11/29/2010 @ 4:45:PM By Maureen Lyons
Most Americans have never discussed what should happen when they die. There are many decisions to make, yet they have very little help in making those decisions.
Studies show that more than 90% of Americans believe that pre-funding their funeral is a good idea, yet only 12% have done it. Studies also show that elder law and estate planning clients would prefer that this discussion take place in the context of their other planning. This creates an opportunity for the planning team to work together to fill this unique planning need.
According to a survey conducted by the National Funeral Directors Association, clients identified the following as the most appropriate times to pre-fund a funeral:
80% find it appropriate to pre-fund when afflicted with a serious illness.
71% find it appropriate to pre-fund with their trusted advisor.
61% find it appropriate to pre-fund at retirement.
58% find it appropriate to pre-fund when planning retirement.
9% find it appropriate to pre-fund when solicited by a funeral home.
Only 12% of Americans have worked with a funeral home to pre-plan, and only 9% find it appropriate to pre-fund when solicited by a funeral home. However, 71% of Americans would like to set aside funds with their trusted advisor for this purpose.
A conversation about Final Expense benefits the following individuals: clients over the age of 55; adult children worried about their parents; those who don’twant to burden their family at death; those afflicted with a serious illness; and those with a funeral home aversion.
What is a Final Expense Trust?
A final expense trust (aka a funeral trust or burial trust) is specific-purpose, guaranteed-issue insurance product that is irrevocable, un-assignable and provides dollar-for-dollar coverage that is readily available to pay the actual costs of a person’s final funeral, cremation, burial, or related expenses. Simply stated, it is a product designed to ensure the availability of funds to pay for the client’s desired final expenses when needed.
The benefits of a Final Expense Trust include:
- Death benefits are payable to the funeral home of the client’s choice; any excess funds will be returned to the client’s estate or designated beneficiaries.
- Funds are protected from all creditors, probate, nursing homes, and even Medicaid (Medi-Cal in California). Funds are immediately excluded as a resource in determining qualification for Medicaid. There is no Medicaid penalty for purchases of final expense trusts for the client and other members of the client’s family. Policy limits vary by product.
Final Expense Trust Considerations
Here are several questions you might think about relating to this planning tool:
What is important to you about how funeral arrangements should be conducted, or how do you picture the most appropriate final arrangements?
1. Is it important to you to have a traditional funeral?
2. What are your feelings regarding burial or cremation?
3. What needs to be purchased to fulfill your final wishes?
4. What do you believe these final arrangements will cost, and how do you plan to pay for them?
5. Do you know that Medicaid requires the spend-down of all liquid assets (including cash value life insurance and CDs), but actually encourages paying for a funeral with a pre-paid funeral and burial insurance trust?
Final Expense Trusts allow seniors and their families to address one of their significant planning
concerns – what will happen when they die. By working together, the senior’s “planning team” or advisor can address this issue without affecting eligibility for Medi-Cal/Medicaid or other government benefits.
Posted Under: Comprehensive Estate Planning, Estate Planning, Trust Administration
Tags: , final expense trust, funeral trust, long term care, Planning
Comments: 1
11/22/2010 @ 8:01:AM By Moynihan_Lyons
In this post we will cover two additional mistakes people can make in planning for family members with special needs.
Relying on siblings to use their money for the child with special needs’ benefit. Parents may be relying on their other children to provide for the special needs child from their own inheritances. This can be a temporary solution for a brief time such as during a brief incapacity if their other children are financially secure and have money to spare. However, it is not a solution that will protect the child with special needs after the parent/s dies or when siblings have their own expenses and financial priorities.
Here’s what can happen…
What if the inheriting sibling divorces or loses a lawsuit? His or her spouse (or a judgment creditor) may be entitled to half of it and will likely not care for the child with special needs. What if the sibling dies or becomes incapacitated while the child with special needs is still living? Will his or her heirs care for the child with special needs as thoughtfully and completely as the sibling did?
Siblings of a child with special needs often feel a great responsibility for that child and have felt so all of their lives. When parents are able to provide clear instructions and a helpful structure, they lessen the burden on all their children and support a loving and involved relationship among them.
Failing to protect the child with special needs from predators. An inheritance from parents who fund their child’s special needs trust by will rather than by a revocable living trust is in the public record. Predators are particularly attracted to vulnerable beneficiaries, such as the young and those with limited self-protective capacities. When you plan using a trust, rather than a will, the parent can decide who has access to the information about the child’s inheritance. This protects the special needs child and other family members, who may be serving as trustees, from predators.
In conclusion, planning for special needs beneficiaries requires particular care and the participation of the family’s entire “advisory team.” The estate planning and/or elder law attorney plays a pivotal role in ensuring the future well-being of a special needs child.
A properly drafted and funded Special Needs Trust can ensure that the beneficiary has sufficient assets to care for him or her, in a manner consistent with the parent’s wishes, throughout the beneficiary’s lifetime.
Posted Under: Comprehensive Estate Planning, Revocable Living Trusts, Special Needs Trusts, Trust Administration
Tags: , Planning, Special Needs, Special Needs Trust
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11/15/2010 @ 8:01:AM By Moynihan_Lyons
So far, we have shown five common mistakes families can make.
Here are some additional issues people are likely to encounter…
Failure to properly “fund” and maintain the plan. When planning for children with special needs, it is absolutely critical that there are sufficient assets available for the special needs beneficiary throughout his or her lifetime. In many instances, this requires utilization of a funding vehicle that can ensure liquidity when necessary. Oftentimes permanent life insurance is the perfect vehicle for this purpose, particularly if the clients are young and healthy such that insurance rates are low.
It should be noted that because this is an ever-changing area, it is imperative to revisit the plan frequently to ensure that it continues to meet the demands of the special needs beneficiary.
Some situations may require special strategies. For example, if the client is potentially subject to estate tax, an Irrevocable Life Insurance Trust can own and be the beneficiary of the policy, naming the Special Needs Trust as the beneficiary. Alternatively, in a non-taxable situation, it is also possible to name the client’s revocable trust as the beneficiary to help equalize inheritances if that happens to be the objective.
Choosing the wrong trustee. As a parent (or grandparent) of a special needs child, you will be able to manage the trust as long as you are alive. However, when you are no longer able to serve as trustee, you can choose who will serve according to the instructions you provide. It is possible to choose a team of advisors and/or a professional trustee. It is critical that the person’s chosen be financially savvy, well-organized, and of course, ethical.
Failing to invite contributions from others to the trust. A key benefit of creating a Special Needs Trust now is that the beneficiary’s extended family and friends can make gifts to the trust or remember the trust as they plan their own estates. For example, these family members and friends can name the Special Needs Trust as the beneficiary of their own assets in their revocable trust or will. They can also name the Special Needs Trust as a beneficiary of life insurance or retirement benefits.
Posted Under: Comprehensive Estate Planning, News, Special Needs Trusts, Trust Administration
Tags: , Planning, Special Needs, Special Needs Trust
Comments: 0
11/8/2010 @ 8:00:AM By Moynihan_Lyons
In today’s post, we continue looking at the problems typically encountered in planning for family members with special needs.
Ignoring the special needs when planning for the child’s benefit. Planning that is not designed with the child’s special needs in mind will probably render the child ineligible for essential government needs. A properly designed Special Needs Trust promotes the special needs person’s comfort and happiness without sacrificing eligibility. This Trust can be used as the vehicle to pass assets to the child. Otherwise, those assets may disqualify the child from public benefits and might become available to repay the state for the assistance provided.
Special needs can include medical and dental expenses, annual independent check-ups, necessary or desirable equipment (for example, a specially equipped van), training and education, insurance, transportation, and essential dietary needs. If the trust is sufficiently funded, the disabled person can also receive spending money, electronic equipment and appliances, computers, vacations, movies, payments for a companion, and other self-esteem and quality-of-life enhancing expenses. These are the kinds of things parents may currently provide for their child or other special needs beneficiary.
Creating a “generic” special needs trust that doesn’t fit. Even some “special needs trusts” are unnecessarily inflexible and generic. Although an attorney with some knowledge of the area can protect almost any trust from invalidating the child’s public benefits, many trusts are not customized to the particular child’s needs. Thus the child fails to receive the benefits that the parent provided when they were alive.
Another frequent mistake occurs when the Special Needs Trust includes a “pay-back” provision rather than allowing the remainder of the trust to go to others upon the death of the special needs child. While these “pay-back” provisions are necessary in certain types of special needs trusts, an attorney who knows the difference can save your clients hundreds of thousands of dollars, or more.
The take home message is that you need to make sure that your attorney is well versed in special needs legal planning.
Posted Under: Comprehensive Estate Planning, Special Needs Trusts, Trust Administration
Tags: , Planning, Special Needs, Special Needs Trust
Comments: 0
10/5/2010 @ 11:11:AM By Maureen Lyons
While disability and retirement planning, and special needs planning can be ‘top of mind’ issues for boomers or older seniors, there are two additional essential estate planning needs that are not directly tied to the economy.
These two concerns, if not addressed adequately, are responsible for a lot of family discord and discontent, not to mention the dissipation of one’s assets and life savings. Lastly, failure to address these planning categories can lead to potentially serious probate issues.
Beneficiary protection planning.
Protecting an inheritance from being lost in a divorce or to a beneficiary’s creditors is a serious concern of many individuals. Many from the older generation fear that their children and grandchildren lack strong financial discipline and decision-making skills. The potential for adverse creditor action or for beneficiary dissipation of an inheritance is greater during difficult economic times.
Also, divorce exceeds 50% nationally. Many individuals are concerned about their children and grandchildren divorcing. They do not want the assets they worked so hard to accumulate winding up in the hands of a former daughter-in-law, son-in-law, etc. Since divorce rates increase in difficult economic times, this planning is even more critical now than in better economic conditions.
Blended family planning.
A higher divorce rate also leads to more second and subsequent marriages, each with a higher statistical probability of ending in another divorce. With blended families (in other words with potentially his, her, and their kids) it is important that each parent’s planning protect his or her children in the event that parent predeceases the subsequent spouse. Failure of blended-family parents to do this type of planning practically guarantees that somebody’s kids will be disinherited or a messy probate will result.
Carefully drafted estate plans protect beneficiaries from divorce, creditors, and themselves. Such plans can also provide for children from prior marriages, which is often the only way to ensure that these beneficiaries actually receive any inheritance.
Posted Under: Comprehensive Estate Planning, Estate Administration, Estate Planning
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Comments: 0
9/28/2010 @ 4:07:PM By Maureen Lyons
These are difficult times. Consumer confidence is low, and its a long way before the economy is expected to fully recover. Many of us are concerned, wondering what planning we should do now, if any.
For the vast majority of Americans, planning is not discretionary. These individuals continue to have personal concerns that they need to address now because these concerns are unrelated to the economy. In fact, some of these issues may even be made worse by our current economic situation.
In addition, for anyone who may be subject to federal or state tax in the future, unusual circumstances have created a “perfect planning storm” that may not last long. This post addresses some of the planning needs unrelated to the economy, and discusses strategies that create the biggest planning opportunities today.
Here are the basic planning needs that are not directly related to the economy:
- Disability and retirement planning
- Special needs planning
- Beneficiary protection planning (for example, protection from divorce, creditors and/or perhaps the beneficiaries themselves)
- Second marriage and “blended family” protection
These planning needs are often more critical for those with fewer assets than for those with more wealth.
Disability Planning.
We’ve covered disability planning in a previous post. Let’s do a quick review.
According to the Family Caregiver Alliance and a recent MetLife Mature Market Study, of those Americans currently age 65 or older:
- 43% will need nursing home care
- 25% will spend more than a year in a nursing home
- 9% will spend more than 5 years in a nursing home
- the average stay in a nursing home is more than 2.5 years.
Nursing home costs are increasing much faster than the inflation rate would imply. Thus, many of us are quite appropriately worried about how we will pay for that kind of care when we need it.
Also of concern to many people is who will provide long term care and whether those caregivers will care for us in the way we desire. For many, there is a strong desire to stay at home as long as possible. For others, the companionship found in an assisted living facility makes that choice preferable. Still others need care that cannot be provided at home or only at a prohibitive cost. Not surprisingly, these goals often change over time and with changing circumstances.
In light of these challenges, it is critical that you create a trust that sets forth your current, carefully thought out “disability objectives” — to ensure that if and when the time comes you and your loved ones are prepared.
Special Needs Planning.
Special needs planning is another area unrelated to the economy. According to the 1002 U.S. census:
- 51.2 million people reported having a disability
- 13-16% of families have a child with special needs
- Autism occurs every 1 in 150 births and between 1 and 1.5 million Americans have an Autism spectrum disorder
Failure to properly plan for a person with special needs can have disastrous consequences, especially if the person is receiving government benefits. The Special Needs Trust that incorporates specific care provisions is a critical component of the planning necessary for a special needs person who needs ongoing support. Insurance on the lives of the parents or grandparents of a special needs person frequently funds the ongoing care of that special needs beneficiary.
In our next post we will talk about beneficiary, as well as blended family, planning…
Posted Under: Comprehensive Estate Planning, Estate Planning, Special Needs Trusts
Tags: , Disability, Estates, Planning
Comments: 0
9/6/2010 @ 2:19:PM By Maureen Lyons
In previous posts I discussed how long term care needs of seniors can be met through self (or third-party) insurance. But what if these are not possible options?
A senior can use a planning technique called a “Medicaid” trust. (Here in California, it’s called “Medi-Cal” trust). This is part of a comprehensive wealth planning process that your legal advisor can help you with.
In this kind of trust, the trust maker retains the right to all of the trust income for life. However, the senior will irrevocably give up the right to receive or benefit from the principal of the trust. By using this type of trust, a senior can preserve capital and still qualify for Medi-Cal. This will happen only after expiration of the “look-back period” for the transfer of the trust.
This means that if assets have been transferred or given away during the period before applying for Medi-Cal, coverage can be denied. This period can be as much as 5 years.
There is a specific method to calculating this “penalty period” depending on your state’s provisions. Your legal advisor can give your the specifics of this calculation. The variables that will affect the time period are: (a) nursing home cost in your state, and (b) the dollar amount of the transfer.
What are the implications of this “look back period” in terms of the senior’s need for long term care?
For the trust strategy to work, there must be sufficient funds to pay for the long term care needs of the individual during the waiting period before applying for Medi-Cal. This can be met through insurance, an income stream, or other assets.
If a Medi-Cal trust is not desired, it is still possible to make “outright” gifts of property, wait until the look-back period expires, and then apply for coverage.
If the home is the senior’s only asset, there are still certain techniques to protect the property in the context of Medi-Cal eligibility.
What is important to note is that with any of the “advanced” planning strategies available, the senior must have sufficient funds to cover long term care costs during this ‘look back” time segment.
Its critically important that seniors consult with a qualified attorney, even when they think that they are engaging in “simple Medi-cal planning.
Long term care strategy, and specifically Medi-Cal planning is a highly specialized field. Laws are constantly changing, and there are a lot of myths and anecdotal “advice” circulating out there that can lead you down the wrong path.
Posted Under: Care Coordination, Comprehensive Estate Planning, Estate Planning, Life Care Planning, Medi-Cal Benefits
Tags: , LifeCare, long term care, Medi-Cal, Planning, seniors
Comments: 0
8/30/2010 @ 7:56:PM By Maureen Lyons
In the previous post, we discussed Medicare’s limitations in covering long term care needs. There are several options available, each differing in terms of coverage and complexity. These alternatives are all part of a comprehensive life care planning and wealth management strategy.
Here are two basic options available:
Self-insurance for possible long term care expenses. This requires a close collaboration of financial planning and estate and tax professionals to ensure that there are enough assets available to cover possible costs for as long as needed. This requires a comprehensive look at the overall financial condition of the senior, as well as a thorough understanding of the person’s health and wishes regarding care in the event of incapacity. The main consideration is to create an investment strategy that will produce asset growth and income sufficient to fund the individual’s long term care expenses
When working with an advisor, detailed information will be needed for the initial analysis. This will included client assets, current and anticipated income and expenses, and other data, such as where care will occur, the level of support available from family caregivers, and any family history of incapacity. This information will provide the foundation for the planning required to maximize the value of Social Security income, fixed pensions, dividend, interest, and other income streams, as well as maximizing tax deductions for such things as medical expenses.
Long term care insurance. The majority of seniors may not be able to fully self-insure for their long term care needs. Those who cannot but are insurable and can afford the premiums should integrate a long term care policy into their comprehensive wealth plan.
There are two types of policies available: (a) cash payment, and (b) reimbursement. The former pays cash to the insured. The latter reimburses the insured for actual costs incurred.
Policy benefits to consider in a long term care policy include: nursing home and home care coverage; sufficient daily payouts; elimination periods (the number of days you must be in a nursing home before benefits begin, typically 0 to 100 days); duration of benefits; renewability; waiver of premiums (insured pays no premiums while receiving benefits); and inflation protection.
In a future post, we will discuss some of the “advanced” methods available for long term care planning, such as the “Medicaid” trust and other asset protection strategies.
Posted Under: Care Coordination, Comprehensive Estate Planning, Estate Planning, Life Care Planning
Tags: , Healthcare, LifeCare, long term care, Planning, seniors
Comments: 0
8/23/2010 @ 4:26:PM By Maureen Lyons
Two out of every five Americans reaching the age of 65 will require some type of long-term care. Though most seniors prefer to stay at home, the staggering price tag of full-time in-home care can make this an untenable option for most families.
Is Medicare an option for financing a senior’s long-term care needs?
Many seniors think that Medicare will pay for long-term care if and when they need it. This is incorrect. It does not cover hospital costs beyond 150 days, skilled nursing home costs beyond 100 days, or any custodial nursing home or non-skilled home health care.
This is what Medicare specifically covers:
-Qualified medical expenses (80% of an approved amount for doctors, surgical services, etc.)
-Hospitalization for 90 days per benefit period with a total deductible of $1,024.00 for the first 60 days, and a co-payment of $256 per day for the remaining 30 days
-An additional one-time, lifetime benefit of 60 days of hospitalization, with a co-payment of $512 per day, for a maximum of 150 days
Medicare only pays for a limited period of “skilled” nursing home care that begins within 30 days following a hospital stay of at least 3 days. The maximum period is 100 days per benefit period.
“Skilled” care is that provided under the supervision of a doctor that requires the services of skilled professionals such as physical therapists or registered nurses. Medicare does not cover “custodial care,” which is basic personal care and other maintenance-level serices.
If the patient is eligible, Medicare will pay 100% of the costs for up to 20 days of skilled nursing home care. After that, from day 21 through day 100, the patient has a $128 per day co-payment, assuming eleigibility.
If a patient stops needing skilled nursing home care, the patient ceases to be eligible and Medicare stops paying. Home health care may be available in limited amounts, but only if “medically necessary.”
For all Medicare benefits there are deductibles and co-payments, which can be substantial. Lifetime limits can easily be reached in the case of catastrophic illness.
The bottom line is that one has to look beyond Medicare to finance long-term care needs. In our next blog post we will cover other options available to seniors to meet this basic requirement.
Posted Under: Care Coordination, Comprehensive Estate Planning, Estate Planning, Life Care Planning
Tags: , Healthcare, LifeCare, long term care, Planning, seniors
Comments: 0
4/16/2010 @ 10:51:AM By Moynihan_Lyons
Are you prepared? Have you given someone the legal authority to make medical decisions on your behalf if you are unable to do so through an Advance Directive or Healthcare Power of Attorney? Does that person know what you want AND what you don’t want? Do you have a Living Will which addresses your end-of-life choices? Don’t wait. Plan now.
Posted Under: Care Coordination, Comprehensive Estate Planning, Estate Administration, Estate Planning, IRA Retirement Trusts, Laureate Planning, Life Care Planning, Medi-Cal Benefits, News, Probate / Conservatorship, Revocable Living Trusts, Special Needs Trusts, Trust Administration, Veteran Benefits
Tags: , Administration, Estates, Healthcare, Planning
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