and for any expenses related to the trust
Locating and communicating with beneficiaries to carry out their duties in full

Any failure of any of the above as required by law or the trust can create serious problems for both the trustee, the settlor's estate, and the beneficiaries.

Bad Business Activities

When the trust owns a business, the trustee is bound to act in the business's best interest, which is also the best interest of the trust. Engaging a business that competes with the business owned by the trust can – if the former business benefits from the trustee's acts – be a violation of the trustee's duty.

Can Trustees Be Held Liable for Breaches?

Trustees can be held liable for the losses they cause to the trust they are administering. Typically, beneficiaries can recover assets of the trust that were distributed improperly if they can trace them.

Problems may arise in recovering the assets if an innocent purchaser bought them for value. There are, however, other avenues available for the beneficiaries and anyone else (such as a creditor) who suffered a loss due to the trustee's breach or wrongdoing.

What Should You Do If a Trustee Has Breached Their Duty?

If you have suffered a loss due to a trustee breaching their duty, it is in your best interest to contact a lawyer in your jurisdiction that handles estate planning matters. They will be able to explain to you the options you have to recover from the loss you have sustained.

Trusts FAQ

Trusts can be very useful, but they are not for everyone. Here, commonly asked questions are answered.

What is a Trust?

A trust is a fiduciary relationship wherein one person or entity, known as the trustee, has custody and control over certain assets. The custody and control of the assets are given to the trustee by the trustor. The trustee has the responsibility of managing the assets according to the terms of the trust and for the benefit of the person, persons, or entity the trust was created for. The person, persons, or entity benefiting from the trust is known as the beneficiary.

There are different types of trusts designed for various situations. Trusts are often used as an estate planning tool along with Wills.

When Do I Need a Trust?

Trusts can be used at any age and for a variety of reasons. Some of the most common reasons people will benefit from the use of a trust include:

Inheritance

If you have inherited a large number of assets, it is a good idea to look at a trust to manage them and keep them safe. It is also beneficial to place your own assets in a trust to protect your children's inheritance.

Special Needs Family Member

If you have a child or other member of your family who has special needs, a trust is a common way to protect any assets they may have access to. The trustee will ensure the proceeds of the trust are used for the special needs family member and not for some other purpose.

Privacy Matters

The terms of trusts, unlike Wills, are not made public. Trusts are a good choice if you do not want the details of your financial matters made public.

What are the Benefits of a Trust?

Benefits of a trust vary, but can include:

Keeping certain assets judgment-proof
Providing income to a special needs family member without having that income render them unable to receive public assistance
Tax benefits
Ability to avoid the probate process

There may be other benefits available to you depending on the circumstances of your situation.

What are the Disadvantages of a Trust?

Some trusts are irrevocable, meaning that once created, the trustor is unable to change the terms of or revoke the trust in its entirety. This loss of control is a huge disadvantage to many. That said, the trust may still be terminated, but it can be a lengthy process involving all parties to the trust.

Fortunately, it is possible to create revocable trusts (trusts that can be changed), but these types of trusts vary in the purpose that may not reflect the reason you created an irrevocable trust.

Another disadvantage is the amount of paperwork involved in setting up a trust and the costs associated with creating and managing it.

How Do I Terminate a Trust?

The ability and process to terminate a trust will depend upon the terms of the trust itself. Some make the process easy and the trustor may retain the ability to terminate the trust up until the moment of their death. Others are formed in such a way that once they are formed, termination requires a complex process and, in the end, may not be eligible for termination.

Irrevocable Trusts

Irrevocable trusts can be an important component of estate plans. Much of it depends on the purpose of the trust. There are many considerations, however, that must be taken into account before creating one.

Understanding Irrevocable Trusts

An irrevocable trust is a trust that cannot be changed, amended, or terminated after it is created (with some limited exceptions). By creating an irrevocable trust, the grantor is relinquishing their control over the assets placed in the trust. Irrevocable trusts are administered by a trustee for the benefit of the trust beneficiaries.

Pros of an Irrevocable Trust

There are various reasons a grantor may choose to place assets in an irrevocable trust, including:

Tax Avoidance

It is possible to reduce your tax liability by moving taxable assets from your estate to an irrevocable trust. This is typically a more beneficial move for owners of large estates.

Asset Protection

Irrevocable trusts provide protection to the assets that they contain. This includes protection from creditors, judgments, and divorce. People employed in highly litigious professions are most likely to use irrevocable trusts for this purpose.

Beneficiary Protection

Irrevocable trusts are a useful estate planning tool when you are providing for a family member with special needs. These trusts are often referred to as irrevocable special needs trusts, and they allow a beneficiary with a disability to receive funds for their living expenses without that income being used to disqualify them from receiving government benefits.

Cons of an Irrevocable Trust

There are various reasons a grantor may choose against placing assets in an irrevocable trust, including:

Loss of Control

If you desire to maintain control over your assets, an irrevocable trust may not be the best choice for you. Changing the terms of an irrevocable trust is something that is not easily accomplished after it has been formed unless all parties (trustee and beneficiaries) are on board.

Unforeseen Circumstances

While the formation of an irrevocable trust may seem like a good idea when it is established, circumstances change, and it may not be the best choice down the road. Even so, you will not be able to easily change the terms to fit your new situation.

Terminating an Irrevocable Trust

In limited circumstances and jurisdictions, it may be possible to terminate an irrevocable trust by agreement when all parties, including the trustee and the qualified beneficiaries, agree to do so. Modification or termination of an irrevocable trust may also occur pursuant to a judge's order. Judges are more inclined to make these changes or terminate an irrevocable trust when it is obvious that the purpose of the trust has been fulfilled, has become illegal, or is defeated by compliance with the terms of the trust.

Otherwise, irrevocable trusts will end naturally pursuant to the terms that were established when the trust was created. It is typically dependent upon an event, such as the death of the person that created the trust, or it will end on a certain date.

Irrevocable Life Insurance Trusts

ILITs are life insurance trusts that legally own a life insurance policy. The grantor cannot revoke or amend the policy after it has been established.

What Is an Irrevocable Life Insurance Trust?

ILITs are legal entities that are established through a written or statute agreement to own a life insurance policy. The grantor, who is usually the person who created the trust, cannot revoke, or amend the policy after it has been established.

The ILIT is the beneficiary of the life insurance policy, and it holds the title to it even though the grantor is still alive. After the grantor passes away, the proceeds of the policy are distributed to the trust's administrators or trustees.

How an Irrevocable Life Insurance Trust Works

Life insurance can be used to transfer a premature death risk to an insurance company and provide financial support to the surviving family members. It can also help provide liquidity during a person's life, as physical assets can be sold tax-free at the time of death. However, its use in estate planning may be problematic due to its tax implications.

Although life insurance proceeds are generally not subject to federal taxes, they can still be subject to state and federal estate taxes when the assets are distributed to the surviving family members. This is because the income from the policy can be included in the total value of the person's estate. Some people have tried to exclude life insurance from their estate to minimize their estate tax liability.

An irrevocable life insurance trust can be used to minimize the estate tax liability of life insurance. If the policy is owned by a trust, the proceeds are not considered part of the estate, and this allows for tax relief.

An ILIT allows a trust to purchase a life insurance policy or transfer it to the trust. The document that establishes the trust will then appoint a trustee to manage the assets of the trust. The trustee will also provide the terms of the distribution of the benefits from the trust. Since the trust is irrevocable, it can't be changed after it's established.

Let's assume that John lived in Vermont and had a $1 million insurance policy and a $4 million home at the time of his passing in 2021. His gross estate value increased to $5 million after he died.

Although the $11.7 million estate tax exclusion is well below the federal estate tax rate of $11.7 million, John's estate would most likely be subject to state estate tax due to the state's estate tax exclusion. If he had an ILIT three years before he died, his policy would be valued at around $4 million and would be excluded from his estate, which would eliminate both state and federal estate tax liability.

Types of Irrevocable Life Insurance Trusts

There are two kinds of ILITs:

A funded ILIT is a type of trust that allows the trustee to use the insurance policy's premium to pay for the trust's expenses. However, this arrangement can also result in gift tax consequences if the additional assets are given to the trust.

An unfunded ILIT is a type of trust that relies on the grantor's life insurance policy for its funding. The grantor annually contributes to the trust to help the trustee pay the premiums.

Pros and Cons of Irrevocable Life Insurance Trusts

The advantages and disadvantages of ILITs include:

Pros

Lower federal and state estate taxes
Asset protection against creditors
Increased asset control

Cons

Potential for gift taxes
Inability to change the trust agreement
Three-year waiting period before gross estate exclusion applies

Pros Explained

The advantages of an irrevocable life insurance trust include:

The lower federal and state estate taxes are also beneficial for ILITs. The proceeds of the life insurance policy can be excluded from the grantor's estate, which reduces or eliminates both federal and state estate tax liability.

The asset protection provided by an ILIT eliminates the possibility of creditors placing a lien on the assets that are transferred to the trust. Also, the beneficiaries' creditors can't place a lien on the insurance proceeds if the funds remain in the trust.

The grantor can also dictate the trust's ultimate purpose and use of the funds. This allows them to control the financial decisions of the trust and ensure that the beneficiaries are satisfied with the terms of the agreement. For instance, if a beneficiary reaches a certain age, the insurance proceeds can be paid out according to the grantor's terms.

Cons Explained

The drawbacks of an irrevocable life insurance trust include:

If the trust agreement is not in compliance with certain provisions, an ILIT could potentially trigger gift taxes on the withdrawals made by the beneficiaries. These include the so-called Crummey provisions, which allow the use of the gift tax exclusion.

The grantor's ILIT is also not allowed to be revoked or amended once it has been created. This makes it important that the beneficiaries and the attorney work together to structure the trust in a way that minimizes the risk of gift and estate taxes.

The three-year waiting period before the estate exclusion takes effect is also important for ILITs. The policy's proceeds can't be excluded from the estate if the death occurs within this period.

Note

If a grantor passes away before the three-year waiting period expires, they can't immediately transfer their assets to a trust to avoid estate taxes. Therefore, it's important that they make estate planning plans now.

Key Takeaways

Administered through an irrevocable life insurance trust, the grantor's life insurance policy is owned by the trust.

An irrevocable life insurance trust is commonly used to minimize the estate taxes on the grantor's estate. It can also provide more money to the beneficiaries.

ILITs can either be funded with additional assets or unfunded, leaving only the insurance policy in the trust.

Disadvantages of ILITs should be considered. Among these are the three-year waiting period, the inability to amend the trust, and the risk of gift taxes if the agreement is poorly drafted.

Intro to Elder Law

As people get older, they face many important decisions regarding their health and well-being. One of the most common questions they ask is where they should live and what they should do at the end of their lives. Elder law attorneys can help them make informed decisions.

This section aims to provide a variety of articles on elder law, including topics such as guardianship and advance healthcare directives. It also covers other health care and living arrangements issues.

What is Elder Law

The field of elder law is focused on the concerns of older people. It includes a wide range of tasks, such as preparing advance health care directives and filing disability and Social Security claims.

Making Plans for Old Age

Many people worry about their retirement years. Individuals with serious illnesses may need help managing their affairs, while those with poor health may require assistance. Having an attorney help them address these issues can help ease the burden on their families.

One of the most important areas of elder law practice is estate planning. This process can help individuals create a will or trust to distribute their assets after they die. Having the proper documents can help individuals secure the benefits they need, such as Medicare, Social Security, and state-based aid.

Advance Care Directives, Power of Attorney, and Guardianship

When an individual becomes incapacitated, they may not be able to make or communicate their decisions. Having the proper documents can help individuals manage their affairs. One of the most important steps that an attorney can help individuals take is drafting an advance healthcare care directive. This type of document can provide an individual with the necessary information to make informed decisions.

Powers of attorney can also be granted to individuals to manage their financial affairs. If an individual's plans don't work out, the courts can appoint a guardian or a conservator. Having an attorney help individuals avoid these situations can help ease the burden on their families.

Advocates for the Elderly

Being trained advocates can also help elder law attorneys protect their clients' interests. In the case of nursing homes, residents have certain rights that are expected to be respected. Health care decisions can also involve questions about who should be in charge.

Unfortunately, many agencies can wrongfully deny or reduce the benefits that are intended for older individuals. This can lead to abuse, fraud, and even death. Having an attorney can help individuals ensure that their rights are protected.

End of Life Issues

It can be hard to talk about end of life issues, especially since it's common for people to feel afraid about their future and the future of their friends and family. However, there are some things that people can do to prepare themselves for the future. One of these is to make sure that they're ready to enjoy the remaining days of their lives.

The legal system is often called upon to address end of life issues. One of the most common concerns that people have is when they become incapacitated. Although healthcare decisions are still being made, financial matters still need to be managed. This article aims to provide an overview of some of the most important end of life issues that people should consider.

Healthcare Decisions

As people get older, they may no longer be able to make healthcare decisions for themselves. This can affect their ability to communicate with their doctors and other family members. Although doctors have their own ideas on what should be done, friends and family may not agree on the best course of action. There are various options that people can consider to deal with end of life issues.

Prepare an Advanced Health Care Directive

A healthcare proxy, also known as an advance health care directive, is a non-binding document that states an individual's preferences for healthcare services should they become incapacitated. It can be used to specify what type of treatment they would like to receive, as well as other issues such as artificial life support and organ donation.

An advance health care directive can be very easy to create, and it can be used to communicate an individual's wishes to their doctors and other family members. However, it can't be used to resolve disputes between doctors and other family members.

Prepare a Living Will

A living will is a type of document that provides an individual's wishes for their own healthcare decisions. It can be used to communicate an individual's preferences for treatment, as well as other issues such as financial and medical matters. Some people create a living will as a way to direct their doctors to withhold certain types of treatment, while others use it to allow them to receive all possible means of prolonging their lives.

Grant a Power of Attorney for Healthcare

A power of attorney for healthcare is a type of document that allows an individual to appoint someone to make healthcare decisions for them. It can be used to provide a person with the authority to make decisions on their own behalf. This type of document can be very detailed and can be used to give an individual's friends or partners the ability to make these decisions for them.

Financial Decisions

As people get older, their financial situation can become more challenging. Although healthcare decisions are still being made, many people lose the ability to manage their own affairs. This can be a huge burden that people can carry around. Having the proper tools and resources can help people manage their finances.

One of the most common types of documents that people can consider is a financial power of attorney. This type of document allows an individual to manage their financial affairs in the event that they become incapacitated. It can be used to pay bills and taxes in their name, manage their investments and real estate, and buy insurance.

A living trust can also be a type of document that allows people to manage their finances. It can be used to pool all of their assets into a trust that is managed by an appointed trustee. This type of arrangement can be very flexible, and it can be used to give an individual the ability to make changes to the trust instrument.

It's important that people seek the advice of an attorney who is knowledgeable in estate planning law.

What are Advance Directives

One of the most important things that people can do in the event that they are unable to make healthcare decisions on their own is to create an advance health care directive. This type of document can be used to communicate an individual's wishes to their doctors and other family members.

What Exactly are Advance Directives?

An advance health care directive is a type of legal document that allows an individual to express their wishes regarding the type of medical treatment that they would like to receive. It can also be used to instruct a person on their behalf in the event that they are unable to make these decisions on their own. These documents are very useful in the event that an individual is experiencing a medical emergency.

The two main types of advance health care documents are the living will and the healthcare power of attorney. Although each state has its own laws regarding the use of these documents, it can be very different from one state to another. For instance, in some states, family members can make healthcare decisions for their loved ones, while in other states, the requirements for a legal designated decision-maker are very different.

When Do Advance Directives Become Effective?

In most states, advance health care directives can become effective after a doctor has certified that an individual is not able to make their own healthcare decisions. They can also be used to tell a person on their behalf that they are in a condition that is specific to that state's living will law.

An advance health care directive can only be valid if it has been signed by two witnesses, and the person who you name as the health care agent is not a witness. In some states, the documents must also be accompanied by an oath of authenticity.

The Living Will

A living will is a type of legal document that allows an individual to express their wishes regarding the type of medical treatment that they would like to receive.

Although the term healthcare declaration or medical directive may be used interchangeably with living will, the purpose of living wills is to guide and inform doctors and other healthcare providers about an individual's wishes at the end of their lives.

A living will can become effective after a doctor has certified that an individual is not able to make their own healthcare decisions. This type of legal document can also be used to tell a person on their behalf that they are in a condition that is specific to that state's living will law.

Healthcare Power of Attorney

A healthcare power of attorney is also a type of legal document that allows an individual to appoint a legal representative on their behalf to deal with their healthcare needs in the event that they are unable to make their own decisions.

A healthcare power of attorney can become effective after a doctor has certified that an individual is not able to make their own healthcare decisions.

Out of State Advance Directives

The question of whether an advance health care directive can be honored in another state is a matter of interpretation depending on the laws in that state. For instance, if the laws in your home state match those in another state, then an out-of-state advance directive can be honored. However, other states may not allow an out-of-state advance directive to be issued.

What to Do With a Completed Advance Directive

If you are planning on creating an advance health care directive, then it is important that you make multiple copies of the document and keep them in a safe place. Since you never know when you will need it, it is a good idea to give your doctors, friends, or other family members copies of the completed document. You can also bring it with you to the hospital for any type of surgery or other procedure that requires a stay.

Before you start creating an advance health care directive, it's important that you first consult an attorney about the various legal issues that you might have.

Medicare

Most retirees are worried about their healthcare costs in retirement. Unfortunately, many do not plan for these expenses due to the overwhelming amount of information about healthcare.

Unfortunately, many people do not plan on their healthcare expenses in retirement. They often find that their actual spending on these expenses is significantly different from their projected budget. To help people understand their current expenditures, the US Bureau of Labor Statistics conducts regular surveys about Americans' healthcare costs.

According to the data collected by the Bureau of Labor Statistics, the average consumer over 65 years old reports that they have a total annual budget of $6,724 for healthcare services. Some of the services they cover include: insurance premiums, Medicare Part D and Part B, prescription drugs, and medical supplies.

U.S. Bureau of Labor Statistics Consumer Expenditure Survey, 2017-2018.

Medicare is a government health insurance program for people who are 65 years old and older. It also covers disability benefits.

Medicare is a federal program that provides healthcare coverage to people aged 65 and older and those with certain types of disabilities and illnesses. It does so by controlling the medical costs that individuals encounter as they get older. However, its benefits don't cover everything.

What is Medicare?

Medicare is composed of four parts: Part A, Part B, Part C, and Part D. Each of these plans provides specific coverage and has varying cost.

Part A covers hospital care and related services.
Part B covers doctor appointments and outpatient medical care.
Part C covers the same benefits of Parts A and B but is offered by private insurers.
Part D covers prescription drugs.

Here's what you should know about Medicare coverage and some of the expenses that come with it.

If you are 65 years old and have been a US citizen or legal permanent resident for five years, then you are automatically eligible for Medicare. It also covers some people with a disability who are under the age of 65. Usually, people with disability insurance can get in touch with Medicare after two years.

People with end-stage renal disease, also known as kidney failure, are automatically enrolled in Medicare when they sign up. Also, people with amyotrophic lateral sclerosis, also known as Lou Gehrig's disease, are entitled to benefits when they start their disability.

Important Medicare Enrollment Dates:

Understanding Initial and Special enrollment dates, and requirements for each, is important.

The dates that are important for people who are planning on signing up for Medicare are typically the same as those for other healthcare plans. They help prevent late enrollment penalties and coverage delays. If you are already eligible for Medicare, then you have a seven-month initial enrollment period.

You can sign up for Medicare during the 7-month period that starts three months before you turn 65 and ends three months after you reach the age of 65. This includes the month you turned 65 and the month you turned 65.

If you were not able to sign up for Medicare when you first became eligible, then you can still sign up during the General Open Enrollment Period, which lasts from January 1 to March 31. This period provides people with the opportunity to sign up for their coverage before it starts on July 1. If you have a late enrollment penalty, it's a permanent penalty that will keep your premiums the same regardless of whether or not you have insurance.

Here is an example:

When John retired from his job at 64, he decided not to continue his health insurance coverage. He knew that he would eventually be able to sign up for Medicare, and he was still very healthy when he turned 65. However, when he turned 67, he was more of a risk and decided to enroll in Medicare.

Two years after he became eligible, John was surprised to learn that he had a late enrollment penalty. He was required to pay a 20% penalty, as well as a 10% increase on his annual premium.

If you are still working and have health insurance through an employer-sponsored plan, then the recommended enrollment dates for Medicare may not apply to you. For instance, if you are still able to work and have a company-sponsored plan that provides coverage for you at age 65, then you might not need to enroll in Medicare right away.

If your company's health insurance plan ends, then you may be subject to a special enrollment period. This is because, if you have a long-term disability or are covered under a COBRA program, then you might not be able to keep up with the changes in the healthcare industry.

Although COBRA is not considered to be part of the end of your company's healthcare coverage, it may still be required to enroll in Medicare if you are still eligible. This is because some employer-sponsored plans require people to sign up for Medicare when they are initially eligible. You should speak with your company's benefits representative to determine if this is a requirement.

If you are a group retiree who is still working and have health insurance through an employer-sponsored plan, then you might be able to lose some or all of your medical coverage for yourself and your family if you choose a new Medicare Part D plan.

Original Medicare

Medicare is a type of healthcare system that is managed by the federal government. It provides people with the opportunity to see a doctor that accepts their Medicare assignment.

Medicare Part A (hospital insurance)

Medicare Part A covers the cost of nursing home care, inpatient care, and other types of healthcare services. It does not provide coverage for long-term care or custodial care.

In addition to providing coverage for healthcare services, Medicare Part A also has a deductible that is set at $2,560 in 2022. This means that patients must pay a portion of the bill. For instance, if a person goes to the hospital for the first 60 days, then they will not have to pay a co-insurance fee. However, they will typically pay around $400 a day for the rest of their stay.

Most people don't pay premiums for Medicare Part A if they or their spouse paid Medicare taxes for at least 10 years

If you are one of the millions of people who are affected by the payroll taxes that are included in the Medicare taxes, then you might be able to qualify for a free premium-free Medicare Part A. However, this type of healthcare insurance is still available to some people with a high monthly premium.

Medicare Part A: If it's free, why not take it?

If you're still working and have been with the same company for 10 years, then you might be able to receive a free Medicare Part A. This type of healthcare insurance covers the cost of in-patient care and hospital bills.

If you're still working and have group health insurance through your company, then you might be able to receive a free Medicare Part A. This type of healthcare insurance can help you lower your out-of-pocket costs and provide you with better coverage.

But as with so many aspects of Medicare, there are caveats, exceptions, and potential pitfalls.

One of the most common exceptions to this rule is if your spouse or employer has more than 20 workers. If it doesn't make financial sense for you to sign up for Medicare, then you can still keep working and have group health insurance.

If your spouse's or employer has fewer than 20 workers, then you must enroll in Medicare at the age of 65. Medicare is your primary insurance. It will pay the first bill, and the employer will then pick up the rest. This means that if the health insurance policy is not included in a multiemployer group plan, then the employer will pay the difference.

If you're still working and have a Health Savings Account (HSA), then you might be able to keep contributing to it, but Medicare doesn't allow people to make contributions to this type of account. To avoid a tax penalty, you should stop making these contributions at least six months before you start signing up for Medicare.

If you're not signing up for Medicare at the age of 65 and are still working, then you might be subject to a penalty. This is because if you're not signing up for Medicare before your employer's health insurance ends, then you might end up with a gap in your coverage.

Before you start signing up for Medicare, make sure that you have a good understanding of how your group health insurance will cover you once you reach the age of 65.

Medicare Part B (medical insurance)

Medicare Part B provides various types of healthcare services, such as doctor visits and supplies. It also covers the cost of various types of healthcare services, such as mental health coverage and durable medical equipment.

Medicare Part B's monthly premium is set at $170.10 in 2022. For single people with an adjusted gross income of over $91,000, and married couples with an adjusted gross income of over $182,000, the monthly premium is higher.

In 2022, the Medicare Part B deductible will be set at $233. This means that patients will have to pay a portion of the bill for healthcare services. After that, they will typically pay around 20% of the approved amount for supplies and services.

The Medicare Part B penalty

If you don't have group health insurance coverage through an employer, then you will most likely be penalized for not signing up for Medicare Part B at the age of 65. This penalty will be charged monthly for the rest of your life.

If you have group health insurance through your job, then you might be able to avoid the penalty for not signing up for Medicare Part B at the age of 65. You must sign up for this type of healthcare insurance within eight months from the end of your current coverage.

Should you sign up for Medicare if you're 65 and still working?

If you are 65 or older, and you have group health insurance through your job, then it's possible that you should sign up for Medicare now. It can lower your out-of-pocket costs and provide you with better coverage.

Due to the increasing number of people who are working, the number of people who are 65 or older is expected to reach 30.2% in 2026.

Medicare is a complicated program, and there are a lot of factors that you should be aware of to avoid unexpected expenses and late-enrollment penalties. This guide will help working individuals understand when and how to enroll in Medicare.

This section is for married couples who have health insurance through their employers. If one of the partners has group coverage, then this information applies to both when they turn 65.

The cost equation: Will Medicare save you money?

If your company requires you to pay a portion of the premium for your group health insurance, then you might be able to find Medicare more affordable. It can also help you lower your out-of-pocket costs. Before you start signing up for Medicare, make sure that you compare the costs of your current plan with the benefits it provides.

Medicare Part B: Delay to avoid premiums

If you're 65 or older and still have health insurance through your company, then you might want to delay signing up for Medicare Part B. This type of healthcare insurance covers the cost of doctor visits and other outpatient services. Unlike Medicare Part A, this type of insurance is not free.

As with Part A, your circumstances can influence your decision, and there are pitfalls to avoid:

If you're still working and have health insurance through your company, then you might want to delay signing up for Medicare Part B. This type of healthcare insurance covers the cost of doctor visits and other outpatient services. If you fail to sign up for Medicare within eight months, then your premiums could go up for the rest of your life.

If you have an HSA and would like to continue contributing to it, then you must stop making contributions to it and sign up for Medicare Part B. You must also stop making these contributions at least six months before you start signing up for this type of insurance.

If your spouse's or employer has fewer than 20 workers, then you must sign up for Medicare at the age of 65. This rule applies if the health insurance policy is not included in a multiemployer group plan.

If your spouse's or employer has more than 20 workers, then you don't have to sign up for Medicare at the age of 65. However, you still must sign up for Medicare once your employer's health insurance ends.

If you're planning on delaying your Medicare Part B enrollment, then make sure that you speak with your spouse's benefits administrator about how this will affect your group insurance.

Special situations: Previous employers, military, vets

If you have health benefits that are provided through a military service program, such as CHAMPVA or TRICARE, then you should also consider enrolling in Medicare when you reach the age of 65.

If you have health insurance from past employers, such as your former spouses or employer's retirement or COBRA coverage, then you must enroll in Medicare Part A and B when you reach 65. It's complicated, so get all the advice you need.

The enrollment process for Medicare is complex and rife with exceptions. If you don't follow the rules, then you could end up paying a high price for not signing up. Before you decide to delay or enroll in Medicare, make sure that you speak with the benefits administrator of your former employer.

Medicare Advantage (Medicare Part C)

Medicare Advantage is a type of healthcare insurance that provides the same benefits as those provided by Medicare Part A and B. However, it does come with a separate premium that you have to pay. This type of insurance is commonly offered at $0 premiums.

In addition to providing the same benefits as those provided by Medicare, Medicare Advantage plans also come with additional coverage options. These include dental and vision care.

In 2022, you could expect to pay around $7,550 out of pocket for a Medicare Advantage plan. These types of plans are typically preferred provider organizations (PPOs) or health maintenance organizations (HMOs). They only provide coverage in certain areas and require referrals and pre-authorization.

Medicare Part D (prescription drugs)

Part D of Medicare allows people to get covered for the cost of prescription drugs. These plans are typically offered by private insurance companies and have a monthly premium of around $33. Higher income beneficiaries pay more.

If you don't sign up for Medicare Part D when you're first eligible, then you could be facing a late penalty. This is a 1% of the national base premium, which is around $33.37 monthly in 2022. The late penalty is multiplied by the number of months that you've been missing out on coverage.

Medigap (Medicare Supplement Insurance)

A Medicare supplement insurance policy is an additional type of healthcare insurance that can be purchased from a private insurance company. It can help pay the cost of certain services that are not covered by Medicare Part A and B. For instance, if you travel outside the US, a Medigap policy might not cover long-term care or certain types of prescription drugs.

In most states, there are 10 different types of Medicare supplement insurance policies that you can choose from. However, if you have Medicare Part A and B, then a Medicare Advantage plan is not compatible with a Medigap policy.

Enrolling in Medicare

If you're 65 years old and receive Social Security benefits, then you'll automatically be enrolled in Medicare when you turn 65. Part A covers hospital expenses, while Part B provides doctor visits.

If you're not receiving Social Security, then you can still sign up for Medicare by visiting the Social Security Administration's website. You can do this during the seven-month window that's available for new enrollees. This allows people to avoid long waiting times and penalties.

You can also sign up for a Medicare supplement insurance policy during the six-month period that's available for new enrollees. If you're interested in a policy, then you'll need to make sure that the private insurance company that provides it will take you.

Medicare enrollment periods

If you're already enrolled in Social Security and have a disability, then you'll automatically be enrolled in Medicare when you turn 65. However, it's up to you to sign up for Medicare on your own.

If you're not on the automatic roll, then you'll have a seven-month initial enrollment period that starts three months before your 65th birthday and ends two months after your birthday. This period includes the four months that you'll have before and two months that you'll have after your birthday.
If you don't sign up for Medicare during the initial enrollment period, then you'll have to wait for the general enrollment period, which lasts from January 1 to March 31. If you have late penalties, then you'll have to pay them before your coverage begins on July 1.
You can also sign up for a Medicare health insurance policy during the special enrollment period, which lasts from January 1 to March 31. This is a special period for people who have specific life events that cause them to change their coverage.

If you would like to change your coverage for Medicare later, then you can do so during the annual open enrollment period that's available from October 15 to December 7 each year. If you have a Medicare Advantage plan, then you can change it during the open enrollment period that's available from January 1 to March 31.

How to enroll in Medicare

If you're enrolling yourself, you can sign up in one of three ways:

Apply for Medicare online at Social Security's site.
Call Social Security at 800-772-1213.
Contact your local Social Security office.

The process for applying for Medicare online usually takes around 10 minutes. However, if you're planning on visiting an office, make sure that you have a mask and prepare for the weather. Social Security offices have been reopened, and they ask that you come in without assistance. If you can't make an appointment online, you can always call to check if there are available in-person appointments.

What Medicare doesn't cover

Common expenses that Medicare doesn't cover (and that are excluded in the Medicare law) include:

Hearing aids and exams for fitting them.
Eye exams and eyeglasses.
Dentures.
Most dental care.
Most foot care, unless related to diabetes or medically necessary due to injury or disease.
Medical care overseas.
Cosmetic surgery.
Massage therapy.

One of the biggest expenses that Medicare doesn't cover is long-term care, which is also known as custodial care. Medicaid, the federal health insurance program for low-income individuals, covers this type of care.

Medicare vs. Medicaid

Medicare is a type of insurance program that's mainly for people who are over 65. It's also available for people with certain illnesses and disabilities. Unlike other federal programs, it doesn't require people to pay for certain medical expenses.

Medicaid is a federal-state program that's for low-income individuals. It doesn't require people to pay for certain medical expenses. It serves people of all ages, and it can vary depending on the state.