Author Archives: Tyler Barrett

Although the revocable living trust is a powerful estate planning tool, it may not be right for everyone. For older adults who could potentially require long-term care in the near to medium term, establishing a revocable living trust might make them ineligible to receive assistance from Medicaid for nursing home or assisted-living facility costs. Others are simply more comfortable with a will-based estate plan. Whatever the reason, the last will and testament does have some benefits.

The first benefit of a will is the ability to name an executor for your estate. A will still has to go through probate. However, you can designate a particular family member, loved one or other trusted individual who will be responsible for managing your estate during the probate case and ensuring that your wishes are carried out.

In addition to naming an executor for your estate, you can use your will to appoint a guardian for minor children. In most instances, the court will follow your wishes with respect to the guardian you name. This avoids the need for lengthy court proceedings to determine a guardian for the minor children, which could result in the appointment of a guardian you would not have wanted.

Third, a will can be beneficial because of its simplicity. Unlike revocable living trusts, which can be over 100 pages long, wills are typically closer to 10 pages. This means less confusing provisions and a clearer understanding of your estate plan.

Finally, will-based estate plans are less expensive than an estate plan centered around a revocable living trust. As discussed above, wills are shorter and simpler than revocable living trusts. Consequently, attorneys can draft wills in less time. Moreover, in contrast to a revocable living trust, it is not necessary with a will to change the title to your home, cars and financial accounts, something that also reduces the cost to the client.

Those are some of the benefits of a last will and testament. That said, wills do not avoid probate and are easier to challenge in court than revocable living trusts, provide less flexibility in deciding when and how your heirs get their inheritance, make your property and assets public record and could cause estate tax problems for higher net worth families. Accordingly, it is important to discuss your personal and financial circumstances with a knowledgeable estate planning attorney to decide what estate planning options are best for you.

I hope that everybody enjoyed the holiday season with family and friends. The new year is a time when many of us take stock of various things in our lives, be it our careers, our finances or that exercise routine we never got around to starting last year (guilty as charged). As 2015 begins, you may want to consider something else: your estate plan.

Periodic review and updating is essential to the success of every estate plan. Perhaps you have a new grandchild for whom you want to provide. Maybe you bought a house. Or the trustees you named in your trust document will no longer be able to serve. The bottom line is, over time, it’s possible that your estate plan does not reflect your wishes like it did when originally created. Therefore, it is important that your estate plan change along with your life. This need not be an arduous process. It could be as simple as signing a new signature card for a bank account or amending a single provision of your trust.

Think of your estate plan like your IRA or 401(k). You would never buy a stock and keep it in your account forever regardless of how the share price changed: instead, you monitor the share price and sell the stock to lock in gains or avoid losses. You should take the same approach to your estate plan by reviewing it with your attorney on an annual or semi-annual basis and updating as needed.

Until next time, I wish all a happy and healthy 2015!

In recent posts, I have explored the advantages of a revocable living trust centered estate plan: namely, avoiding probate, providing for incapacity and the ability to dictate the manner in which your heirs receive their inheritance. For these advantages to be realized in your estate planning, your revocable living trust must be fully funded. What does it mean to fully fund your trust, and how is trust funding accomplished? That is the subject of today’s post.

Trust funding is the process of transferring title of your property and assets to your revocable living trust. Take your house for instance. If you own a home, it’s likely that upon closing the seller gave you a deed conveying the house from his/her name to your name (or jointly to you and your spouse). In order to fund your revocable living trust with your house, you would grant a deed to the trustee(s) of your revocable living trust. Another example is your bank accounts. Funding your revocable living trust with your bank accounts involves changing ownership of the accounts into the name of the trustee(s) of your revocable living trust by signing new signature cards. A similar process is undertaken for stocks, bonds and brokerage accounts (note, however, that individual retirement accounts cannot be owned by a revocable living trust; rather, the revocable living trust is named as beneficiary of the account). Funding your revocable living trust with your personal property such as furniture, jewelry and other valuables is accomplished by drafting an assignment of property to be included in your revocable living trust.

As you can see, trust funding requires additional work. Yet, the benefits of fully funding your revocable living trust are worth the extra effort that trust funding requires. And some estate planning attorneys will fund your revocable living trust for you. At my firm, I handle trust funding for all of my clients to ensure their estate plan is effective and fulfills their goals and wishes.

An advantage of the revocable living trust centered estate plan is the ability to control how distributions are made after your death. This is accomplished by drafting your revocable living trust so that following your death the property and assets of your revocable living trust continue to be held in trust for your beneficiaries. At first glace, many people balk at this idea and are inclined to give beneficiaries their inheritances outright. After all, most of us trust our loved ones; we want them to have the money and believe they will spend it appropriately and as we would have wished. Yet, even if you are confident that your beneficiaries will act wisely, there are reasons to consider establishing continuing trusts for them instead of making outright distributions.

One reason to create continuing trusts for your beneficiaries is creditor protection. Assume for a second that you and your spouse both have passed away and your revocable living trust has been distributed outright to your beneficiaries, who are your children. Now assume that one of your children is involved in a car accident in which they are at fault and they are sued by the other driver. The inheritance your child received outright from you could be subject to the lawsuit and used to pay a court judgment to the other driver. On the other hand, if you distributed the child’s inheritance to him or her through a continuing trust, the money would be protected (not only from lawsuits but also from credit card companies, medical bills and the like).

Another reason to favor continuing trusts over outright distributions is what estate planning attorneys often refer to colloquially as divorce protection. Whenever a child who is married gets an inheritance, they commonly place it in a joint account with their spouse. Under Oklahoma divorce law, inheritance is normally treated as separate property. However, in the event the inheritance is deposited in a joint account, the inheritance becomes part of the marital estate. In practical terms, this means if your child later separates from their spouse, the inheritance you gave them could potentially be divided in the divorce case. By establishing continuing trusts for your beneficiaries, their inheritance will not be at risk of winding up in the hands of an ex-spouse.

While there is nothing wrong with making outright distributions in your revocable living trust, sometimes establishing continuing trusts for your beneficiaries is the preferable course. As with most other aspects of your revocable living trust, this is something you should discuss in depth with your estate planning attorney.

In my last post, I discussed the ability to provide for incapacity as one of the primary advantages of a revocable living trust in estate planning. Today, I look at the options estate planning clients have in regards to how their revocable living trust defines incapacity. Once the creator (a/k/a grantor) of the trust is determined to lack capacity, the successor trustee(s) named in the document takes over and begins managing the property and assets of the trust on behalf of the grantor and the trust’s beneficiaries.

One possibility for defining incapacity in the revocable living trust is to rely on the opinion of a medical professional, typically a physician licensed to practice medicine in the state where the trust was created. Sometimes, the trust also dictates that the physician be board certified in the specialty most closely related to the condition that caused the incapacity. With this option, the client can choose how many doctors are required to make a finding of incapacity (two is a popular number). The trust usually provides that the physician must state in writing that due to physical or mental illness, the grantor cannot manage his or her financial and personal affairs.

Another option to define incapacity for purposes of a revocable living trust involves the courts. This type of provision declares that the grantor of the trust will be deemed incapacitated if a court having jurisdiction over the trust makes such a finding or appoints a guardian of the person or estate of the grantor. The downside to defining incapacity this way is the potential for expensive, drawn-out litigation and details of the trust being made public knowledge.

Finally, the revocable living trust can appoint a panel of family, friends and advisers to decide whether the grantor is incapacitated. Many people like this option because several individuals working together must make the decision about incapacity; the trust can be written so that a unanimous or majority vote is required. However, there are couple of drawbacks. First, the panel’s members may not all be doctors or medical professionals; therefore, the panel might lack the expertise to make an accurate determination. Second, if the grantor of the trust disagrees with the panel, the matter could end up in court.

As we have seen, there are several ways to define incapacity in a revocable living trust. Whenever you are creating your trust with an estate planning attorney, this is one of the most important issues to discuss. What is right for one person is not always desirable for another.

For some individuals and families, a will-based estate plan is adequate. However, others may want to think about creating a revocable living trust as the foundation of their estate plan. As compared to a will, the revocable living trust has a few distinct advantages.

The first advantage of a revocable living trust is probate avoidance. If you have a will, then whenever you pass away the will must go through the court-monitored process known as probate in order to pass title of your property and assets to your heirs. Probate can be expensive, with attorney fees potentially running several thousand dollars. What is more, probate may invite claims by creditors and challenges to your will by disgruntled family members who were cut out. Lastly, probate makes your estate public knowledge. In probate, the will must be filed with the court, meaning people can see to whom you left your estate and in what amounts. The executor is also required to submit an inventory to the court listing the value of all of your property and assets.

Unlike a will, it is not necessary for a trust to be probated. Instead, your affairs are handled out of the public eye. While there are likely to be some fees associated with distributing the trust to the beneficiaries you name, in many instances the expense is less than probate. Additionally, trusts do not need to be filed with the court. Most of the time, the court will not order your trust opened. Therefore, the details of your trust remain private.

A second advantage of the revocable living trust over a will is control with regard to distributions. With the exception of minors, the persons you name in your will receive their inheritance outright. By contrast, a trust allows you to give instructions about how and when the beneficiaries of your trust get their inheritance. For example, you can specify that beneficiaries do not receive anything until they reach a certain age or their inheritance is held in a separate trust for them to be spent only on particular things such as education. This has the added bonus of protecting the beneficiaries of your trust from creditors, ex-spouses and others seeking to gain access to their inheritance.

Finally, revocable living trusts can provide for your incapacity. The creator of the trust, called the grantor, is usually the initial trustee of the trust. In addition, a well-drafted trust appoints one or more successor trustees to serve in the event the grantor dies, resigns or becomes incompetent due to Alzheimer’s disease, stroke or other illness. Assuming your trust was properly funded (i.e. your property and assets were transferred to the trust), this allows your finances to be managed if you cannot do so yourself.

Probate avoidance, control of distributions and providing for your incapacity: these are the advantages of a revocable living trust. If you are considering estate planning, think about a revocable living trust.

Care for the elderly provided by family and friends costs $522 billion each year, a new study by the RAND Corporation found. The results of this and similar studies show the economic impact of informal caregiving. “Our findings explain the interest in workplace flexibility policies being considered by a number of states that provide paid time off from work for caregivers as well as programs such as Medicaid’s Cash and Counseling Program that allows family caregivers to be paid for their assistance”, said Dr. Ateev Mehrotra, a co-author of the RAND study.

As the American population continues to age with the retirement of baby boomers, the cost of providing informal care for the elderly will likely increase. Therefore, it is important for seniors and their loved ones to explore family caregiver agreements as well as estate and Medicaid planning options as they think about the possibility of long-term care.

The state of Ohio is facing lawsuits and criticism for denying Medicaid benefits to seniors in long-term care facilities whose spouses purchased annuities. In order to qualify for Medicaid, the applicant’s income and resources must not exceed specific limits. Typically, any transfer of assets results in a period of ineligibility for Medicaid benefits lasting five years. However, most states make an exception for annuities meeting certain requirements. Such annuities are a common tool to help older adults with the burden of paying for long-term care. Ohio argues they are being used to circumvent the state’s rules regarding Medicaid eligibility, but Elder Law attorneys and advocates for the elderly claim the state is not following federal law and is hurting the middle class. The outcome of this dispute could shape how Elder Law attorneys in Oklahoma and other states advise their clients on planning for long-term care.

In my previous post, I discussed Medicaid as an option to help seniors cover the expense of long-term care in a nursing home or assisted-living facility. However, eligibility for Medicaid is determined based on the applicant’s available income and resources. Oklahoma has set limits such that even people of modest means may fail to qualify. Enter Medicaid planning. Working with a knowledgeable attorney, many seniors who would otherwise be ineligible can obtain Medicaid benefits to assist with the costs of long-term care while still protecting assets for their families. Medicaid planning can generally be divided into two categories: pre-planning and crisis planning. Today, I will focus on crisis planning.

As the name implies, Medicaid crisis planning occurs when someone who is already receiving long-term care can no longer afford it or the need for long-term care is imminent and the individual has no means of paying. Although the options in these cases are limited, there are steps that can be taken. If the applicant’s resources are too high, they must proceed with extreme caution. The general rule is that a person cannot give away assets to become eligible for Medicaid. Doing so can make them ineligible to receive Medicaid benefits. Yet, there are exceptions to this general rule. The main exception is transfer of the applicant’s primary residence to his or her spouse or a disabled child. Transferring the applicant’s primary residence to a spouse or disabled child reduces the applicant’s available resources for purposes of Medicaid eligibility without incurring the ineligibility penalty. Other exceptions include transfer of assets to a special needs trust, that is, a trust established solely for the benefit of a disabled individual under the age of 65, or where the applicant can show that the transfer was exclusively for a purpose other than Medicaid eligibility. Note: placing assets in a revocable living trust will trigger the ineligibility penalty.

In the event a Medicaid applicant’s income is too high, the applicant can establish a Qualified Income Trust — commonly known as a “Miller” Trust. This is an irrevocable trust in which the Medicaid applicant deposits all of his or her income each month. In turn, the trust pays the applicant’s share of nursing home costs not covered by Medicaid as well as a personal allowance for the applicant and their spouse. A “Miller” Trust is an exempt asset. Money placed into the trust is not considered income to the applicant for purposes of Medicaid eligibility.