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Monday, November 16, 2015

First Party and Third Party Pooled Income Trusts, Explained

Generally, a "pooled trust" holds assets for people that have a disability, and/or elderly individuals. The trust is established and run by a not-for-profit organization, which will establish separate accounts for each individual within their system. However, the money of all of the individuals served is added together (in other words, it is pooled together) for investment and management purposes.


There are typically two types of pooled trusts. The first type is sometimes referred to as a "first party" trust. In this type of trust the disabled person places his or her own assets into the trust. Doing so will cause those assets to be non-countable for government benefit programs, such as Medicaid. The trustee of the trust (the not-for-profit organization) can use that person's money to pay for things that Medicaid will not cover. So, the assets are still there for the benefit of the person but their use is restricted. In this type of "first party" trust, any assets that remain when the person dies must be paid to the state up to the amount that the state has paid out for the person's care under the Medicaid program.

The second type of pooled trust is referred to as a "third party" trust. This means that the money did not come from the disabled person. For example, a parent with a disabled child could leave that child's inheritance to a pooled trust for the benefit of the child. The benefit is that the money would still be there for the child but would not disqualify the child from receiving SSI or Medicaid because the money would not be counted for these government programs. Unlike the first party trust, upon the death of the disabled person (in this example, the child) any remaining assets do not have to go to the state but can pass to any other beneficiaries that the parent wanted to have them.

Whether a pooled trust would be of any benefit to you depends upon many factors. Seek the advice of a qualified estate planning attorney to determine your best course of action.


Monday, November 2, 2015

Mediation: Is It Right For You?

Mediation is one form of alternative dispute resolution (ADR) that allows parties to seek a remedy for their conflict without a court trial. Parties work with a mediator, who is a neutral third party. Usually, mediators have received some training in negotiation or their professional background provides that practical experience.

Unlike a judge, a mediator does not decide who wins; rather, a mediator facilitates communication between the parties and helps identify issues and solutions. The goal is for parties to reach an acceptable agreement.

Mediation can be an appealing option because it is less adversarial. This might be important when the relationship between the parties has to continue in the future, such as between a divorcing couple with children. The process is also less formal than court proceedings.

Mediation often costs less than litigation, which is another benefit. Another advantage to using mediation is that it generally takes much less time than a traditional lawsuit. Litigation can drag on for years, but mediation can typically be completed within a few months. Court systems are embracing mediation and other forms of ADR in an effort to clear their clogged dockets. There are some programs that are voluntary, but in some jurisdictions, pursuing ADR is a mandatory step before a lawsuit can proceed.

Mediation can be used in a variety of cases, and it is sometimes required by a contract between the parties. Mediators can be found through referrals from courts or bar associations, and there are companies that specifically provide ADR services. Ideally, a mediator will have some training or background in the area of law related to your dispute.

Mediation is often a successful way to reach a settlement. If parties fail to resolve their conflict, information learned during mediation might be protected as confidential under state law.

Contact our law firm today to help determine if mediation would be a valuable tool to resolve your case.


Monday, October 26, 2015

What Is the Spousal Share of an Estate?

There are many reasons why a person might leave a spouse or another loved one out of his or her will. It is possible that the will in question was executed prior to a marriage and was never properly updated. It may also be the case that the husband and wife, though still technically married, are estranged, and do not contribute to one another’s support. An end of life revelation of a past infidelity may anger a spouse enough to rewrite his or her last will and testament. Individuals may make rash decisions to disinherit spouses based on a single argument or misunderstanding. This can be exacerbated by symptoms of dementia. Regardless of the reason, a person who is not named in his or her spouse’s will may petition the court for the spousal share to receive a portion of the estate.

The spousal share of an estate, also called an elective share, is a holdover from the concept of dower in English common law. Traditionally, dower is a portion of a man’s estate guaranteed to a wife when she is widowed to ensure that she does not fall into poverty after her husband dies. The practice continues today without the same restrictions on gender. Every state in America has a provision in its laws to protect an individual whose spouse dies from being left with nothing. Similar provisions for children also exist in some states. Attempts have been made to introduce legislation to protect unmarried romantic partners the same way as married couples, but these attempts have had little success.

The structure of these protections vary from state to state. The value of the estate for the purposes of establishing the spousal share may include the widow’s assets depending on the jurisdiction. Some states provide a widowed spouse a larger share of the deceased’s estate than others, but almost every state prohibits an individual from disinheriting a spouse entirely. The one state that does not permit an elective share to the spouse in a probate case requires that an estate pay a disinherited spouse financial support for up to one year after the death.


Monday, October 19, 2015

What is a Life Estate?

A life estate is a special designation in probate law referring to a gift to a family member that lasts as long as the life of the recipient. If an individual uses a life estate as part of his or her estate plan, whatever is bequeathed under the life estate will revert back to the residual estate upon the death of the life estate recipient. It is most common in scenarios where an individual starts a new family without children later in life and wants to ensure that the present spouse is taken care of for the remainder of her or his life. The owner of a life estate is called a life tenant. A life estate is often used as an alternative to a trust because it provides the life tenant with more control over the transferred asset.

A life tenant may treat an asset as his or her own. A home may be rented to tenants for income. The life tenant may sell his or her interest in the property to the heirs of the residual estate or to third parties. If the property is sold to a third party, that third party must surrender the property to the residual heirs upon the death of the life tenant.

Though the property belongs to the life tenant, the life tenant has a duty to the residual heirs to keep the property reasonably maintained and in good condition. He or she has an obligation to avoid mortgage arrearages and tax liens while in possession of the property. Exploiting natural resources on the property may be restricted during a life tenancy. A life tenant may not bequeath his or her interest in a life estate through a will because that interest immediately terminates upon the life tenant’s death. Significant changes to the property need to be agreed upon by all parties.

Though there are benefits, there are also drawbacks to establishing a life estate as part of an estate plan. The action could create estate tax issues for the tenant’s estate. In addition, creditors of the tenant may attach liens on the property, creating complicated legal issues for the heirs of the residual estate.


Monday, October 5, 2015

Five Common Reasons a Will Might Be Invalid

There are several reasons that a will may prove invalid. It is important for testators to be aware of these pitfalls in order to avoid them.

Improper Execution

The requirements vary from state to state, but most states require a valid will to be witnessed by two people not named in the will. Some jurisdictions require the document to be notarized as well. Although these restrictions may be relaxed if the will is holographic (handwritten), it is best to satisfy these requirements to ensure that the testamentary document will be honored by the probate court.

Lack of Testamentary Capacity

Anyone over the age of 18 is presumed to understand what a will is. At the end of life, individuals are often not in the best state of mind. If court finds that an individual is suffering from dementia, is under the influence of drugs or alcohol, or is incapable of understanding the document being executed for some other reason, the court may invalidate the will on the grounds that the individual does  not have testamentary capacity.

Replacement by a Later Will

Whenever an individual writes a new will, it invalidates all wills made previously. This means that a will might be believed to be valid for months until a more recently executed document surfaces. The newest will always takes precedence, controlling how assets should be distributed.

Lack of Required Content

Every will is required to contain certain provisions to carry out its purpose. These provisions, ensure that the testator understands the reason for executing the document.  Although these provisions vary from state to  state, some are common to all jurisdictions. It should be clear that the document is intended to be a will. The document  should demonstrate an individual’s wishes in regard to what should happen to his or her property after death. A proper will should also include a provision to appoint an executor to act as an agent for the estate and enforce the terms of the will. If the document  lacks any of these provisions, the will may be declared invalid. 

Undue influence or fraud

A will that was executed under undue influence, coercion or fraud will be invalidated by a court. If a will has been presented to a testator for a signature as if it were any other document, like a power of attorney or a business contract, the court will find that the will was fraudulently obtained and will not honor it. If an individual providing end of life care with exclusive access to the testator threatens to stop care unless a will is modified, that modification is considered to be the result of undue influence and the court will not accept it.


Monday, September 28, 2015

Avoiding Common Mistakes in Estate Planning

Estate planning is designed to fulfill the wishes of a person after his or her death. Problems can easily arise, however, if the estate plan contains unanswered questions that can no longer be resolved after the person's demise. This can, and frequently does, lead to costly litigation counter-productive to the goals of the estate. It is important that will be written in language that is clear and that the document has been well proofread because something as simple as a misplaced comma can significantly alter its meaning.

Planning for every possible contingency is a significant part of estate planning. Tragic scenarios in which an estate planner’s loved ones predecease him or her, though uncomfortable, must be considered during the preparation of a will to avoid otherwise unforeseen conflicts. 

Even trained professionals can make significant mistakes if they are not well versed in estate planning. An attorney who practices general law, while perfectly capable of preparing simple wills, may not understand the intricacies of trusts and guardianships. A great many attorneys, not aware of the tax consequences of bequests involving IRAs, may leave heirs with unnecessary financial obligations. If an attorney is not knowledgeable enough to ask the proper questions, he or she will be unable to prepare an estate plan that functions efficiently and ensures the proper distribution of the estate's assets.

In spite of the wealth of an individual, the estate may be cash deficient if that wealth is tied up in assets at the time of the individual's death. Problems can also result if an estate planner has distributed assets into joint bank accounts or accounts with pay on death provisions. If the executor of the estate does not have access to funds to pay the estate's bills or taxes, the heirs of the estate may run into trouble.

Even if estate planning is handled well from a logistical point of view, lack of communication with loved ones can interfere with a will's desired execution. A tragedy that incapacitates the testator can occur suddenly, so it is imperative that a savvy estate planner confers with loved ones as soon as possible, making them aware of any future obligations, such as life insurance premiums that must be paid and informing them of the location of any probate documents and inventories of assets. Such conversations ensure that the individual's wishes will be carried out without complications or delay in the event of an unexpected incapacity.

In addition to communicating logistical information, it is also essential to schedule a personal conversation with loved ones that makes clear any sentimental bequests or large gifts that require explanation. This avoids the shock or discomfort that may arise after one's death during which a well-thought-out decision is questioned as impulsive or irrational. Such direct communication of one's plans avoids unnecessary envy, arguments or rivalry among family and friends.

Consulting with attorneys who specialize in estate planning is the cornerstone of creating a plan to ensure that one's desires are carried out and that all the bases are covered. Estate planning attorneys serve as invaluable repositories of all information necessary to strategizing a plan that not only meets one's personal needs and desires, but is legally binding.


Monday, September 14, 2015

Controlling Estate Planning Through Trusts

How can I control my assets after death?

The practice of estate planning is dedicated to preserving an individual’s control over his or her assets after death. A simple will can control which individuals receive what assets, but a more thorough plan has the potential to do much more. Establishing a trust is the most common method used to exercise this kind of control. 

A trust can issue a bequest restricted by a condition; for example, a trust might be established to pay out $10,000.00 to a specific grandchild only once he or she has reached 18 years of age. Multiple payments can be made to the beneficiaries as long as the trust is funded. The trust can stipulate that the grandchild may have to graduate from college to receive the money, or even that he or she must graduate from a specific school with a minimum grade-point average or membership in a particular fraternity or sorority.

A trust can make the condition of payment as specific or as broad as the creator of the trust wishes. It may, for instance, bequeath benefits to a humanitarian organization on condition that the organization continues to provide food and shelter to the homeless. There is no limit to the number of conditions permissible in a trust document. Even when the conditions go against public policy and general norms and mores established by society, as long as the conditions may be met legally, they will be upheld by the court.

In order to create a trust, there must be a capital investment to fund it and a trustee must be named. The trustee is responsible for protecting the assets of the trust, investing them to the best of his or her ability, managing real estate and other long-term assets, interpreting the trust document, communicating regularly with the beneficiaries of the trust and performing all of these actions with a high level of integrity. Trust assets may be used to pay for expenses of managing the trust as well as to provide a stipend for the trustee if so provided for in the trust document.

If a trust document is not well written, it may be the target of a lawsuit seeking to dissolve the trust and disburse the assets held therein. Even if the trust is defended successfully, the costs of this challenge may deplete its coffers and frustrate the very reason for its creation. In order to avoid these possible pitfalls, it is imperative that a trust document be drafted by an attorney with a high degree of experience in estate planning law.


Monday, September 7, 2015

Glossary of Estate Planning Terms

Will - a written document specifying a person’s wishes concerning his or her property distribution upon his or her death.

In order to be enforced by a court of law, a will must be signed in accordance with the applicable wills act.

Testator/Testatrix - the person who signs the will.

Heirs - beneficiaries of an estate.

Executor/Executrix - the individual given authority by the testator to make decisions to put the testator’s written directions into effect.

Once the will is entered into probate, the executor’s signature is equivalent to the testator’s. The executor has a legal duty to the heirs of the estate to act in the best interest of the estate, and may collect a fee for performing such service.

Administrator/Administratrix - the person who assumes the role of the executor when a person dies without a will (intestate).

The Administrator must apply with the local probate office and may be required to provide a bond to be held in escrow as collateral for control over the assets of the estate.

Codicil - an amendment to a will.

In order to be valid, a codicil must comply with all the requirements of the applicable wills act.

Holographic Will- a handwritten will. 

Holographic wills are often exempt from requirements of the applicable wills act.

Bequest - a gift given by the testator to his or her heirs through a will.

Residual Estate - the balance of a testator’s belongings after debts have been paid and specific bequests have been distributed. 

Intestate - not having signed a will before one dies; a person who dies without having signed a will.

Life Estate - a bequest that gives an heir the right to have exclusive use of a property for the remainder of his or her life, but without the power to transfer such property upon the death of that heir.

The property will transfer to the heirs of the residual estate after the death of the beneficiary of the life estate.

Per stirpes - a Latin phrase precisely translated as “by the branch” meaning that, if an heir named in the will dies before the testator, that heir’s share will be divided equally among that beneficiary’s own heirs.

 An alternative to per capita, described below.

Per capita - a Latin phrase precisely translated as “by the head” meaning that, if an heir named in the will dies before the testator, that heir’s share will be divided among the testator’s remaining heirs.

 An alternative to per stirpes, described above.

While it is a good idea to have a basic understanding of fundamental estate planning vocabulary, this cannot serve as a substitute for the services of an experienced attorney.


Wednesday, August 26, 2015

Pooled Income Trusts and Public Assistance Benefits

A Pooled Income Trust is a special kind of trust that is established by a non-profit organization. This trust allows individuals of any age (typically over 65) to become financially eligible for public assistance benefits (such as Medicaid home care and Supplemental Security Income), while preserving their monthly income in trust for living expenses and supplemental needs. All income received by the beneficiary must be deposited into the Pooled Income Trust.


In order to be eligible to deposit your income into a Pooled Income Trust, you must be disabled as defined by law. For purposes of the Trust, "disabled" typically includes age-related infirmities. The Trust may only be established by a parent, a grandparent, a legal guardian, the individual beneficiary (you), or by a court order. 

Typical individuals who use a Pool Income Trust are: (1) elderly persons living at home who would like to protect their income while accessing Medicaid home care; (2) recipients of public benefit programs such as Supplemental Security Income (SSI) and Medicaid; (3) persons living in an Assisted Living Community under a Medicaid program who would like to protect their income while receiving Medicaid coverage.

Medicaid recipients who deposit their income into a Pooled Income Trust will not be subject to the rules that normally apply to "excess income," meaning that the Trust income will not be considered as available income to be spent down each month. Supplemental payments for the benefit of the Medicaid recipient include: living expenses, including food and clothing; homeowner expenses including real estate taxes, utilities and insurance, rental expenses, supplemental home care services, geriatric care services, entertainment and travel expenses, medical procedures not provided through government assistance, attorney and guardian fees, and any other expense not provided by government assistance programs.


Monday, August 17, 2015

Do I Really Need Advance Directives for Health Care?

Many people are confused by advance directives. They are unsure what type of directives are out there, and whether they even need directives at all, especially if they are young. There are several types of advance directives. One is a living will, which communicates what type of life support and medical treatments, such as ventilators or a feeding tube, you wish to receive. Another type is called a health care power of attorney. In a health care power of attorney, you give someone the power to make health care decisions for you in the event are unable to do so for yourself. A third type of advance directive for health care is a do not resuscitate order. A DNR order is a request that you not receive CPR if your heart stops beating or you stop breathing. Depending on the laws in your state, the health care form you execute could include all three types of health care directives, or you may do each individually.

If you are 18 or over, it’s time to establish your health care directives. Although no one thinks they will be in a medical situation requiring a directive at such a young age, it happens every day in the United States. People of all ages are involved in tragic accidents that couldn’t be foreseen and could result in life support being used. If you plan in advance, you can make sure you receive the type of medical care you wish, and you can avoid a lot of heartache to your family, who may be forced to guess what you would want done.

Many people do not want to do health care directives because they may believe some of the common misperceptions that exist about them. People are often frightened to name someone to make health care decisions for them, because they fear they will give up the right to make decisions for themselves. However, an individual always has the right, if he or she is competent, to revoke the directive or make his or her own decisions.  Some also fear they will not be treated if they have a health care directive. This is also a common myth – the directive simply informs caregivers of the person you designate to make health care decisions and the type of treatment you’d like to receive in various situations.  Planning ahead can ensure that your treatment preferences are carried out while providing some peace of mind to your loved ones who are in a position to direct them.


Thursday, August 6, 2015

Planning Pitfall: Probate vs. Non-Probate Property

Transfer of property at death can be rather complex.  Many are under the impression that instructions provided in a valid will are sufficient to transfer their assets to the individuals named in the will.   However, there are a myriad of rules that affect how different types of assets transfer to heirs and beneficiaries, often in direct contradiction of what may be clearly stated in one’s will.

The legal process of administering property owned by someone who has passed away with a will is called probate.  Prior to his passing, a deceased person, or decedent, usually names an executor to oversee the process by which his wishes, outlined in his Will, are to be carried out. Probate property, generally consists of everything in a decedent’s estate that was directly in his name. For example, a house, vehicle, monies, stocks or any other asset in the decedent’s name is probate property. Any real or personal property that was in the decedent’s name can be defined as probate property.  

The difference between non-probate property and probate centers around whose name is listed as owner. Non-probate property consists of property that lists both the decedent and another as the joint owner (with right of survivorship) or where someone else has already been designated as a beneficiary, such as life insurance or a retirement account.  In these cases, the joint owners and designated beneficiaries supersede conflicting instructions in one’s will. Other examples of non-probate property include property owned by trusts, which also have beneficiaries designated. At the decedent’s passing, the non-probate items pass automatically to whoever is the joint owner or designated beneficiary.

Why do you need to know the difference? Simply put, the categories of probate and non-probate property will have a serious effect on how plan your estate.  If you own property jointly with right of survivorship with another individual, that individual will inherit your share, regardless of what it states in your will.  Estate and probate law can be different from state-to-state, so it’s best to have an attorney handle your estate plan and property ownership records to ensure that your assets go to the intended beneficiaries.


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