Thursday, July 23, 2015Understanding the Unique Taxation Standards Applicable to IRA Distributions
I have most of my every-day checking and savings accounts titled in the name of my revocable trust. Should I take the same steps with my 401(k) and retirement investments?
For clients with a single or joint revocable trust, retitling assets into the name of the trust not only accomplishes the goal of its creation, but ensures the seamless and effortless transition of personal and real property to beneficiaries when the time comes. However, trust creators (known as grantors) are highly cautioned to speak to an elder law attorney prior to retitling retirement accounts or transferring those assets into trust, as a hefty and unexpected tax bill may follow.
Tax implications of retitling a retirement account
401(k) accounts and IRA’s can reap significant tax savings if withdrawn correctly and at the right time. By contrast, account holders can expect a massive tax penalty for withdrawing too early – or even inadvertently.
Under current IRS rules, retitling a 401(k), 403(b), or Individual Retirement Account will be treated as an outright withdrawal of funds, even if the actual funds in the account are never actually spent. Therefore, the retitle will trigger a tax penalty congruent to the amount in the account for the transfer tax year, which can be especially significant for accountholder with high account balances.
Safe ways to ensure the proper transfer of IRA assets
When it comes to leaving retirement account assets to a beneficiary, the easiest, simplest, and safest way to accomplish this task is to change the beneficiary designation on the account. This is accomplished by simply contacting the bank or investment firm and filling out a Change of Beneficiary form. Many accountholders choose an alternative beneficiary in the event the primary beneficiary predeceases the accountholder, but this is not always necessary. Then, when it comes time to distribute the assets upon the death of the accountholder, the funds will not only pass outside of probate, but will transfer directly to the beneficiary tax-free.
If you have questions about proper estate planning
or beneficiary designations, please do not hesitate to contact Andrew Byers, serving Auburn Hills, Rochester Hills and Troy, Michigan, by calling (248)301-1511.
Thursday, July 16, 2015Funeral Planning for Medicaid Eligibility
Are there any other less common ways to protect assets during the Medicaid planning process?
When it comes to planning for long-term care, many couples and individuals opt to pre-plan to eventually qualify for Medicaid coverage. While the thought of applying for need-based Medicaid coverage may seem unlikely for many middle-class individuals, the rising costs of long-term care – particularly for couples needing care together – is enough to deplete a sizable nest egg in just a few short years.
The keystone of Medicaid planning is reducing one’s assets to the allowable threshold in order to reach the financial-need eligibility criteria. However, planners must be careful when transferring assets as Medicaid will impose a penalty period to address any transfers made during the five years immediately prior to the application for benefits. Fortunately, there are several other financial options to accomplish the “spend down” of assets other than outright transfers, sales or gifts, such as pre-planning for a memorial service, funeral, and/or burial plot.
Earmarking assets for funeral costs
Pre-planning one’s funeral is hardly the most pleasant way to spend an afternoon. However, this important – and relatively simple – step can help avoid the hassle and inconvenience of “crisis planning,” or quickly planning for Medicaid eligibility at the last minute.
Under the applicable rules, money spent on prepaid funeral arrangements and an irrevocable burial contract is not “counted” as either part of an applicant’s assets or as a penalty-inducing transfer. Taking this step can also help alleviate the financial burden for surviving family members who will be left to foot the final bill after all assets have been depleted by nursing home costs.
When funeral planning, be sure to find a reputable entity to complete the task – and purchase a spectrum of services necessary to cover the service and burial – including the headstone and engraving costs. Be sure to pay the entire bill in full, as payment plans or credit arrangements will not allow for the maximum possible exemption for Medicaid applicants. Lastly, be sure to work with a reputable Michigan elder law attorney before making any purchases, as the timing of the prepaid funeral plan purchase is important, particularly for couples.
If you are considering long-term care planning and would like to discuss your options with a reputable Auburn Hills, Rochester Hills and Troy, Michigan elder law attorney, please contact Andrew Byers today: (248)301-1511.
Friday, June 26, 2015Estate Planning for a Special Needs Child or Relative
My niece will need lifelong care due to a developmental disability, and I’d like to include a provision for her in my estate plan. How can I ensure this will not interfere with her eligibility for benefits?
Estate planning to include a special needs child or relative should be done with great care and consideration of the beneficiary’s financial situation. While it is undoubtedly noble to provide for the regular care and maintenance of a loved one, many special needs individuals also receive benefits from both benevolent charities and government programs – some of which may be needs-based. In order to ensure the beneficiary receives the financial care he or she needs – while also helping to maintain this eligibility status – be sure to meet with an experienced estate planning attorney in Auburn Hills as soon as possible.
Planning for a Government Beneficiary Recipient
Proper precautions should be taken when estate planning for the benefit of an individual receiving Supplemental Security Income (SSI), Medicaid, and/or Social Security Disability Income (SSDI), as these programs operate based on a recipient’s financial need. Leaving a lump sum outright or in trust for a government beneficiary will drastically increase his or her personal asset calculation, and could actually work to impose a penalty (i.e., loss of benefits) for months – or even years – after receiving the gift.
A better option is a tool known as a Special Needs Trust (SNT), which allows the grantors an opportunity to appoint a trustee over the funds, which are held entirely by a third-party for the benefit of the special needs individual. During the person’s life, the corpus of the trust is not accessible and may only be distributed in the sole and absolute discretion of the appointed trustee. From the standpoint of the federal and state governments, these assets are not considered within the control of the beneficiary, and will therefore not preclude him or her from receiving much-needed government assistance.
Special needs planning is a highly-specific area of law that should be left to one with experience and wisdom. In addition to properly arranging the inheritance, other considerations could include the implementation of a guardianship over his or her person and property – as well as several other legal procedures that may become necessary.
For help with special needs planning
, please do not hesitate to contact Auburn Hills attorney Andrew Byers at (248)301-1511 today.
Thursday, June 18, 2015Married Couples Should Consider Separate Trusts
What are the benefits of separate trusts?
Estates worth less than a certain amount of money are not subject to Federal estate taxes. This is called the estate tax exemption and while this amount has changed numerous times over the past few years. it currently stands at $5.43 million. Therefore, all estates with a total less than $5.43 million are not subject to estate taxes. The exemption is portable between spouses meaning that a married couple benefits from an over $10 million dollar exemption together.
Beneficial tax treatment under a lower estate tax exemption was one major reason why using separate trusts for married couples was a popular tool in the past. Now, with the increased estate tax exemption, some might think that separate trusts are no longer needed. But, even with the decreased need due to an increased exemption amount, separate trusts still have many benefits. For example, separating assets into respective spousal trusts can help protect assets from creditors. If one of the spouses dies the surviving spouse can access the deceased parties trust . But, the surviving spouse’s creditors cannot. Many joint trusts do not include this protection from creditors.
Using separate trusts can also protect families in the event of remarriage. Many times, an individual remarries after the death of his or her original spouse. By using a separate trust model, the individual’s new husband or wife may be prevented from benefitting from the dead spouses trust after the death of the surviving spouse. While the trust can be written to allow the surviving spouse the ability to amend the beneficiary distributions from the original trust, it is rarely done. However, separating trusts also allows the surviving spouse the ability to amend his or her own trust to provide access to the second husband or wife.
In contrast, many joint trusts are irrevocable at the spouse’s death meaning that the surviving spouse is prevented from changing anything regarding the joint trust. With separate trusts, the spouse can amend or revise his or her trust up to the point of his or her death.
Separate trusts can also be useful in the event that the surviving spouse needs nursing home care. If special provisions are included in the Last Will and Testament of the first spouse to die, the assets that were contained in that spouse’s separate trust can be protected from a Medicaid spend-down in the event that the surviving spouse needs nursing home care. Such provisions should be considered whenever either spouse is diagnosed with a medical condition that could result in the need for long-term care.
If you are planning an estate you should consider all of your options including a joint trust, separate trusts and various other options. Andrew Byers is an estate planning and elder law attorney in the Auburn Hills and Troy, Michigan area. Contact him today at (248) 301-1511 with for all of your estate planning needs.
Wednesday, June 03, 2015Recent Holding by Michigan Court of Appeals Upholds Medicaid Eligibility Penalty for Home Health Aides
How do payments to home health aides impact Medicaid eligibility in Michigan?
In Michigan, as is the case elsewhere, eligibility for Medicaid enrollment is entirely needs-based, meaning an applicant must be financially unable to pay the costs and fees associated with his or her medical care. Currently, Medicaid is the only government-funded healthcare program that covers the costs of long-term care, as Medicare only covers a nursing facility stay up to 120 days.
In order to qualify for Medicaid, an applicant must show a lack of personal assets and a total inability to pay for medical bills individually. Accordingly, state and federal authorities will closely scrutinize an applicant’s financial situation, primarily focusing on any transfers or divestments made over the past five years. If an asset transfer or divestment has occurred, and the applicant could have used those funds toward his or her stay in the long-term care facility, a penalty will apply congruent with the amount of time those funds could have covered daily nursing home costs.
Home Health Aides and Medicaid
A home health aide is someone who regularly visits an individual’s home for purposes of providing routine medical care and/or assists with the administration of medication or other treatments. Home health aides are generally not expected to provide round-the-clock care, and are usually only appropriate for those individuals who are still able to manage several daily care tasks on their own.
In one recent case, an elderly Michigan woman with dementia paid over $19,000 for home health services prior to her admittance to a nursing home. Once her funds were depleted, her family applied for Medicaid to cover the costs of her stay. However, agents concluded that the money she spent for the home health aide did not meet the stringent test set forth by Medicaid regulations, and she was penalized for 7 months before her benefits would be accessible. In the interim, she passed away leaving her family with an enormous debt to cover from an already-depleted estate.
Thereafter, the family’s elder law attorney appealed the decision to the local Circuit Court, which held that the burdensome five-part test for home health aide divestment eligibility only applied when the caretaker is a family member related by blood or marriage, as the risk is higher in these situations for fraud to occur.
Unfortunately, the Court of Appeals was given an opportunity to review the case as well, and agreed with the original opinion by the administrative law judge tasked with deciding the applicability of the home health aide eligibility penalty.
If you are concerned about Medicaid eligibility and would like to speak with a qualified and experienced elder law attorney that serves the Auburn Hills area, please contact Andrew Byers by calling (248)301-1511 today.
Tuesday, June 02, 2015Using the Michigan ‘Lady Bird’ Deed as a Medicaid Planning Tool
What is a ‘lady bird’ deed? And how can it help me with Medicaid eligibility?
Under Michigan law, a ‘lady bird’ deed is an elegant-sounding designation for a relatively common type of real property interest formalized in a document. This interest is that of an enhanced life estate interest.
A life estate is a type of real property interest that may be granted to a person for the duration of a person’s life. For example, a parent might transfer a piece of lakefront property to his or her son that includes a life estate, allowing the parent to use the property exclusively until his or her natural death, at which point, the ownership would transfer directly to the son. However, a traditional life estate is incredibly limiting for the grantor, and essentially prohibits him from encumbering the property with a mortgage or allowing it to fall into disrepair without the threat of liability. Moreover, transferring a real property interest subject to a regular life estate to a loved one during the five-year Medicaid “look-back” period could trigger a temporary penalty congruent to the value of the property.
By contrast, an enhanced life estate – known as a “lady bird deed” in states like Michigan, Florida or Texas – is far less restrictive. For instance, the party grating the life estate may encumber the property, sell the property, or otherwise maintain complete control over the asset for the duration of his natural life. Perhaps a confusing type of property interest transfer, the Lady Bird deed allows for a number of benefits, particularly with regard to Medicaid eligibility.
Using the Lady Bird Deed as an Estate Planning Strategy
Under Medicaid guidelines, an applicant is only eligible upon a showing of true financial need. In other words, the applicant has no personal assets to sell in order to pay for medical benefits, and has essentially met the “needs-based” guidelines set forth by state and federal authorities.
While financial need is the hallmark of eligibility, applicants are not expected to be without shelter in order to qualify. Accordingly, an applicant’s primary personal residence is generally not “counted” against him or her for purposes of receiving benefits. However, any other residence (i.e., second home or investment property) must be disposed of for market value prior to the five-year look-back period in order to avoid penalties. If an applicant transferred property to a friend or loved one and retained a traditional life estate, this transfer will likely result in penalties when the party with the life estate applies for Medicaid benefits. However, if the life estate is under the terms of a lady bird deed, Medicaid views the property as under the control of the applicant, and will consider the property as a primary residence.
If you are considering Medicaid eligibility, or would like to discuss long-term care options with an experienced Auburn Hills elder law attorney
, please contact Andrew Byers by calling (248)301-1511.
Tuesday, May 26, 2015The Power of Attorney: How Important is This Estate Planning Component?
I am preparing to execute my first estate plan, and I always thought I just need a Last Will and Testament. Is a power of attorney necessary?
A power of attorney is an estate planning tool that most experienced Michigan estate planning attorneys will include in a comprehensive portfolio. While it is true that a Last Will and Testament or revocable living trust are the cornerstones of a properly-drafted plan, there are a number of corollary documents that are equally as necessary to ensure the entire estate plan works interactively to achieve your goals, including a power of attorney. What’s more, is that this fundamental document can help avoid the costly experience of petitioning for conservatorship over a loved one who is no longer capable of executing legal or financial documents – which is explained more thoroughly below.
What is a power of attorney?
In Michigan, a power of attorney is a formally-executed document that creates an agency relationship between the principal (yourself) and the individual(s) you choose as agents to act on your behalf. The document may be very limited in scope or extremely broad, the latter affording the agent authority to engage in virtually any transaction on your behalf. The document must be witnessed and notarized, and may be revoked at any time.
Why do I need a power of attorney?
A power of attorney is necessary to finalize any transaction requiring your signature at which you are unable to appear or participate. At your direction, you may authorize your agent to sign tax documents, conduct banking business, pay your bills, engage in litigation, execute a contract or sell real estate. At a minimum, the document allows for increased convenience and alleviates your need to appear in person if you are unable. The document also will be necessary should you reach a point of incapacity and are no longer deemed competent to handle your own affairs.
What happens once I am deemed incompetent?
If you are considered by at least one licensed physician to be under the effects of mental incompetence, your agents may continue to rely on the power of attorney – provided it is a “durable” power of attorney – to conduct your affairs on your behalf. Otherwise, your loved ones will be required to petition the court for a conservatorship over your person and property, which is an expensive legal exercise that may take several weeks or months to conclude – particularly if there is an objection.
If you are considering the best way to execute an estate plan and would like to discuss your options, contact experienced Auburn Hills estate planning attorney
Andrew Byers by calling (248) 301-1511.
Tuesday, May 19, 2015Forty Years After Death, Philanthropist Gives $13 Million
Can an estate plan provide for one's family and friends and still benefit charity in the future?
The passage of time proved no obstacle to a late philanthropist who was determined to give to charity. Leave A Legacy, in Southeast Michigan, announced that it had received $13 million from Dick E. Morand, who died in Detroit, Michigan in 1977. The funds will benefit five non-profit organizations.
Morand's wife had passed away in 1976 and the two were childless. The founder and owner of D.E. Machinery Company, he had placed his assets in a charitable remainder annuity trust (CRAT), which provided payments to beneficiaries he had named, with the remainder to go to charity when they were deceased. In 2013, the two remaining beneficiaries of the trust passed away. That meant the assets could be distributed to charity. Five organizations received $2.7 million each.
The delayed gifts is an object lesson not only in generosity but also in how one can preserve one’s wealth, leave money to friends and loved ones, and still give to charity. Charitable remainder trusts enable you to generate a stream of income from assets, enjoy tax advantages, and specify the organizations that will ultimately receive your wealth. Because of the tax treatment of these trusts, in addition to accomplishing worthy long-term goals, you may also receive a generous current tax deduction.
A CRAT is one of a variety of such strategies that can help you benefit your family, a charity, or both. Options may include a charitable lead trust (CLAT) and a variety of other revocable and irrevocable lifetime trusts and testamentary trusts, depending on your goals and wishes.
Regardless of how much wealth you have now or expect to leave behind, the law firm of Byers & Goulding, PLC can help you draft an estate plan in a way that meets your family and charitable giving goals. From simple wills and long-term planning to complex trusts, we provide the sound, trusted advice on how to do the most good for your loved ones and the organizations you believe in. For a consultation, call our experienced Michigan estate planning attorneys (248) 301-1511 today.
Friday, May 15, 2015Incapacity, Illness and Estate Planning
How can an advanced health care directive benefit you and your family?
It is perhaps impossible for a healthy adult to fully imagine losing a significant portion of his or her cognitive ability through disease, a serious accident or age. Yet more than five million Americans currently suffer from Alzheimer’s disease, and millions more have experienced memory and decision-making challenges through other afflictions and events. Because of the ever-present possibility of sudden or eventual incapacity, it is imperative that you protect your family and your assets through estate planning.
A key component of estate planning is the creation of an advance health care directive, also referred to as a living will, a personal directive, an advance directive, an advance decision or a durable power of attorney for health care (though, in Michigan, some of these terms actually refer to other estate planning tools which are not legally identical to an advance health care directive). An advance health care directive and accompanying legal tools can be used to:
• Specify who will make decisions on your behalf if you are unable to do so
• State which technology should be used and under which circumstances to prolong life
• Specify whether you would like to be an organ donor/make a “declaration of an anatomical gift”
• State your wishes under Michigan’s Do Not Resuscitate Procedure Act
• Communicate whether your advocate has the legal power to halt food and/or water administered through a feeding tube
• State whether you’d like to be admitted to a nursing home
• Specify where you’d like to die (home, hospital, nursing home or elsewhere)
• Spare your family from making agonizing decisions
Advance health care directives are relatively simple to create in Michigan with the assistance of a qualified estate planning or elder law attorney. It is important to note, however, that once incapacitation occurs and you are no longer of “sound mind,” you no longer have the legal right to sign many documents or select a person to make decisions on your behalf. To begin the process of creating an advance health care directive today, contact Auburn Hills estate planning attorney Andrew Byers by calling (248)301-1511.
Thursday, May 07, 2015Dangers of Joint Tenancy in Estate Planning
I am a widow. Should I add my daughter to my bank accounts?
Joint ownership of real estate or accounts – which is known as “joint tenancy” – may seem convenient at the outset, particularly if it is becoming difficult to pay bills and manage household finances properly. However, a joint tenancy can quickly undo an estate plan, allowing for an unintentional windfall to one beneficiary while the others are left with little. Consider the following example of joint tenancy gone awry, which is an all-too-common scenario, particularly for those with well-meaning children looking to help ease the burden for aging parents:
Jane was married for 52 years, and is facing some difficulty in managing her household finances following the death of her husband. Thinking it would be more convenient for everyone, Jane added her daughter Sheila to several of her accounts at the local bank – including her checking and savings accounts. For the next decade, Sheila dutifully helped her mother pay the modest monthly bills. During this time, proceeds from Social Security, her husband’s pension, and an annuity began to accrue in the savings account.
Upon Jane’s death, her Last Will and Testament directed that the entirety of her estate be divided into four portions, one for each of her children. However, as joint tenant on the savings account, Sheila became sole owner – and the recipient of more than $175,000 in cash.
As the above example hopefully illustrates, leaving high-value assets (including homes, cars, boats, and accounts) titled jointly with other individuals can quickly undo an estate plan. Fortunately, there are other options to consider if assistance with bills and financial transactions is an issue.
In the above example, Jane could have easily executed a power of attorney in favor of Sheila, which would have given her daughter access to Jane’s accounts and assets in order to help effectuate the typical household financial transactions. If competency is an issue, it may be necessary for Sheila to obtain a guardianship over her mother, which would also allow her to help with legal and financial transactions once Jane is not mentally competent to execute a power of attorney.
For more information about joint tenancy, and alternatives to this option, please contact experienced estate planning attorney Andrew Byers by calling (248)301-1511. His office is proud to serve clients in Auburn Hills and throughout Oakland County, Michigan.
Sunday, July 27, 2014The Sandwich Generation
The ‘Sandwich Generation’ – Taking Care of Your Kids While Taking Care of Your Parents
“The sandwich generation” is the term given to adults who are raising children and simultaneously caring for elderly or infirm parents. Your children are one piece of “bread,” your parents are the other piece of “bread,” and you are “sandwiched” into the middle.
Caring for parents at the same time as you care for your children, your spouse and your job is exhausting and will stretch every resource you have. And what about caring for yourself? Not surprisingly, most sandwich generation caregivers let self-care fall to the bottom of the priorities list which may impair your ability to care for others.
Following are several tips for sandwich generation caregivers.
- Hold an all-family meeting regarding your parents. Involve your parents, your parents’ siblings, and your own siblings in a detailed conversation about the present and future. If you can, make joint decisions about issues like who can physically care for your parents, who can contribute financially and how much, and who should have legal authority over your parents’ finances and health care decisions if they become unable to make decisions for themselves. Your parents need to share all their financial and health care information with you in order for the family to make informed decisions. Once you have that information, you can make a long-term financial plan.
- Hold another all-family meeting with your children and your parents. If you are physically or financially taking care of your parents, talk about this honestly with your children. Involve your parents in the conversation as well. Talk – in an age-appropriate way – about the changes that your children will experience, both positive and challenging.
- Prioritize privacy. With multiple family members living under one roof, privacy – for children, parents, and grandparents – is a must. If it is not be feasible for every family member to have his or her own room, then find other ways to give everyone some guaranteed privacy. “The living room is just for Grandma and Grandpa after dinner.” “Our teenage daughter gets the downstairs bathroom for as long as she needs in the mornings.”
- Make family plans. There are joys associated with having three generations under one roof. Make the effort to get everyone together for outings and meals. Perhaps each generation can choose an outing once a month.
- Make a financial plan, and don’t forget yourself. Are your children headed to college? Are you hoping to move your parents into an assisted living facility? How does your retirement fund look? If you are caring for your parents, your financial plan will almost certainly have to be revised. Don’t leave yourself and your spouse out of the equation. Make sure to set aside some funds for your own retirement while saving for college and elder health care.
- Revise your estate plan documents as necessary. If you had named your parents guardians of your children in case of your death, you may need to find other guardians. You may need to set up trusts for your parents as well as for your children. If your parent was your power of attorney, you may have to designate a different person to act on your behalf.
Seek out and accept help. Help for the elderly is well organized in the United States. Here are a few governmental and nonprofit resources:
- www.benefitscheckup.org – Hosted by the National Council on Aging, this website is a one-stop shop for determining which federal, state and local benefits your parents may qualify for
- www.eldercare.gov – Sponsored by the U.S. Administration on Aging
- www.caremanager.org -- National Association of Professional Geriatric Care Managers
- www.nadsa.org – National Adult Day Services Association
Estate Planning & Elder Law News
Elder Law attorney Andrew Byers assists clients in Auburn Hills, MI and throughout Oakland County, MI including Rochester Hills, Rochester, Troy, Bloomfield Township, Lake Orion, Oxford, Waterford, Clarkston, Independence Township, and Pontiac, as well as throughout the metropolitan Detroit area, including Macomb County and Wayne County, Michigan.