Medicaid Benefits – House Transfer: Deed Does Not Conflict

Reservation of Power of Appointment in Deed Does Not Conflict With Conveyance of Property to Children

house transfer

A Massachusetts appeals court rules that as part of Medicaid planning, a woman could reserve a power of appointment in a deed conveying property to her children while reserving a life estate for herself. Skye v. Hession (Mass. App. Ct., No. 16-P-282, Apr. 28, 2017).

Margaret Hession sought legal assistance to protect her house in the event she might need Medicaid benefits. As part of the Medicaid planning, she executed a deed transferring her house to her children. The deed reserved a life estate for her and granted her a special power of appointment that allowed her to appoint the property to any person except herself, her creditors, her estate, or her estate’s creditors. Ms. Hession decided her daughter Deaven Skye should inherit less than her other children. She wrote a will that exercised her power of appointment and reduced Ms. Skye’s interest in the property from one-third to 5 percent.

After Ms. Hession died, Ms. Skye objected to the will and argued that the power of appointment was void. The trial court dismissed Ms. Skye’s objection and admitted the will to probate. Ms. Skye appealed, arguing that the provisions in the deed granting the remainder interests and reserving a power of appointment are irreconcilably repugnant to each other.

The Massachusetts Court of Appeals, rules that the reservation of the power of appointment is consistent with the other provisions of the deed. According to the court, “because of the reservation of the life estate, the deed conveyed not present possessory estates but rather remainder interests; and, because of the reservation of the power, the remainder interests were defined, in part, by this limitation.” The court specifically does not express a “view on the effect of the reserved power of appointment on [Ms. Hession’s] strategy of avoiding MassHealth look-back period regulations.”

READ THE TOP 8 MISTAKES IN MEDICAID PLANNING HERE>

A Medicaid Applicant’s Purchase of Life Insurance Policy Is Transfer for Less Than Market Value

mp

An Illinois appeals court rules that a Medicaid applicant’s purchase of a life insurance policy was a transfer for less than fair market value because the applicant did not receive any benefit from the policy. Moore v. State of Illinois (Ill. App. Ct., 4th Dist., No. 4-16-0414, April 11, 2017).

Nursing home resident Elda Buckley applied for Medicaid. On the same day, she purchased a whole life insurance policy for $15,000 that named Christine Moore as the beneficiary. The state approved Ms. Buckley’s Medicaid application, but it determined that the purchase of the life insurance policy was a transfer for less than fair market value and imposed a penalty period.

Ms. Buckley appealed, arguing that she purchased the life insurance policy for fair market value, so the transfer should not be subject to a penalty period. The state and the trial court affirmed the penalty period. Ms. Buckley appealed.

The Illinois Court of Appeal, 4th District, affirms, holding that the purchase of the life insurance policy was a transfer for less than fair market value because Ms. Buckley did not receive the benefit of the policy. According to the court, the “apparent purpose of [Ms.] Buckley’s purchase of the insurance policy, of which she would receive none of the proceeds, was to shelter assets from Medicaid while ensuring [Ms.] Moore received the benefits of her assets.”

For the full text of this decision, go to: http://www.illinoiscourts.gov/Opinions/AppellateCourt/2017/4thDistrict/4160414.pdf

 

READ THE TOP 8 MEDICAID PLANNING MISTAKES HERE>

A Brothers’ Dispute Over Mother’s Nursing Home Placement Is Not Domestic Violence

nu

A New Jersey appeals court rules that an ugly dispute between two brothers over their mother’s placement in a nursing home did not amount to domestic violence. R.G. v. R.G.(N.J. Super. Ct., App. Div., No. A-0945-15T3, March 14, 2017).

R.G was the attorney-in-fact and primary caregiver for his parents. After R.G.’s mother fell ill, R.G. wanted to place his mother in a nursing home. R.G’s brother objected to this plan, but R.G. went ahead and had his mother admitted to a nursing home without his brother’s consent. R.G.’s brother sent angry and threatening texts and emails to R.G. as well as emails expressing his desire to find a way to care for their parents in their home. Eventually the men got into a physical altercation in which R.G.’s brother shoved R.G.

R.G. filed for a restraining order against his brother under the Prevention of Domestic Violence Act. The trial judge ruled that R.G. was harassed and assaulted and issued the restraining order. R.G.’s brother appealed, arguing that R.G. did not meet the definition of a victim of domestic violence.

The New Jersey Superior Court, Appellate Division, reverses, holding that R.G.’s brother’s actions did not amount to domestic violence. The court finds that there was insufficient evidence that R.G.’s brother purposely acted to harass R.G., ruling that “a mere expression of anger between persons in a requisite relationship is not an act of harassment.”

For the full text of this decision, go to: http://www.judiciary.state.nj.us/opinions/a0945-15.pdf

 

Elder Abuse is a National Epidemic

Via Huffington Post…

When Helping Hurts

Screen Shot 2017-03-21 at 12.17.01 PM

Elder abuse is a national epidemic. Each year in the United States, an estimated 10 percent of older Americans are injured physically, debilitated emotionally, exploited financially and/or neglected — often by an adult child, spouse, other relative or caregiver. Elder abuse victims have a three-fold risk of death compared to their non-abused counterparts. Frequently, an elder is isolated, their mistreatment hidden.

In 2006, newspapers around the country headlined the story that Brooke Astor, the legendary New York City philanthropist and socialite, was financially exploited and neglected by her son and attorney. The case attracted national attention as her grandson, with the help of others, sought elder justice – first, by petitioning for guardianship to help his grandmother and those who were (also) helping her, and second, to help bring some of her perpetrators (his father included) to justice. The Elder Abuse Unit of the New York County’s District Attorney’s Office indicted and convicted Brooke Astor’s son and attorney. Elder justice was realized.

That is rare. Most of the millions of elder abuse victims, their suffering shrouded in silence, do not receive justice. Only one in 24 elder abuse cases are reported to authorities. What is not rare is that, despite an almost total lack of support or resources, family, friends and neighbors step up to help. Yet helping hurts, as confirmed by new findings of our research.

 

Staggering Number Know About Elder Mistreatment, Assist Victims, and Feel Distress

Along with colleagues at Cornell University, University of Toronto and Purdue University, we utilized Cornell University’s Survey Research Institute’s omnibus survey to learn about these concerned persons who step up for elder abuse victims — a population that had never been assessed. The survey results were recently released in The Gerontologist. They show that when findings are extended to the general population (U.S. Census Bureau, 2016), approximately 73 million adult Americans have had personal knowledge of a victim of elder mistreatment. Further, approximately 44 million adult Americans have become involved in helping an elder abuse victim. And for over 32 million adult Americans, just knowing about an elder abuse situation is generally highly stressful. Actually providing help to the victim tends to intensify this personal distress.

We need more research to understand what specific aspects cause this distress. We do know from conversations with concerned persons that the path to assisting elder abuse victims is often fraught with challenges. Concerned persons may witness the decline in the victim’s health and seek to obtain medical care, or provide what care they can themselves. They might feverishly focus efforts on trying to stop a financial exploiter from completely emptying bank accounts. They may try to lessen the victim’s despair. Often, they are often the only ones standing between the victim and the abuser, preventing the victim from slipping into total isolation.

Yet they are usually wholly unprepared for how this intervention might take a toll on they themselves. Relationships with friends they confide in and family may become strained, sometimes to the breaking point. They may suffer financial consequences. And seeing or confronting an abuser can be dangerous, so they personally risk becoming the target of abuse. Intervening can take real courage, and even more to remain involved. And it requires time, as elder abuse cases tend not to resolve quickly. It is not surprising that concerned persons can experience anguish, frustration and trauma. Yet like the victims they help, they are largely invisible: their deeds often not recognized, their needs unacknowledged.

 

Communities Can Help

What can communities do? A new program to be launched this spring in New York City is a beginning. The New York City Elder Abuse Center is launching a pilot helpline for concerned persons assisting elder mistreatment victims residing in New York City. Funded in part by the Fan Fox & Leslie R. Samuels Foundation, it will provide information, referrals and support. This is an important first step, but the need is great. Programs must be developed for concerned persons — and elder abuse victims — in every community. This will require support from foundations, private philanthropists, businesses and government. Brooke Astor fervently believed in a collectively expressed philanthropy, a

Elder abuse is a national epidemic. Each year in the United States, an estimated 10 percent of older Americans are injured physically, debilitated emotionally, exploited financially and/or neglected — often by an adult child, spouse, other relative or caregiver. Elder abuse victims have a three-fold risk of death compared to their non-abused counterparts. Frequently, an elder is isolated, their mistreatment hidden.

In 2006, newspapers around the country headlined the story that Brooke Astor, the legendary New York City philanthropist and socialite, was financially exploited and neglected by her son and attorney. The case attracted national attention as her grandson, with the help of others, sought elder justice – first, by petitioning for guardianship to help his grandmother and those who were (also) helping her, and second, to help bring some of her perpetrators (his father included) to justice. The Elder Abuse Unit of the New York County’s District Attorney’s Office indicted and convicted Brooke Astor’s son and attorney. Elder justice was realized.

That is rare. Most of the millions of elder abuse victims, their suffering shrouded in silence, do not receive justice. Only one in 24 elder abuse cases are reported to authorities. What is not rare is that, despite an almost total lack of support or resources, family, friends and neighbors step up to help. Yet helping hurts, as confirmed by new findings of our research.

 

“My mom is in a nursing home and I noticed some bruises and sores. I think they are bedsores—what should I do?”

Bedsores are often a sign of neglect and sometimes a sign of abuse. The first thing you should do is speak to a nurse on duty and begin to remedy the situation. Be aware that the nurse may not have a full understanding of these injuries and you will likely need the attention of a wound care specialist and medical doctor. If you have a cell phone take some pictures of the wound for documentation. Bedsores and Pressure Sores, also known as Decubitus Ulcers can progress quickly and can be deadly. They occur when someone is immobile and there is not adequate blood flow. Then the affected tissue dies and an ulcerated sore develops. In a nursing home, hospital or other care facility it is their responsibility to check and turn the patient regularly. There are laws in place that protect patients and you should know that these injuries are not the fault of the patient. The patient is the victim. If a loved one you know is suffering they may have a significant, financially rewarding lawsuit. Read more about this on our website, http://www.RaphanLaw.com.

As an Elder Law firm we see these cases often. Whether malpractice, abuse or neglect it is simply unjust for it to happen to an innocent victim. Do not put off addressing the issue. Call me for a free consultation (212-268-8200, 800-278-2960) or even to just guide you through the process of getting the proper medical and legal attention.

Visual Stages of Bedsores:

Image

Read our Frequently Asked Bedsore Lawsuit Questions here>

By Brian A. Raphan, Esq.

8 Pretty Good Things For Seniors To Remember at Tax Time

Tax day, which is April 18th in 2017, is approaching and it is time to begin crossing T’s and dotting I’s in preparation for paying taxes. As tax time draws near, you want to make sure you file all the proper forms and take all deductions you’re entitled to. Following are some things to keep in mind as you prepare your tax form.

elder law nyc

  1. Gifts. Did you give away any money this year? The gift tax can be very confusing. If you gave away more than $14,000 in 2016, you will have to file a Form 709, the gift tax return. This does not necessarily mean you will owe taxes on the money, however.
  2. Medical Expenses. Many types of medical expenses are tax deductible, from hospital stays to hearing aids. To claim the deduction, your medical expenses have to be more than 10 percent of your adjusted gross income.  (For taxpayers 65 and older, this threshold will be 7.5 percent through 2016.) This includes all out-of-pocket costs for prescriptions (including deductibles and co-pays) and Medicare Part B and Part C and Part D premiums. (Medicare Part B premiums are usually deducted out of your Social Security benefits, so be sure to check your 1099 for the amount.) You can only deduct medical expenses you paid during the year, regardless of when the services were provided, and medical expenses are not deductible if they are reimbursable by insurance.
  3. Parental Deduction. If you are caring for your mother or father, you may be able to claim your parent as a dependent on your income taxes. This would allow you to get an exemption $4,050 (in 2016) for him or her.
  4. Long-Term Care Insurance Premiums. Premiums for “qualified” long-term care policies are treated as an unreimbursed medical expense. Long-term care insurance premiums are deductible for the taxpayer, his or her spouse and other dependents.
  5. Social Security Benefits. Although Social Security benefits are generally not taxable, people with substantial income in addition to their Social Security may pay taxes on their benefits. If you file a federal tax return as an individual and your “combined income,” including one half of your Social Security benefits and nontaxable interest income is between $25,000 and $34,000, 50 percent of your Social Security benefits will be considered taxable. If your combined income is above $34,000, 85 percent of your Social Security benefits is subject to income tax.
  6. Home Sale Exclusion. Married couples can exclude from income up to $500,000 in profit on the sale of a home ($250,000 for single individuals). If a surviving spouse sells the home, he or she can still claim the exclusion as long as the house was sold no more than two years after the spouse’s death.
  7. Elderly or Disabled Tax Credit. Some low-income elderly or disabled individuals are entitled to a special tax credit. To be eligible, you must meet income limits. For more information, click here.
  8. Tax Refunds. Getting a federal tax refund should not affect your Medicaid or Social Security benefits. For a year after receiving a tax refund from the federal government, the refund will not be considered income or resources for SSI or Medicaid purposes. You can also transfer the refund within a year without incurring a penalty.

The IRS’s Tax Counseling for the Elderly (TCE) Program offers free tax help to taxpayers who are 60 and older. For more information, click here. The IRS also publishes a Tax Guide For Seniors.

More Free Helpful Legal Guides for Seniors, click here.

Steps to Prevent a Contested Will

Emotions can run high at the death of a family member. If a family member is unhappy with the amount they received (or didn’t receive) under a Will, a Will contest may ensue. 

iStock_will

Generally, only a person’s closest heirs, or “distributees” are able to contest a Will. Will contests can drag out for years, keeping all the beneficiaries from getting what they are entitled to. It may be impossible to prevent heirs from fighting over your Will entirely, but there are steps you can take to try to minimize squabbles and ensure your intentions are carried out.

Your Will can be contested if an heir believes you did not have the requisite mental capacity to execute the Will, someone exerted undue influence over you, someone committed fraud, or the Will was not executed properly.

The following are some steps that may make a will contest less likely to succeed:

  • Make sure your Will is properly executed. The best way to do this is to have an experienced elder law or estate planning attorney assist you in drafting and executing the will. Wills need to be signed and witnessed, usually by two independent witnesses.
  • Explain your decision. If family members understand the reasoning behind the decisions in your Will, they may be less likely to contest the Will. It is a good idea to talk to family members at the time you draft the will and explain why someone is getting left out of the Will or getting a reduced share. If you don’t discuss it in person, state the reason in the Will. You may also want to include a letter with the Will.
  • Use a no-contest clause. One of the most effective ways of preventing a challenge to your Will is to include a no-contest clause (also called an “in terrorem clause”) in the will. This will only work if you are willing to leave something of value to the potentially disgruntled family member. A no-contest clause provides that if an heir challenges the Will and loses, then he or she will get nothing. You must leave the heir enough so that a challenge is not worth the risk of losing the inheritance.
  • Prove competency. One common way of challenging a Will is to argue that the deceased family member was not mentally competent at the time he or she signed the Will. You can try to avoid this by making sure the attorney drafting the Will tests you for competency. This could involve seeing a doctor or answering a series of questions.
  • Remove the appearance of undue influence. Another common method of challenging a Will is to argue that someone exerted undue influence over the deceased family member. For example, if you are planning on leaving everything to your daughter who is also your primary caregiver, your other children may argue that your daughter took advantage of her position to influence you. To avoid the appearance of undue influence, do not involve any family members who are inheriting under your Will in drafting your will. Family members should not be present when you discuss the Will with your attorney or when you sign it. To be totally safe, family members shouldn’t even drive you to the attorney’s office.

Bear in mind that some of these strategies may not be advisable in certain states and certain situations. Feel free to talk to me about the best strategy for you.

(For more information on Wills click here.)

Regards,

Brian A. Raphan, Esq.

Top 10 Elder Law decisions of 2016

Below, in chronological order, is ElderLawAnswers’ annual roundup of the top 10 elder law decisions for the year just ended, as measured by the number of “unique page views” of our summary of the case.

gavel17

1. Medicaid Applicant’s Irrevocable Trust Is an Available Resource Because Trustee Can Make Distributions

An Alabama appeals court rules that a Medicaid applicant’s special needs trust is an available resource because the trustee had discretion to make payments under the trust. Alabama Medicaid Agency v. Hardy (Ala. Civ. App., No. 2140565, Jan. 29, 2016). To read the full summary, click here.

2. Trust Is an Available Asset Because Trustees Have Discretion to Make Distributions

A New York appeals court rules that a Medicaid applicant’s trust is an available asset because the trustees have discretion to make distributions to her. In the Matter of Frances Flannery v. Zucker (N.Y. Sup. Ct., App. Div., 4th Dept., No. TP 15-01033, Feb. 11, 2016). To read the full summary, click here.

3. Medicaid Applicant Who Transferred Assets in Exchange for Promissory Note May Proceed with Suit Against State

A U.S. district court holds that a Medicaid applicant who was denied Medicaid benefits after transferring assets to her children in exchange for a promissory note may proceed with her claim against the state because Medicaid law confers a private right of action and the Eleventh Amendment does not bar the claim. Ansley v. Lake (U.S. Dist. Ct., W.D. Okla., No. CIV-14-1383-D, March 9, 2016). To read the full summary, click here.

4. Mass. Court Bridles at Allegations in Request for Reconsideration in Irrevocable Trust Case

In a strongly worded response to a Medicaid applicant’s request for reconsideration of an unsuccessful appeal involving an irrevocable trust, a Massachusetts trial court strikes the applicant’s pleadings after it takes great exception to the tone of the argument.  Daley v. Sudders (Mass.Super.Ct., No.15-CV-0188-D, March 28, 2016). To read the full summary, click here.

5. Caretaker Exception Denied Because Child Did Not Provide Continuous Care

A New Jersey appeals court determines that the caretaker child exception does not apply to a Medicaid applicant who transferred her house to her daughter because the daughter did not provide continuous care for the two years before the Medicaid applicant entered a nursing home. M.K. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., No. A-0790-14T3, May 13, 2016). To read the full summary, click here.

6. State Can Place Lien on Medicaid Recipient’s Life Estate After Recipient Dies

An Ohio appeals court rules that a deceased Medicaid recipient’s life estate does not extinguish at death for the purposes of Medicaid estate recovery, so the state may place a lien on the property. Phillips v. McCarthy (Ohio Ct. App., 12th Dist., No. CA2015-08-01, May 16, 2016). To read the full summary, click here.

7. Attorney Liable to Third-Party Beneficiary of Will for Legal Malpractice

Virginia’s highest court rules that an intended third-party beneficiary of a will may sue the attorney who drafted the will for legal malpractice. Thorsen v. Richmond Society for the Prevention of Cruelty to Animals (Va., No. 150528, June 2, 2016). To read the full summary, click here.

8. Nursing Home’s Fraudulent Transfer Claim Against Resident’s Sons Can Move Forward

A U.S. district court rules that a nursing home can proceed with its case against the sons of a resident who transferred the resident’s funds to themselves because the fraudulent transfer claim survived the resident’s death. Kindred Nursing Centers East, LLC v. Estate of Barbara Nyce (U.S. Dist. Ct., D. Vt., No. 5:16-cv-73, June 21, 2016). To read the full summary, click here.

9. Irrevocable Trust Is Available Asset Because Medicaid Applicant Retained Some Control

New Hampshire’s highest court rules that a Medicaid applicant’s irrevocable trust is an available asset even though the applicant was not a beneficiary of the trust because the applicant retained a degree of discretionary authority over the trust assets. Petition of Estate of Thea Braiterman (N.H., No. 2015-0395, July 12, 2016). To read the full summary, click here.

10. NY Court Rules that  Spouse’s Refusal to Contribute to Care Creates Implied Contract to Repay Benefits

A New York trial court enters judgment against a woman who refused to contribute to her spouse’s nursing home expenses, finding that because she had adequate resources to do so, an implied contract was created between her and the state entitling the state to repayment of Medicaid benefits it paid on the spouse’s behalf. Banks v. Gonzalez (N.Y. Sup. Ct., Pt. 5, No. 452318/15, Aug. 8, 2016). To read the full summary, click here.

Feel Free to contact me to see how any of these decisions may affect your personal situation.

-Brian A. Raphan, Esq. 

Is It Better to Remarry in 2017 or Just Live Together?

Finding love later in life may be unexpected and exciting, but should it lead to marriage? The considerations are much different for an older couple with adult children and retirement plans than for a young couple just starting out. Before deciding whether to get married or just live together, you need to look at your estate plan, your Social Security benefits, and your potential long-term care needs, among other things. Whatever you decide to do, you may want to consult with your lawyer to make sure your wishes will be carried out.

Here are some things to think about: 

  • Estate Planning. Getting married can have a big effect on your estate plan. Even if you don’t include a new spouse in your will, in most states spouses are automatically entitled to a share of your estate (usually one-third to one-half). One way to prevent a spouse from taking his or her share is to enter into a prenuptial agreement in which both spouses agree not to take anything from the other’s estate. If you want to leave something to your spouse and ensure your heirs receive their inheritance, a trust may be the best option.
  • Long-Term Care. Trusts and prenuptial agreements, however, won’t necessarily keep a spouse from being responsible for your long-term care costs or vice versa. In addition, getting married can have an effect on your or your spouse’s Medicaid eligibility. If you can afford it, a long-term care insurance policy may be a good investment once you remarry.
  • The Family Home. Whether you are getting married or just living together, before combining households you will need to think about what will happen to the house once the owner of the house dies. If the owner wants to keep the house within his or her family, putting the house in both spouse’s names is not an option. On the other hand, the owner may also not want his or her heirs to evict the surviving spouse once the owner dies. One solution is for the owner of the house to give the surviving spouse a life estate. Once the surviving spouse dies, the house will pass to the original owner’s heirs.
  • Social Security. Many divorced or widowed seniors receive Social Security from their former spouses, and remarriage can affect benefits. If you are divorced after at least 10 years of marriage, you can collect retirement benefits on your former spouse’s Social Security record if you are at least age 62 and if your former spouse is entitled to or receiving benefits. If you remarry, you generally cannot collect benefits on your former spouse’s record unless your later marriage ends (whether by death, divorce, or annulment). However, if your are a widow, widower or surviving divorced spouse who remarries after age 60, you are entitled to benefits on your prior deceased spouse’s Social Security earnings record.
  • Alimony. If you are receiving alimony from a divorced spouse, it will likely end once you remarry. Depending on the laws in your state and your divorce settlement, alimony may end even if you simply live with someone else.
  • Survivor’s Annuities. Widows and widowers of public employees, such as police officers and firefighters, often receive survivor’s annuities. Many of these annuities end if the surviving spouse remarries. In addition widows and widowers of military personnel may lose their annuities if they remarry before age 57. Before getting married, check your annuity policy to see what the affect will be.
  • College Financial Aid. Single parents with children in college may want to reconsider before getting married. A new spouse’s income could affect the amount of financial aid the college student receives. Some private colleges may even count the combined income of a couple that lives together if they commingle their expenses.

No will or estate plan? Big problem for you and your heirs

Estate planning isn’t just for the wealthy. Financial advisors say that most Americans can benefit from it. Read on and see how you can benefit even if you are not worth millions.

Sarah O’Brien | Tuesday, 9 Aug 2016 | 7:50 AM ET

About 10 years ago, financial advisor Andrew Rafal was involved in helping a husband and wife create an estate plan. Six days after all the documents were in order and signed, the husband unexpectedly died from an aneurysm.

Thanks to the couple’s planning, the surviving wife was able to access and assume ownership of assets that otherwise would not have been available immediately.

“It would have been a very different situation if they hadn’t finalized their estate plan,” said Rafal, founder and president of Bayntree Wealth Advisors. “In a time of grieving, it’s one less thing to go through.”

While estate planning is often associated with the wealthy, financial advisors say that most Americans can benefit from it.

Senior man pensive

Lee Edwards | Getty Images

“It’s not just for the wealthy; it’s for all of us,” Rafal said. “And the earlier you start, the better.”

The most basic part of estate planning is a will, which more than half of Americans die without, according to various data. Advisors caution that dying intestate (having no will) will result in a state court deciding who gets your assets and, if you have children, who will care for them.

This means that if you have an unmarried partner or a favorite charity but no will, your assets won’t end up with them. Typically, the courts will pass on assets to your closest blood relatives, even if that wouldn’t have been your first choice.

“Everyone should have a will,” Rafal said. “It allows assets to go to beneficiaries you name. And if you have children who are minors, it names a guardian, which is extremely important.”

“As people go through different milestones in life, they need to change their beneficiaries. The beneficiary trumps any other estate planning you do.”-Andrew Rafal, founder and president of Bayntree Wealth Advisors

Another often-overlooked element of estate planning is updating beneficiaries on financial assets such as individual retirement accounts, 401(k) plans and life insurance policies. Regular bank accounts, too, should have beneficiaries listed on a payable-on-death form, also known as a POD, which your bank can supply.

“As people go through different milestones in life, they need to change their beneficiaries,” Rafal said, explaining, “If you had your parents listed and then you get married, those assets go to your parents. The beneficiary trumps any other estate planning you do.”

Certified financial planner Aaron Graham had a client who, after a divorce, updated his will to exclude his ex-wife. But because the client’s beneficiary designations were not updated, his ex-wife received his retirement account assets.

“Thankfully, the ex-wife was cooperative with the children of the deceased, but that’s not always the case,” said Graham, a financial advisor at Abacus Planning Group.

If no beneficiary is listed on those assets or the beneficiary has already passed away, the assets automatically go into probate. That’s the process by which all of your debt is paid off and then the remaining assets are distributed to heirs.

Each state has its own laws governing how long creditors have to make a claim against the decedent’s estate, but it typically is about six months to a year.

In the case of Rafal’s client, for instance, if the wife had not been listed as a beneficiary on her husband’s retirement and stock accounts, those assets would have first gone into probate and she would have had no claim to them until probate was completed.

Another part of estate planning involves what Rafal calls “lifetime management.” That is, for starters, creating legal documents that give powers of attorney to specific people in your life if you are alive but incapacitated.

A medical power of attorney lets the chosen person make important health-care decisions if you cannot; a person with durable power of attorney will act as your agent if you become unable to tend to your finances.

Granting your own wishes

Rafal said those people could be one and the same, but most often, people name two separate people.

“You might have someone who’s not great with finances but you trust the person to make medical decisions for you, or vice versa,” Rafal explained. “Durable power of attorney lets a person step in if you are unable to make decisions.”

Tied to that is a living will. It states your wishes if you are on life support or have a terminal condition.

“Do you want to prolong [your] life at all costs, or do you have specific instructions on when and how you would like for life-saving measures to be implemented?” Graham said.

The idea is that it will be your wishes, not someone else’s.

Have you made your annual financial checklist?

   WIN-Initative | Getty Images

As far as taxes go when it comes to estate planning, chances are, you won’t have to worry about the estate tax.

“It’s important to remember that 99 percent of all people don’t need to focus on the tax aspects of estate planning,” said Pete Lang, president of Lang Capital. “For the vast majority of the population, there will be no gift or estate tax.”

For 2016, the Internal Revenue Service will impose taxes on estates whose assets exceed $5.45 million. Roughly 0.02 percent of the population ends up paying the estate tax in any given year.

Estate planning also “helps protect against families fighting, or someone potentially contesting the wishes of the deceased,” Rafal said. “We’ve had new clients come to us who didn’t have proper planning, and their families have been torn apart.”

Rafal said it’s also important to make a list — handwritten or electronic — of all your assets and where they are.

“It makes it so much easier upon death or incapacity so your family isn’t running around wondering what you have or don’t have,” he said.

DOWNLOAD YOUR FREE ESTATE PLANNING GUIDE >>>