I’ll See You in My Dreams

I’ve been having this reoccurring dream:  I am in my office and my phone rings.  I answer.  On the other end is my dog, Ernie and he talks.  It is funny, in my dream, I do not seem to be phased (at all) by the fact my dog is on the phone.  The conversation goes something like this:

Ernie/Dog:  “Marc, I’m going in for surgery in the morning…I’m just a little worried.  What will happen if I  die?”

Marc/Lawyer:  “Ernie, have you ever seen the movie All Dogs Go to Heaven?”

Ernie/Dog:  “I don’t watch TV.  What’s going to happen to my stuff if I die?”

Marc/Lawyer:  “Let me check your file.  I’ll give you a call back.”

Most of the time, I wake up at that point.  When I am awake and on the job, I get similar calls from my clients.  Being a sympathetic person, I bite my tongue and resist the urge to mention the bad results of planning during the 11^th hour

Time can be your best friend, or your worst enemy, and when you are planning or trying to understand the ramifications of your plan on the way to the hospital, time is not on your side.  There is a line in a Bob Dylan song “Time is an ocean, but baby it’s at the shore.” When you are having surgery in the morning, time is “at the shore.”

Trying to pull a plan together in a day or a week before some sort of major surgery is risky.  It is certainly not a big picture approach and there are many reasons why it is inadvisable.    Two major reasons are Contemplation and Cost.

This approach usually lacks the contemplation (on the part of both the client and the attorney) that is necessary to create a plan that is comprehensive and correct.  To get the most benefit out of your estate plan, lots of thought should be put into its’ design, which is difficult to do in an extremely short time frame.

This approach also costs more (note:  other lawyers hate when I talk about how jobs are priced, I mean they want to charge you lots of money- but they are generally horrible at communicating the reasons why).  On pricing, an old, salty lawyer once said to me “You can have it Fast, Correct and Cheap- Pick two out of three.”  If you want it, Fast and Correct- it is not going to be cheap.  If the attorney has to interrupt his schedule to create, draft and properly execute a plan under the gun, before you go under the knife, it is going to cost more, much more.  If the attorney then has to leave, his office to see you at the hospital, it’s going to cost you much, much, much, much more.

You can get a much better plan for less money if you do not wait until the last minute.  If you’ve got surgery planned, make sure your plan is in place long before you go under the knife.

Last Will and Testament = Ticket to Probate (enjoy the ride).

Last time we focused on the question:  “What happens if I die without a Will?”  We discussed that when you die without a will- you die intestate.  When a person dies “intestate” their property and assets are subjected to the one size fits all Connecticut Intestacy Statutes.  This week we will explore what happens if you die with a Will.

If you die with a Will your estate will go through the probate process.   Probate is the process of admitting your Will as a valid legal document, and then disposing of the property of the estate according to the guidelines set forth in the Will.  In a larger sense, probate is the process of gathering up your assets, paying your debts, expenses and taxes, and distributing property to designated beneficiaries.

The process begins when a decedent’s Will and an application for probate is filed with the Probate Court in the town where the decedent lived.  A hearing will be held, and absent objections, the Executor nominated in the Last Will and Testament will be appointed.

Once appointed, the Executor should secure the property of the estate.  This involves transferring bank accounts and brokerage accounts into an estate account.  Changing the names on stock certificates to the estate is also necessary.  If the decedent owned any real estate, the Executor must also file a Certificate of Notice on the land records in each town where the decedent owned real estate.

After the Executor takes possession of the assets of the estate they should inventory it.  Only property that is in the decedent’s name should find its way into the inventory.   You do not need to itemize household goods unless they are valuable.  After the inventory is complete it will need to be filed with the Probate Court.

The Executor is also responsible for notifying creditors to file claims.  The Executor should convert the property to cash as needed to pay claims against the estate, legitimate debts of the estate, taxes and administrative expenses associated with probating the estate.  The Executor must file state and, in some cases, federal estate tax returns, and pay any taxes due.

After all claims, debts, taxes and expenses have been paid the Executor must file a final accounting with the Probate Court.  It should detail the property received and expenses during the settlement of the estate.  The remaining balance is available to be distributed to the beneficiaries.  After the beneficiaries have been paid, the Executor may then file a closing statement with the Court ending the probate procedure.

In most cases the process takes up to a year.  Sometimes it can feel like a full-time job, although much of the time is spent waiting.  There are certain timetables built into the process that stretch it out.  These timetables are necessary to ensure creditors are given adequate notice to file their claims and for various other reasons.  The probate process can be expensive and cumbersome; however, there are ways to avoid probating your estate through the use of trusts.

Special Planning for Special Needs: Part Two

Planning for disabled and special needs beneficiaries:  “part two.” In “part one” I discussed programs available for disabled and special needs individuals.  This week I will focus on how people can protect and provide for special needs and disabled beneficiaries through their estate plans.

As I wrote in “part one,” although it may seem like a good idea, I strongly discourage people from establishing custodial accounts or leaving cash outright to special needs beneficiaries. The distribution of assets outright may disqualify the beneficiary from government assistance, which is means-based.

When the assets of an individual with special needs exceed the governmental financial resource limits, the individual may be disqualified from both Supplemental Security Income (SSI) and Medicaid.

A more appropriate way to pass an inheritance to a special needs beneficiary is to utilize a Special Needs Trust.  Special Needs Trusts can be either self-settled Trusts, or third-party Trusts.  A self-settled Trust is a Trust set up with the disabled persons own assets.  The disabled individual is the Grantor and the beneficiary.  A third-party Trust is created by one person (the Grantor) for the benefit of another, so long as the Grantor is not legally responsible for providing support for the disabled individual.

A Special Needs Trust containing certain provisions may be established to administer and distribute Trust assets to a beneficiary with special needs without otherwise disqualifying them from governmental benefits.  If drafted properly, the assets in the Trust are not counted for the purpose of determining eligibility for governmental benefits.  A properly drafted self-settled Special Needs Trust will require the Trust to pay back the government after the death of the special needs individual for governmental benefits provided to the individual.   If the assets are depleted then they do not need to be reimbursed.   Special Needs Trusts should be drafted with care.  The instrument should not direct the Trustee to make disbursements for a disabled person’s heath, maintenance or support as this will cause the Trust assets to be includable in determining eligibility for governmental benefits.  One way to accomplish this goal is to give the Trustee absolute discretion on disbursements.  When distributions are up to the Trustee’s sole and absolute discretion, the assets in the Trust are not counted when calculating eligibility for governmental benefits.

Special Needs Trusts can be a valuable tool in planning for disabled individuals.  The process requires consideration of many issues and should be approached with care by qualified professional.

Good News/Bad News: We’re All living Longer. The Power of Long Term Care Insurance.

The good news: People are living longer today than ever. The bad news:  People are living longer today than ever.  Long life expectancy does not necessarily translate into a long healthy life. As we all live longer, more and more people find themselves needing long-term care.  Statistically speaking, it does not look good.  Either you or your spouse, if you’re married, may need long-term care at one point in your life.

There are a few different ways to protect yourself against long-term care issues.  The first plan would be to never ever get sick or hurt, or old for that matter.  This is the least advisable plan.  The second plan is to have lots and lots of children and send some of them to medical school, some to nursing school, and others to occupational and physical therapy schools, and hope for the best.  For a lot of folks this plan may not work either. The third plan would be to save enough money to pay for your long-term care.  For some people this plan is “do-able.”   For others, this may not be a realistic plan.  The costs can be staggering and there is no way to predict what the future cost will be.  The cost will vary depending on the care you need and the length of time that you need it. Currently, the cost of long-term care in Connecticut is exceeds $12,000/month.  The best alternative is Long-Term Care Insurance.

Long-term care is not solely for the elderly.  The need for this type of care can come on unexpectedly.  Long-term care insurance is a good way to plan for unexpected incapacity.  Long-term care insurance can provide medical care and other services.  These services can be provided in your home, in a nursing home, or in an assisted living facility.  This type of insurance helps people remain financially independent while guarding against the rising cost of long-term care.  That being said, it can be costly.  While this is true, you should consider the fact that one month in a Connecticut nursing home, at the private pay rate, would probably cost more than the yearly premium for a long-term care insurance policy.  Many homes have been sold, and many potential inheritances have been spent providing skilled nursing care.  You should weigh the cost of carrying long-term care insurance against the possibility of needing this type of coverage.

If you cannot afford to privately pay for your own care, and most people cannot, then look into long-term care insurance.  If you can afford to privately pay for long-term care you should still look into long-term care insurance because you can probably preserve a lot of your own assets by having it.  Long-term care insurance is one of the best ways to protect assets, and at the same time provide you with peace of mind and quality care.

There are many types of policies offering many different benefits, different waiting periods, different inflation protection, and different costs.  You should not take the purchase of a long-term care policy lightly.  Do your homework.  Make sure you know how long and how much the policy will pay, as well as what will trigger a payment from the policy.  You should also know if the policy is indexed for inflation.  Most importantly you should educate yourself on the level of care associated with the policy.  Is custodial care covered?  How about skilled nursing care?  Is home healthcare provided?  Check with several companies and agents and find the best policy for you, not the best policy for the agent to sell you.   Understand the policy you are purchasing.    Make sure you know what your policy covers and what it does not cover before you purchase it.  Caveat Emptor!