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These Four Examples Are Completely Avoidable 

We may not have control over everything in life, but when it comes to estate planning, there’s a vast toolbox available to ensure that you don’t become the next cautionary tale. Yet somehow, despite ubiquitous stories about the guy who lost everything, or the family in shambles, many people don’t recognize estate planning as the way to prevent these things from happening. Let’s take a look at four of the most common consequences you can avoid with good estate planning:  

 1. Having no say in major medical issues

It’s a common misconception that estate planning is something you don’t have to worry about until you have kids. Consider this example: Imagine you have a college-aged child away at school who suffers a serious accident. They’re taken to the hospital, but the hospital won’t talk to you because your child is no longer a minor. It’s an unthinkable situation, but it can be prevented with a healthcare power of attorney. It should be part of every kid’s off-to-college planning, ranking right up there with finding the perfect twin extra-long bedding for their new dorm. 
 

But perhaps you’re past that phase, with adult children who have families of their own. There’s still reason to be concerned. But now, the concern pertains to who will make decisions for you in the event of cognitive issues. Without a healthcare power of attorney for yourself, that could be a court.  

The bottom line? Every adult in your family—no matter their age—needs a healthcare power of attorney.  

2. A court making the important decisions

Maybe you don’t care what happens to your potholders, but surely there are some things you’d like to see in the hands of a specific loved one, like a treasured collection or a family home. However, without a will, the only guarantee is that a court will get to decide. Surely that’s not what you had in mind. 

What about minor children? The court would decide that, too. Do you really want that decision in the hands of strangers? That’s why it’s critical to have a will. In addition to indicating the heirs of your possessions, a will can also provide direction for who would be the guardian of your children and who would oversee their financial estate (which can be the same person or two different people).   

3. A surviving spouse being left impoverished

This is a situation no one wants to imagine, but it happens more frequently than you think. The culprit is long-term care costs. 

While you don’t need to assume you, your spouse, or both will go into a nursing home, you’d be wise to plan for the possibility. That’s because statistics show nearly 70% of the 65-and-older crowd will need some form of long-term care. And the cost is staggering, with a private room in a nursing home averaging over $7,500 per month. Because the figures are so overwhelming—and long-term care insurance so expensive and difficult to find—many people choose to bury their heads in the sand instead of creating a plan. Or, perhaps they’ve visited an estate planning attorney in the past but have a type of trust that offers no protection against long-term care costs, such as a revocable trust (also known as a family trust).

So how can you ensure that a surviving spouse doesn’t lose their home, or suffer a precipitous decline in their standard of living to pay for long-term care? The answer is an asset protection trust. When put in place at least five years prior to when you might need care, assets placed in the trust will be shielded from nursing home costs. It could be the difference between losing your home and keeping it in the event of the worst. 

4. Your family being left with a huge tax bill and disagreements

When we pass away, we’d like to think we leave our loved ones with warm memories of our time together. But unfortunately, without an estate plan, sometimes those warm memories are accompanied by big headaches—like infighting and unexpected tax bills. 

As we mentioned in the second point, a will can solve arguments about who receives what by clearly outlining your intentions. But a will can’t address the other source of angst: the widow and kiddo penalties. 

The widow penalty refers to the change in tax filing status that happens when one’s spouse passes away. The surviving spouse then files at the single rate, which will yield a significantly higher tax bill than married filing jointly. The effects can be minimized with advanced planning. A good estate planning attorney should have you consult with an experienced retirement planner who will help you develop a de-tax draw strategy for your retirement accounts and can advise on whether you ought to consider converting any IRAs to a Roth IRA to take advantage of your married filing jointly rate. 

A good estate planning attorney will also have you work with a retirement planner to avoid the kiddo’s penalty. That’s when your adult children or other loved ones pay taxes on your inheritance at a higher rate than the one you enjoy in retirement. Why does this happen? Because they’re in their peak earning years, and likely at the highest tax bracket of their lives. A retirement planner can help you devise a sound gifting strategy and help you adjust it accordingly if tax law changes over time. 

While it may seem inconsequential to put off creating or updating your estate plan for one more day, the consequences of being caught without the right plan in place are anything but. Don’t go another day without the protections in place that you and your family need. We’re here to make the process painless and support you every step of the way. Schedule a complimentary phone consultation to learn more. 

When you envision what you might spend money on in your golden years, does the image include travel, spoiling your grandchildren, or perhaps indulging in a hobby? What about long-term care? If you’re like most retirees, that last one wasn’t what you had in mind.  

Nobody wants to plan for long-term care, but what’s worse than having to think about the possibility is not being prepared for it. That’s why we created this post with sample questions for your estate planning attorney and tips to make the discussion a little easier. Now you can spend less time worrying about the “what ifs” and more time enjoying the good stuff.

When it comes to planning for long-term care, you’ve got options. Here’s what we’ll discuss: 

Government benefits

Self-funding 

Insurance 

Legal tools such as asset protection trusts 

Government Benefits

There are some government programs that may provide assistance with long-term costs if you qualify. We’ll break them down below. But before we do, we should address what you might have noticed is missing from the list: Medicare. That’s because Medicare will only pay for some home or nursing home care so long as it’s rehabilitative and not long-term.   

Medicaid & PASSPORT: Medicaid is the primary payer of long-term care in the country. This state-based program is available to those who have limited resources and fall below a set threshold for income and assets based on federal poverty guidelines, which means qualifying can be difficult. Plus, there are nuances that could make your eligibility less straightforward. For example, a healthy spouse may be able to keep some assets to live on without disqualifying the spouse in need of care from receiving benefits. And here in Ohio, it’s possible for people whose assets exceed the Medicaid threshold to qualify for a PASSPORT waiver—enabling in-home or assisted living care—by transferring assets into an asset protection trust, which is Medicaid exempt. We’ll expand on that under Legal Tools below.

VA: Veterans and their spouses may qualify for The Department of Veterans Affairs’ Aid and Attendance benefits, which can help pay for long-term care needs. This benefit provides monthly payments in addition to your pension for use toward assisted living costs. Note that you must be 65 or older, meet certain service requirements, and have income and assets below limits set by the VA, in addition to other eligibility factors. 

What to ask: 

How do I determine if I’d qualify for government benefits? 

If I do qualify, would the benefits cover the cost of care? 

Self-funding

Self-funding is just as it sounds: you’ll pay the tab and assume full risk for the cost. Because the cost of long-term care can vary widely, so too can the outcome. Since there is no risk-sharing, if the costs of care exceed what you’ve saved, you’re still on the hook. Alternatively, if you’re lucky enough to not need long-term care, the worst that happens is you’ve built a sizeable nest egg.  

In order to shoulder the cost of self-funding, you must have the financial resources to accommodate both an expensive extended long-term care stay and your retirement goals. Keep in mind that according to LongTermCare.gov, the average cost of one year of care in a nursing home with a private room is $92,376 and the average stay lasts three years.  

What to ask: 

What is at risk if I decide to self-fund? 

How much should I have saved to meet my goals? 

Insurance

Chances are you’ve heard of long-term care insurance. After all, it’s been around for decades. If you’ve also heard it’s expensive, then you’ve heard right. As people live longer, the cost and duration of care has risen, making it a losing proposition for insurance companies. For this reason, long-term care insurance isn’t as widely offered anymore and has risen tremendously in cost, making it unaffordable for most.  

Before you eliminate insurance as an option, be sure to check your life insurance policy, which may offer a valuable alternative to long-term care insurance if it allows for Accelerated Death Benefits. Policies with Accelerated Death Benefits provide a tax-free advance on your life insurance death benefit while you’re still alive to help with the cost of long-term care. The cap is usually around 50% of the death benefit, with monthly benefits around 2% of the policy’s face value for nursing home care, and half that for in-home care. 

What to ask: 

Would I be better off paying for long-term care insurance or investing the money? 

What are the limitations of Accelerated Death Benefits? 

Legal Tools

When it comes to reducing your risk, estate planning and elder care law attorneys offer a wealth of resources. One such resource is an asset protection trust, which we mentioned above. In an asset protection trust, ownership of your assets and property are transferred to the trust, effectively shielding your estate from creditors. This can help some individuals qualify for Medicaid or preserve a portion of their estate or property for their loved ones.  

It’s important to note that this is a proactive measure that requires some forethought. That’s because Medicaid has a five-year “look back” period. Any property or assets that haven’t been in the trust for at least five years could disqualify you from benefits. That’s why it’s especially important to work with an experienced attorney who can help you understand your options and ensure that your trust is set up properly. 

What to ask: 

Would I be a good candidate for an asset protection trust? If so, when is the right time to put one in place? 

Are there any other estate planning tools that might be beneficial for my circumstances? 

Planning Your Next Steps

While there is no one-size-fits-all approach to planning for long-term care costs, we hope this post has helped demystify the options and illuminate what may be the best fit for you. As you consider your next steps, we urge you to enlist the assistance of a qualified estate planning attorney. At AlerStallings, we know that choosing an estate planning attorney is a highly personal decision, and that’s why we offer a no-cost, no-commitment consultation so you can get to know us. After all, we’re with you for life. This is a partnership that starts from the heart. 

We’re Here for You.

Call us at (614) 798-9800 to schedule your complimentary consultation.

You’ve probably heard a lot about trusts, and you may be wondering, “Do I need one?”

It’s a simple, straightforward question, but there isn’t one magic answer. It depends on your goals for your estate and your family as you age and after you pass away. Let me explain.

First, what is a trust? It’s a legal document, yes, but think of it like a holding tank. A trust can own a car or your house. It can own bank accounts. It can hold—in the ownership sense—things much in the same way a person can. A trust does this as a benefit to you and your family.

Why would that make sense? You might be thinking, “Only if you’re rich with millions of dollars in assets,” but that’s not the case. Instead, think protection of assets; specifically, do you want to make sure certain assets you own are protected against long term care expenses, probate, or taxes? Do you want to have some level of control over the distribution your assets to the people you designate when you’re gone? For most people, the answer is a resounding yes.

Those are the big four reasons a trust make sense: long-term care, probate, taxes, and distributions. Let’s dive a little deeper on those, starting with long-term care.

There are certain types of trusts in which you can put assets like your home, family farm, or some CDs, and after a certain period of time, the nursing home cannot touch those assets. That’s huge considering that if you were to go into a nursing home facility, the cost could be upwards of $100,000 a year, which is a massive risk for many families. Naturally, you’d want to do what you can to protect against that, and a trust may be the answer.

The desire to avoid probate is another reason a trust could make sense. Assets owned by the trust circumvent probate. If you’ve ever been an executor or a beneficiary of a will, you know it could take six months or even years to finally get through the court system. Using a trust avoids the entire probate court process altogether. That’s a big reason a lot of people like to have a trust instead of just using their will. It saves time, headaches, fees, and costs.

The next reason a trust can make sense is that it can help reduce your tax burden. There are many ways trusts can be used to help you maximize your estate’s tax savings at the state or federal level. And let’s face it—nobody likes paying more taxes than they have to. This is an especially salient point when we consider that the estate tax can (and will) change over time. We don’t know what it will be in the future, which is why it can make sense to put some proactive protection in place now with a trust.

Which brings us to our final reason a trust could make sense: control over the distributions. It might not seem like a huge deal, but if you have young children or grandchildren, providing some guidance on how they would inherit money could position them for success in the future. Perhaps you’d like them to receive a third of their inheritance at age 25, then another third at 35, and so on, instead of getting everything at once. Otherwise, the alternative may be that they receive everything at age 18, at which point they have the greatest college experience of all time, and no money left to show for it. That’s probably not what you had in mind. A trust can help ensure that you’re able to help your loved ones in the way you intend to.

There you have it—four reasons a trust might make sense. The takeaway here is that trusts are not just for rich people, and frankly, they’re not that complicated if you have the right attorney. Our team would be happy to help guide you through the process. Just give us a call.

Finally, if you’re just joining us, don’t forget to check out the rest of our Estate Planning 101 series.

When it comes to important life events, creating or updating an estate plan tends to slip the mind. And in fairness—whether you’re moving, starting a new job, having a baby, or retiring—you probably have your hands full. Yet when we’re least likely to think about estate planning is usually when we need to most.  

So today, I want to talk about when it’s important to create or revisit your estate plan. Some of these you may already know, but I bet a couple will surprise you.  

Let’s start with the first one, which I’ll call… 

Save the Date #1: The First Job 

This one tends to be a surprise. You’re young, healthy, single, just out of college, and have few or no assets. For most twenty-somethings, estate planning isn’t even on the radar. But it’s important because this is a very mobile period of life—whether you’re moving frequently, traveling, or living far from family. As you’ll recall from the last installment of Estate Planning 101, an estate isn’t just about specifying how you want your assets divided; it’s also about how you want to be cared for in the event you’re unable to make those decisions yourself. So, if mom and dad get a call from the hospital about their twenty-something who lives away from home and needs medical care, an estate plan can help inform their decisions. 

However, there comes a time when you might want to take mom, dad, siblings, or friends off the estate plan, which brings me to our next save the date… 

Save the Date #2: Marriage 

Once you get married, you’ll likely want to update your estate plan (or create one if you haven’t yet) to reflect the role your spouse now plays in your life. At this stage, because you’re just starting to accumulate wealth, the important pieces are a health care power of attorney and financial power of attorney to guide how healthcare and financial decisions should be made. 

Then, as any parent will tell you, everything changes when you have kids. Which brings me to the next point… 

Save the Date #3: The Birth or Adoption of Children 

This is often what inspires young couples to develop an estate plan. But I advocate for starting it sooner, because, as we all well know, life is busy with young children. So, it can relieve some stress if you only need to update your estate plan upon the birth of your children, versus finding an attorney and starting from scratch. 

Either way, the important piece here is updating your documents to specify two things: 1) who should be responsible for the care of your children and 2) who should be responsible for the finances of your children in the event both you and your spouse pass away. These can be the same people, or they can be different. This tends to be a tough decision for parents, but the important thing to remember is that as your children grow, relationships change and family members move, so you may choose to update these designations again.  

And then—barring any major life changes like divorce or the death of a family member included in your estate plan—we can fast forward to our next save the date…  

Save the Date #4: Retirement 

At this stage, your children are older and perhaps they’re married with children of their own. You have more assets and you may want to reconfigure your estate plan to specify that more of your assets go to your children or grandchildren. That’s the type of update that tends to be on people’s minds at this stage.  

But another thing you need to contemplate is how you’re going to protect yourself against the cost of long-term care. Depending on your financial situation, your estate planning attorney might recommend an asset protection trust, which can ensure that you don’t lose everything—including your home—to nursing home costs. This is important to do now because it’s time-sensitive. Your assets must be in the trust for at least five years to be fully protected. 

Finally, that brings us to our last save the date…
 

Save the Date #5: The Golden Years 

Ten, twenty, thirty years out from retirement can be a long time and a lot can change between now and then. Your assets may be different. You might have moved. The family dynamic might have changed. Maybe you have more grandkids. Or perhaps your preferences for your healthcare power of attorney have changed. Either way, your 70s or 80s are a good time to update your estate plan to reflect those changes. 

So that’s it! Now you have your estate planning “save the dates.”  

The good news is establishing a relationship with an estate planning attorney ensures that you’ll have someone looking out for you through all of life’s seasons. So even if you forget any of these “save the dates,” you’ll have a trusted advisor to stay on top of important updates, making any changes as seamless as possible. 

Even if you don’t currently have an estate plan and are in the midst of a major life event, don’t be daunted by the process of creating one. Our practice is solely focused on estate planning and elder care law, so we’re able to make the process as streamlined and stress-free as possible. That way you can get the protection you and your family deserve, without missing a beat. 

If these save the dates have reminded you or a family member that it’s time to update or create an estate plan, let’s talk about how we can help. Click the Contact button at the top right of the web page to schedule a complimentary consultation to learn more. 

Finally, if you’re just joining us, don’t forget to check out the rest of our Estate Planning 101 series.

When your kids or grandkids get a new set of LEGOS, it always comes with instructions. Same with that assemble-it-yourself furniture from the big-box retailer (or at least, we hope it comes with intelligible instructions). But when it comes to living life, there are no instructions, even when we need them the most.

As an attorney, I’m often asked to explain what estate planning is. And while I could rattle off a bunch of terms like probate, taxes, powers of attorney, wills and trusts, that doesn’t tell you what estate planning really is. Estate planning is creating the instructions we and our families desperately need for some of life’s toughest moments. Just like when the LEGO tower gets knocked over, or the assemble-it-yourself furniture isn’t coming together the way it should, we need something to reference that tells us what to do. That’s what estate planning is. When life happens, or when things go wrong, an estate plan provides direction for your loved ones.

Let’s look at some real-life examples of what an estate plan would do. If you have minor children, an estate plan would give the courts specific direction on who should care for your kids and how they would be supported if, God forbid, both parents were killed in an accident.

What about later on in life? Let’s say you receive a medical diagnosis with an unfavorable prognosis or develop cognitive issues and can no longer care for yourself. Your estate plan would provide guidance on who should make your healthcare decisions and financial decisions. Having that information readily available is important so your family and friends can navigate the situation in the manner you would have wanted.

I know these examples aren’t comfortable to imagine, but I bring them up to illustrate that life is unexpected. As Benjamin Franklin said, “…in this world nothing can be said to be certain, except death and taxes.” We’re all going to experience both. And that’s precisely why we all need an estate plan—not just the wealthy or the elderly. When you pass away, your estate plan will guide whomever you appoint so they don’t have to make guesses in a stressful, terrible situation.

Which brings me to my final point: an estate plan provides more than just instructions; it also provides the peace of mind that your loved ones will know exactly what you’d want them to do next. It alleviates the pressure to interpret your wishes and reduces or eliminates frustration and confusion. We all know how we feel when the instructions are missing from the LEGO box, or the directions for the furniture assembly appear to be in another language. It’s miserable. And that’s just trying to put together stuff, not someone’s life. That’s why an estate plan is more than just a set of documents. When life is in pieces, an estate plan is what helps your loved ones put it all back together.

Ready to build your estate plan? We’ll make it easy to put the pieces together. Schedule a complimentary consultation with one of our attorneys. Call us at 614-612-1115.

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Finally, if you’re just joining us, don’t forget to check out the rest of our Estate Planning 101 series.