February 7th, 2013 | written by Nancy Larson

Looking over your personal cliff:  fiscal and otherwise!

The thought of adding to the volume of commentary already written this year on the Fiscal Cliff is enough to put any of us over the cliff of our tolerance for dealing with uncertainty.  What we do know is that the world is complicated at any age and that can be unsettling.

Sit back and take an inventory of what gives you a sense of satisfaction in your life.  Perhaps it is your home, your children, volunteering, generosity, being useful in some way.  As my mother reminds me, “The hands on the clock keep going around.” Time does not wait for anyone or anything, so we have a mandate not to waste it!  Nurture what gives you satisfaction.

My children and family are good people and that gives me a sense of satisfaction!  I also get a sense of satisfaction from helping someone work through a problem and come to resolution.  That seems to be an accomplishment that in one small way “uncomplicates” the world.  None of this, however, is done in isolation. Many good things come about through some form of collaborating, either by talking things through or by a coming together of a critical mass of information and life experience that results in seeing things in a different light.  That different light gives us an epiphany, an “ah-ha moment,” in which we can now find our way to resolution.

Take another inventory:  What is unresolved in your life? What stirs through your head at midnight, but doesn’t get resolved by morning’s first light?  Do something positive to interrupt the pattern and resolve the situation.  Having more information and input from a discrete supportive person brings fresh perspective and clarity.  Reach out as needed for information and support from trusted family, friends, clergy, counselors, and attorneys.

My mother was my first teacher.  Lesson one being:  life is innately good, but it is tough.  Since life is inevitably challenging, we have to live life without complicating it more than it already is. As you look over your own personal cliff (and financial cliff, for that matter) know there will be some days that are more challenging than others.  Take care of what you can today so your head will be clear for the next challenge that presents itself.

A familiar story comes to mind as we focus on what we choose to nurture in this life.  A grandfather says to his grandson, “There are two wolves at war in my heart.  One is kind and the other is vicious.” “Which one will win?” asks the grandson.  The grandfather replies, “The one that I feed.”

This year, choose to feed thoughts and actions that nurture you.

(Submitted to BND, Feb. 2012)


October 31st, 2012 | written by Nancy Larson

Your estate plan should ideally include the following documents:

1.  A Health Care Power of Attorney, sometimes referred to as an Advanced Directive for Health Care, allows you to appoint a trusted person who makes health care and medical decision for you if you are not able.  This person must be someone you trust who will speak on your behalf and advocate for the care you would want if you could make the decisions yourself.

2.  A Property Power of Attorney is a separate document in which you appoint someone you trust implicitly to pay your bills, pay your taxes, and tend to all of your other financial matters if you are not able to do so yourself.  Not all power of attorney documents are created equal.  Be sure to seek advice from an attorney in the preparation of your property power of attorney as there are provisions which can be added to the document that may have far-reaching consequences based on your wishes and your unique situation.

3.  A plan for long-term care must address who will take care of you if you are unable to do so, where you will live and how your expenses will be paid.  Will you be able to stay in your home?  If so, how will help be paid?  Is your home safe?  Learn about long-term care insurance and if it is appropriate in your situation.

4.  An estate plan includes a Last Will & Testament, and sometimes a Trust, that allows you to direct the distribution of your assets at the time of your death.  These documents also direct that your bills and taxes are paid prior to distribution of your assets.  This is the time to review the beneficiaries on your insurance policies, IRAs, and other beneficiary-designated accounts.  The estate plan is where you plan for avoiding or reducing estate and inheritance taxes.

5.  A funeral and burial/cremation plan created by you lets your family and friends know what you want to happen.  You need to clearly communicate this so it comes as no surprise at the time of your death.  You may want to make a pre-arranged plan with a funeral home.

6.  Communicate your plan to whoever you have appointed to carry out your wishes.  Remember that they need to know what you want and what is important to you.  Tell them where your documents are kept so they can do their job the way you desire it to be done.

Autumn 2012

Timing is Everything: A Gift is a Life-Changing Act of Generosity

October 12th, 2012 | written by Nancy Larson

Generosity is an act of kindness.  The timing of generosity is a whole other matter.  In my practice of many years, I have been privy to the concerns of people who want to bestow a gift but must consider the consequences of their generosity.

Consider the 18 year old receives $250,000 by gift or inheritance.  Is that young person mature enough to put it to good use?  Is the receiver of the gift prone to drinking, drug, or gambling; or perhaps vulnerable to being taken advantage of by friends or other family members?  And if so, will the gift be too much to handle … will the receiver of the gift self-destruct?

An act of generosity that was well-intentioned may change the course of the receiver’s life in wonderful ways and be a great blessing.  A gift could be the boost that helps a young couple put a down payment on a house, pays for tuition, pays off credit cards, pays for a vacation.  The same gift received 10 years later or 10 years earlier would have a different impact.

During life you can make decisions about making gifts to your loved ones, churches or charities, but when you are not here to make those decisions at your death the provisions of a trust can direct the timing and amount of distribution.  Managing distributions for grandchildren can be left to a trustee so that education expenses are paid for and that distributions can be made to the grandchild in increments over time.  Some folks simply feel that a young person must make their own decisions whether right or wrong and let the chips fall where they may.

There is a rare opportunity until the end of the year for persons with larger estates to make substantial gifts free of the federal gift tax.  Until December 31, 2012 the lifetime federal gift tax exclusions allows each of us to transfer up to $5.12 million worth of assets to family members or friends free of any federal gift tax.

This truly is an advantage for a person with assets that are in excess of a million dollars.  Given the vast majority of Americans do not own more than a million dollars of assets, this is an unusual opportunity for those with larger estates.

On January 1, 2013, the federal gift tax exclusion is scheduled to drop back to cover only one million dollars worth of lifetime transfers.  It is not clear if Congress will extend the federal gift tax exclusion or let it revert back to the one million dollar level.  As a result, there is an opportunity for those with large estates to make significant gifts prior to the end of the year in order to take advantage of this rare tax advantage.

Although there may be much benefit to gain from this opportunity, always proceed with caution and with due diligence before making any large gifts to family or friends.  Consider the cost of living out the rest of your life and the expenses of long-term care.  If you were to need skilled care in a nursing home it could cost 50,000 to 100,000 a year.

Again, timing is everything. The five-year-look-back period for Medicaid eligibility is a deterrent to giving without close scrutiny of the potential cost for large long-term care expenses for yourself and your spouse.  Use caution in giving away what you may need in the future.

With careful planning, gifting is possible even in the event of the possibility for long-term care in the future.  Often substantial gifts to friends and family are best made within the bounds of a trust, but each situation is unique.  In gifting-related matters, one size does not fit all.  Check out your options and do your due diligence to find if you can benefit from this rare gifting opportunity.

(Published in BND October 2012)

Estate Planning for Parents – Part II

August 8th, 2012 | written by Nancy Larson

Estate Planning for Parents of Persons

With Developmental and Other Severe Chronic Disabilities

Part II

No one cares more about the future of a disabled child than parents.  If a person with a disability will likely have long-term medical and support needs, parents should consider setting up a Special Needs Trust, also referred to as a SNT.

It is never too early to put plans in place for contingencies such as a parent’s disability or sudden death.  A Special Needs Trust (SNT) is a specific trust that is set up with the purpose of preserving a disabled person’s eligibility for needs-based government benefits while providing assets that may be used to supplement public benefits in order to improve the disabled person’s quality of life.  There are several kinds of special needs trusts, namely self-settled SNTs and third-party SNTs.

The laws governing trusts are complex and subject to changes.  Tight state budgets have not been kind to the disabled:  setting up a special needs trust requires an attorney who is knowledgeable in special needs planning who can draft a will and necessary trust documents.

Types of Special Needs Trusts

Self-settled SNTs are established with the assets of the disabled person from the proceeds of a personal injury award or other court action, or from inheritances or gifts received before the creation of the trust.  A self-settled SNT must be established by a parent, grandparent, guardian, or a court.

The disabled person must be the sole beneficiary of a self-settled SNT.  No remainder beneficiaries may be named in the trust instrument.  A self-settled SNT is irrevocable, and must be set up during the person’s life, and can be established only if the beneficiary is under age 65.

At death, anything left in the trust is paid back to the state to “pay back” the Medicaid lien.

Another kind of SNT is a third-party SNT which is established with assets owned by a third party for the benefit of the disabled person.  This kind of trust is usually established and funded by the parents, relatives, or friends of the disabled adult child as part of an estate or gifting plan.

Other family member’s children can be named as remainder beneficiaries after the death of the disabled person.  There is no age limit for a disabled beneficiary, and there is no requirement that any remaining funds at death be “paid back” to the Medicaid lien.

The Golden Rule

The golden rule in special needs planning:  the trustee should make payments on behalf of the beneficiary directly to third-party vendors for equipment or services which are not food or shelter.  For example, distributions directly to a retailer for a radio or television, to an airline for a plane ticket, or to a companion/aide for services rendered are not income to the beneficiary.

Example #1:  Distributions from a SNT directly to an SSI beneficiary

Paul is the trustee of a special needs trust established by his deceased father, Bill, for the benefit of Bill’s disabled daughter and Paul’s sister, Jean.  Jean’s living expenses, including rent, food, transportation and clothing, total approximately $2,000 per month.  Paul sends Jean a check on the first of every month for $2,000 so Jean can pay her expenses.  Since Jean is receiving cash income in excess of her monthly SSI benefits, she loses her SSI.  She also loses her Medicaid benefits that pay for costly prescriptions and medical care.

Example #2:  Distributions from a SNT to third-party vendors for food or shelter

May is the trustee of a special needs trust established by Betty under her Last Will and Testament for her adult disabled adult, Karen.  Karen receives SSI, Medicaid, and food stamps.  Karen lives in an apartment.  May signed the lease as trustee of the SNT and pays all rent directly to the landlord.  The rental payments will result in a reduction, but not the elimination, of Karen’s SSI benefits.

Example #3:  Distributions from a SNT to third-party vendors for items that are NOT food or shelter

JoAnn, a disabled adult, receives SSI.  Deb is the trustee of a special needs trust established by JoAnn’s parents for her benefit.  JoAnn likes to read the Belleville News Democrat.  Deb arranges for the delivery of the BND newspaper to JoAnn on a daily basis and pays the bill directly to the Belleville News Democrat.  This is not considered income, and will not affect JoAnn’s SSI benefits.

There are many follow-up steps to make sure a special needs trust works on behalf of a loved one. Be sure to consult with an attorney interested in special needs issues, as well as estate planning, to put your disabled or special needs family member in the best situations possible.  A knowledgeable attorney will help determine the best course of planning for a lifetime of quality of care.

(Submitted to BND Adult Lifestyle:  5/23/12)

Estate Planning for Parents of Persons With Developmental and Other Severe Chronic Disabilities

August 8th, 2012 | written by Nancy Larson

Part I

From birth through age 18, the family learns to accept the disability and work with it to help the child function to his/her highest capacity.  The family also “learns the system” by learning what programs and protections are available for the child.  This involves learning the culture of disability through support systems, advocacy, access, and schools.

Facts of Life

Who will provide for a disabled child as the child becomes an adult
and the parents age and eventually die?

Portrait of beautiful young girlsPersons with disabilities are living longer now due to medical and societal advancements.  To live a full life, public benefits are often necessary, but there is no guarantee that public benefits will provide adequate resources over the disabled person’s lifetime.  Further, there is no guarantee that public agencies will provide services and advocacy over the disabled person’s lifetime.

Upon attaining age 18, a child becomes an adult for all legal purposes.  The child becomes eligible for public benefits based upon evidence of disability and the child’s low income and resources as the parents’ income and resources are no longer considered in determining the child’s eligibility.  Parental decision-making authority ends at age 18, and a guardianship may be necessary.

In providing for persons with disabilities, parents must be aware of several common pitfalls that may disqualify their child from receiving benefits upon attaining 18 years of age. Beware of the following pitfalls:

A. Uniform Gifts to Minors Act (UBMA) Accounts

  • Upon turning 18, the child takes control of the account, and the child may then use the money for purposes other than education — regardless of the custodian’s wishes.
  • UGMA accounts are considered available resources for purpose of SSI eligibility.

B. Unstructured Beneficiary Designations

  • Naming an SSI or Medicaid recipient as the beneficiary of a retirement plan, insurance policy, or annuity, will cause a reduction or elimination of public benefits.

C. No Planning at All

  • Dying without a will or a trust will usually leave all or a portion of the estate to the decedent’s children.
  • Any child receiving SSI or Medicaid will lose eligibility until the inheritance is either spent down, converted to an exempt resource, or placed in a Special Needs Trust.

What should a parent do?

Providing for a child with disabilities with a Special Needs Trust (SNT) will preserve the disabled person’s eligibility for needs-based governmental benefits while providing assets which may be used to supplement public benefits in order to improve the disabled person’s quality of life.

A SNT is drafted specifically to give discretion to the trustee so trust assets are not considered to be “countable resources” in determining the disabled person’s eligibility for public benefits based on need.

The Social Security Administration describes a discretionary trust as “a trust in which the trustee has full discretion as to the time, purpose and amount of the distributions.”  If the beneficiary has no discretion over the distributions, the trust is not counted in determining SSI eligibility.  Assets in a SNT will not count as a resource for public benefits purposes.  The assets in the SNT may be used to supplement the beneficiary’s needs not covered by public benefits without a reduction or elimination of those public benefits.

The following are examples of permissible SNT expenditures:  Entertainment / education / travel expenses / newspaper and magazine subscriptions / personal care services / In-home care services / non-covered medical expenses / vacations / companions.

Does every person with a disability need to have a trust? …. Not necessarily.

A SNT trust is appropriate if it helps to achieve greater independence or reliable asset management, but a trust by its nature means a loss of control over the funds by the disabled beneficiary.

Special Needs Trusts vs. Support Trusts

If needs-based public benefits are either not needed or not anticipated by the disabled beneficiary, there is no need to establish a SNT.  If public benefits are not an issue, it may be appropriate to establish a support trust to provide financial oversight and administration for the disabled person’s behalf.

Each family, each person, is unique and requires and deserves specific planning tailored to best meet the needs of their situation.

Submitted to BND Adult Lifestyle:  4/2/12