Presentation on theme: "Estate Planning and Decision Making"— Presentation transcript:
1Estate Planning and Decision Making Presented by:Joshua L. BrothersDussault Law Group(206)
2Public Benefits Eligibility SSI/MedicaidDisabled, blind, >65Disabled = no SGA ($1,040/month)“Means tested”IncomeEarned ($2:$1)Unearned ($1:$1)ISM (up to 1/3)Assets < $2000 (individual)Exemptions include primary home (<$500k), vehicle, personal property, SNTSSDI/MedicareDisabled, blind, >65Disabled = no SGA ($1,040/month)Work HistoryAvailable to individuals who have paid FICA taxes in the last 20 of 40 quarters prior to disabilityNot “means tested”Medicare available when: over 65 or meets SSA disability definition, 29 months post injury
3SSI/SSA Benefit Coverage 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 programsSSACash benefit depending on amount paid into Social Security systemReceived through earned credits of self, spouse, or parent
4Medicaid/ Medicare Coverage Medical AssistanceNo premiums, co-pays or deductiblesLong-Term CarePersonal care hoursAssisted living, nursing homes, etc.MedicareHospital, doctor visits, prescription drugsPremiums, co-pays and deductiblesMinimal rehabilitation care, but no long-term care
5Last Will and Testament (aka the “Will”) vs. Revocable Living Trusts No will/living trust = “intestate succession”Most common estate planning documentsDecision based on state probate processEstate tax considerations ($5,000,000 exemption in 2013)Living trusts and estate taxesEstate TaxesShould I leave assets to an individual with disabilities?Outright distributionDisinherit the individual“Testamentary” special needs trust
6Probate vs. Non-Probate Assets Probate assets are assets held in the decedent’s name without a beneficiary designationNon-probate assets are those that pass by a written instrument or arrangement other than a willJointly owned property with right of survivorship (bank accounts and real property)Pay on Death (POD) AccountTrustCommunity PropertyIndividual Retirement Accounts (IRA)401(k) PlansLife InsuranceReview non-probate assets on a regular basis
7Roles of Individuals in a Will Executor:DutiesWho to name?Guardian:Should be consistent with any Court filesTrustee:Advantages & disadvantages of using professionals
8What is a Trust? Separate legal entity Barrier between beneficiary and Trust assetsRolesTrustor or SettlorTrusteeBeneficiaryBasic Functions of a TrustSafeguard assetsFinancial ManagementDistributions“Types” of Trusts are just restrictions on basic functionsCan serve as an alternative to guardianship
9What is a Special Needs Trust (SNT)? Purposes:Financial managementContinued eligibility for “means” sensitive benefits (primarily SSI and Medicaid)Restriction on expenditures – “extra and supplemental needs” of the beneficiaryNeeds not covered by SSI and MedicaidCannot pay for basic food (groceries) and shelter (rent and basic utilities) or primary medical services otherwise covered by benefitsCan be used to pay for vacations, clothes, entertainment, education, etc.Trust restrictions must be observed.Must be “irrevocable”Sole benefit
10Source of Funding Matters Own Assets or Legal Right to AssetsAssets from 3rd PartySelf-Settled or (d)(4)(A) SNT3rd Party SNT
11Self-Settled (d)(4)(A) SNT Beneficiary’s own assetsRestrictionsBeneficiary must be disabledEstablished by parents, grandparents, guardian, or courtBeneficiary must be under 65 years of ageMedicaid ReimbursementCourt-ordered (d)(4)(A) SNTCourt reporting requirementsBond or blocked accountsPossible need for a professional Trustee (bifurcated duties?)“Grantor” Trust if drafted appropriatelyAlternative: (d)(4)(C) SNTPooled TrustRetained Trust assets replaces Medicaid Reimbursement
12Third Party SNT Assets of anyone other than the beneficiary No (d)(4)(A) SNT restrictionsAnyone can establishBeneficiary can be any ageNo Medicaid reimbursementComplex TrustsCan be a Living or Testamentary TrustCommon situations in which a Third Party SNT is createdWill and Estate Planning documentsFamily or friends want to assist the beneficiaryAvoidance of multiple SNTs in willsLack of judicial oversightUse of non-professional TrusteesControl of assets after the beneficiary has passed away
13SNT Administration Who is the Trustee? Beneficiaries with Guardians ProfessionalNon-ProfessionalBifurcated duties (investment/disbursement)Trust Protector?Beneficiaries with GuardiansPerson vs. EstateCourt appointed legal representativeGuardian stands in the shoes of the beneficiary
14SNT Administration (Continued) Fiduciary DutiesCan be highly intensive trustsUnderstanding specific disabilitiesUnderstanding public benefit programsFamily interactionsCourt supervisionAnnual ReportsBond or Blocked accountsCourt accountings & duty to keep informed.
15SNT Administration (Continued) Direct payments to vendors/service providersCash to Beneficiary?Impact on SSI/MedicaidUse of credit cards and gift cardsTrust Owned HomeCharge rent?Sources of rent (SSI, SSA and HUD)
16SNT Administration (Continued) TaxesTrust vs. Individual Taxes3rd Party SNT = Complex TrustRetained income taxed to the TrustDistributed income taxed to the BeneficiarySelf-Settled SNT = Grantor TrustAll income taxed to BeneficiaryPayment of taxes by TrustWA’s flexible laws on Trust issues (“TEDRA”)
17Presumed CapacityWhen 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 CareDrivingMarriageSchools & Other Government AgenciesFinancial
18Conferred AuthorityTo 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 authorityGuardianshipPower of AttorneyTrustRepresentative Payee
19Guardianship/ 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 Person Estate Full Limited
21Establishing A Guardianship Court determinesIncapacityScope of the guardianshipWho should be appointed as guardianProcess varies from state to sate
22Potential Rights Objection to Guardianship. Representation by counsel Jury trialPresumed to have capacity until found incapacitated.
23Who Should Serve As Guardian? Parents, siblings, other close family members, family friends, certified professional guardian, public guardianMinimum qualificationsOver 18 years of ageOf unsound mindNo conviction of a felony or of a misdemeanor involving moral turpitudeA person whom the Court finds unsuitableStand-by GuardianTransition
24Guardian’s Ongoing Rights and Responsibilities Manage the Incapacitated Person’s assetsManage the Incapacitated Person’s financial affairsCourt Reports & AccountingIs the Guardian responsible for the Incapacitated Person’s Debts?
25Power 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 requiredThe Principal does not lose the ability to make decisionsSubstituted judgment ruleDecisions of Principal “trump”POA is revocableDate of EffectivenessImmediately (terminates on disability unless otherwise indicated)Upon disability of the PrincipalBeware of the form!
26POA AuthorityScope of the AIF’s authority determined by language in the POAFinancialHealth CareBroad language granting "all powers that the principal has" allows the AIF to make most decisions regarding the Principal's financial affairs and health care, includingConsent to most medical treatmentBuy or sell thingsEnter contractsLanguage can be very specific and limited
27POA vs. Guardianship Guardianship No retained rights Difficult to revokeInvasivenessEstablishmentOn-Going ReportsPsychological effect on AIPCan be expensivePOARetained RightsEasily revocablePrivacyDoes not protect against bad decisionsRelatively inexpensiveMay be a “temporary fix”
28Representative PayeeAn individual designated by the Social Security Administration (“SSA”) to act on behalf of a disabled person in dealing with the SSAActs as a substitute to receive and handle a recipient’s benefits including SSI and SSDIAgrees to use the government benefits on behalf of the beneficiary for the beneficiary's personal care or well-being
29Who may serve as Representative Payee? Anyone concerned with the recipient’s welfareIndividualsParentSpouseClose relativeGuardianFriendOrganizationsInstitution such as a nursing home or health care provider;Public or nonprofit agency or financial organizationCannot be a convicted felon
30Role of Representative Payee Uses benefits for the recipient’s basic needs for food and shelterProvides 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 reportsAdvocates for the best interests of the disabled recipient to the agency including appealsAuthority is limited to matters between the recipient and the agency.
31Disclaimer/NoticeThis 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.
32Thank You!Joshua L. Brothers Dussault Law Group (206)