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Estate Planning and Decision Making Presented by: Joshua L. Brothers Dussault Law Group (206) 324-4300

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Presentation on theme: "Estate Planning and Decision Making Presented by: Joshua L. Brothers Dussault Law Group (206) 324-4300"— Presentation transcript:

1 Estate Planning and Decision Making Presented by: Joshua L. Brothers Dussault Law Group (206)

2 Public Benefits Eligibility SSI/Medicaid – Disabled, blind, >65 – Disabled = no SGA ($1,040/month) –Means tested – Income – Earned ($2:$1) – Unearned ($1:$1) – ISM (up to 1/3) – Assets < $2000 (individual) – Exemptions include primary home (<$500k), vehicle, personal property, SNT SSDI/Medicare – Disabled, blind, >65 – Disabled = no SGA ($1,040/month) – Work History – Available to individuals who have paid FICA taxes in the last 20 of 40 quarters prior to disability – Not means tested – Medicare available when: over 65 or meets SSA disability definition, 29 months post injury

3 SSI/SSA Benefit Coverage SSI – Cash benefit of up to $710 to be utilized for food and shelter expenses (as of 1/13). – Some States provide cash supplements to base SSI limit – Gatekeeper to Medicaid and other public benefit programs SSA – Cash benefit depending on amount paid into Social Security system – Received through earned credits of self, spouse, or parent

4 Medicaid/ Medicare Coverage Medicaid – Medical Assistance No premiums, co-pays or deductibles – Long-Term Care Personal care hours Assisted living, nursing homes, etc. Medicare – Hospital, doctor visits, prescription drugs Premiums, co-pays and deductibles – Minimal rehabilitation care, but no long-term care

5 Last Will and Testament (aka the Will) vs. Revocable Living Trusts No will/living trust = intestate succession Most common estate planning documents Decision based on state probate process Estate tax considerations ($5,000,000 exemption in 2013) – Living trusts and estate taxes – Estate Taxes Should I leave assets to an individual with disabilities? – Outright distribution – Disinherit the individual – Testamentary special needs trust

6 Probate vs. Non-Probate Assets Probate assets are assets held in the decedents name without a beneficiary designation Non-probate assets are those that pass by a written instrument or arrangement other than a will – Jointly owned property with right of survivorship (bank accounts and real property) – Pay on Death (POD) Account – Trust – Community Property – Individual Retirement Accounts (IRA) – 401(k) Plans – Life Insurance Review non-probate assets on a regular basis

7 Roles of Individuals in a Will Executor: – Duties – Who to name? Guardian: – Duties – Who to name? – Should be consistent with any Court files Trustee: – Duties – Who to name? Advantages & disadvantages of using professionals

8 What is a Trust? Separate legal entity Barrier between beneficiary and Trust assets Roles – Trustor or Settlor – Trustee – Beneficiary Basic Functions of a Trust – Safeguard assets – Financial Management – Distributions Types of Trusts are just restrictions on basic functions Can serve as an alternative to guardianship

9 What is a Special Needs Trust (SNT)? Purposes: – Financial management – Continued eligibility for means sensitive benefits (primarily SSI and Medicaid) Restriction on expenditures – extra and supplemental needs of the beneficiary – Needs not covered by SSI and Medicaid – Cannot pay for basic food (groceries) and shelter (rent and basic utilities) or primary medical services otherwise covered by benefits – Can be used to pay for vacations, clothes, entertainment, education, etc. – Trust restrictions must be observed. Must be irrevocable Sole benefit

10 Source of Funding Matters

11 Self-Settled (d)(4)(A) SNT Beneficiarys own assets Restrictions – Beneficiary must be disabled – Established by parents, grandparents, guardian, or court – Beneficiary must be under 65 years of age – Medicaid Reimbursement Court-ordered (d)(4)(A) SNT – Court reporting requirements – Bond or blocked accounts – Possible need for a professional Trustee (bifurcated duties?) Grantor Trust if drafted appropriately Alternative: (d)(4)(C) SNT – Pooled Trust – Retained Trust assets replaces Medicaid Reimbursement

12 Third Party SNT Assets of anyone other than the beneficiary No (d)(4)(A) SNT restrictions – Anyone can establish – Beneficiary can be any age – No Medicaid reimbursement Complex Trusts Can be a Living or Testamentary Trust Common situations in which a Third Party SNT is created – Will and Estate Planning documents – Family or friends want to assist the beneficiary – Avoidance of multiple SNTs in wills Lack of judicial oversight Use of non-professional Trustees Control of assets after the beneficiary has passed away

13 SNT Administration Who is the Trustee? – Professional – Non-Professional – Bifurcated duties (investment/disbursement) – Trust Protector? Beneficiaries with Guardians – Person vs. Estate – Court appointed legal representative – Guardian stands in the shoes of the beneficiary

14 SNT Administration (Continued) Fiduciary Duties Can be highly intensive trusts Understanding specific disabilities Understanding public benefit programs Family interactions Court supervision Annual Reports Bond or Blocked accounts Court accountings & duty to keep informed.

15 SNT Administration (Continued) Direct payments to vendors/service providers Cash to Beneficiary? Impact on SSI/Medicaid Use of credit cards and gift cards Trust Owned Home Charge rent? Sources of rent (SSI, SSA and HUD)

16 SNT Administration (Continued) Taxes Trust vs. Individual Taxes 3 rd Party SNT = Complex Trust Retained income taxed to the Trust Distributed income taxed to the Beneficiary Self-Settled SNT = Grantor Trust All income taxed to Beneficiary Payment of taxes by Trust WAs flexible laws on Trust issues (TEDRA)

17 Presumed Capacity When an individual turns 18, she is an adult in the eyes of the law. Adults presumed to be capable of making decisions on their own behalf. Parents lose the right to speak & act for their child, including… – Health Care – Driving – Marriage – Schools & Other Government Agencies – Financial

18 Conferred Authority To make decisions on behalf of another adult, a person must be granted that authority by the adult, by the courts, or by operation of law. Ways to retain decision making authority – Guardianship – Power of Attorney – Trust – Representative Payee

19 Guardianship/ Conservatorship A guardian appointed by Superior Court upon a finding of incapacity. Types of Guardianship: – Estate/Conservatorship (financial) – Person (everything else!) Can be all rights or something less in most states

20 Scope of Guardianship PersonEstate Full Limited

21 Establishing A Guardianship Court determines – Incapacity – Scope of the guardianship – Who should be appointed as guardian Process varies from state to sate

22 Potential Rights Objection to Guardianship. Representation by counsel Jury trial Presumed to have capacity until found incapacitated.

23 Who Should Serve As Guardian? Parents, siblings, other close family members, family friends, certified professional guardian, public guardian Minimum qualifications – Over 18 years of age – Of unsound mind – No conviction of a felony or of a misdemeanor involving moral turpitude – A person whom the Court finds unsuitable Stand-by Guardian Transition

24 Guardians Ongoing Rights and Responsibilities Manage the Incapacitated Persons assets Manage the Incapacitated Persons financial affairs Court Reports & Accounting Is the Guardian responsible for the Incapacitated Persons Debts?

25 Power of Attorney (POA) A legal instrument in which a person (the Principal) grants another person (the Attorney-in-Fact or AIF) the right to make decisions on his or her behalf Capacity to sign the Power of Attorney required The Principal does not lose the ability to make decisions Substituted judgment rule Decisions of Principal trump POA is revocable Date of Effectiveness – Immediately (terminates on disability unless otherwise indicated) – Upon disability of the Principal Beware of the form!

26 POA Authority Scope of the AIFs authority determined by language in the POA – Financial – Health Care Broad language granting "all powers that the principal has" allows the AIF to make most decisions regarding the Principal's financial affairs and health care, including – Consent to most medical treatment – Buy or sell things – Enter contracts Language can be very specific and limited

27 POA vs. Guardianship Guardianship No retained rights Difficult to revoke Invasiveness – Establishment – On-Going Reports Psychological effect on AIP Can be expensive POA Retained Rights Easily revocable Privacy Does not protect against bad decisions Relatively inexpensive May be a temporary fix

28 Representative Payee An individual designated by the Social Security Administration (SSA) to act on behalf of a disabled person in dealing with the SSA Acts as a substitute to receive and handle a recipients benefits including SSI and SSDI Agrees to use the government benefits on behalf of the beneficiary for the beneficiary's personal care or well-being

29 Who may serve as Representative Payee? Anyone concerned with the recipients welfare Individuals – Parent – Spouse – Close relative – Guardian – Friend Organizations – Institution such as a nursing home or health care provider; – Public or nonprofit agency or financial organization Cannot be a convicted felon

30 Role of Representative Payee Uses benefits for the recipients basic needs for food and shelter Provides an accounting, usually on an annual basis to the agency showing how the benefits were used. Communicates with the agency, including completion of agency requests and reports Advocates for the best interests of the disabled recipient to the agency including appeals Authority is limited to matters between the recipient and the agency.

31 Disclaimer/Notice This training and written materials are designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the presenter is not engaged in rendering legal, financial or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Please keep in mind all written materials and power point slides are the intellectual property of the Dussault Law Group. These materials may not be distributed without the express written consent of the authors.

32 Thank You! Joshua L. Brothers Dussault Law Group (206)


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