New York Estate Planning & Elder Law Blog

Preparing a comprehensive estate planning strategy is an important step in making sure the assets you have worked hard to build are secure and can be distributed to heirs according to your wishes. An experienced estate planning attorney can help you develop an estate planning portfolio that meets all of your needs. A recent article from WealthManagement.com reminds us that one important aspect of estate planning includes retirement accounts such as traditional IRAs, Roth IRAs, or a tax-qualified employer-sponsored retirement plan.

When these plans are left to individual beneficiaries, the person inheriting the qualifying account is able to open their own account and transfer the money they have inherited into it. In turn, they can appoint an individual to be the beneficiary of their account. This allows them to stretch out minimum required distributions for a longer period of time instead of simply taking the lump sum of money in the account. However, when qualifying retirement accounts are left to a trust then there are additional

Trusts and Retirement Accounts

According to a recent report by CNBC, Medicare Part B premiums are expected to rise for millions of seniors across the country in 2018, putting even more financial strain on elders trying to enjoy their golden years while living on fixed incomes. The increased costs means many seniors should prepare to pay more for their doctors visits and outpatient care.

An estimated 70 percent of Medicare Part B enrollees paying lower monthly premiums due to the “hold harmless” rule will likely see their monthly premiums jump from $25 to $134, over the average of $109 per month in 2017. The hold harmless provision is a legal clause that prevents an individual’s premiums from rising more than their Social Security cost of living adjustment for that year.

The extra amount enrollees pay will go towards paying the full amount of the $134 Part B premium and fortunately, for an estimated 28 percent of those individuals, they will still pay below that capped amount. Even higher income earners, those making $85,000 or more, will remain unchanged with rates varying from $187.50 to $428.60.

It is difficult to turn on the news today without hearing tragic stories of how the opioid crisis that has swept the United States impacts families and communities. While many of the unfortunate effects of addiction can easily be seen, there are more unintended consequences that need to be taken into account when discussions about addiction and estate planning intersect. Often, individuals dealing with addiction have well-founded concerns that any inheritance they leave to an individual could be squandered on the addiction itself. That can be a disheartening possibility. A recent article from WealthManagement.com reminds us that there are options available to help deal with the role addiction might play in your comprehensive estate planning strategy.

Bequests

Disinheritance is a troubling option for many reasons. The prospect of completely cutting an individual out of any inheritance can difficult to consider, especially when the heir involved is already suffering from a serious condition like addiction. However, you may want to consider leaving a smaller bequest to that individual if you are concerned that they may use their inheritance to facilitate an addiction problem. You may also want to consider leaving the inheritance earmarked for the individual that is suffering from addiction to siblings or other family members that you can trust to safeguard the inheritance and work with the individual to overcome addiction. If you choose the latter, you must make sure that you have a conversation with the individual(s) you are considering for this to make sure that they are prepared and willing to undertake this kind of responsibility.

In the first part of this post, we covered the initial basics in setting up a trust. Determining your purpose for creating the trust is certainly one of the most important steps, as are determining which individuals will be involved in the trust and how you want to go about establishing the trust. However, once the initial legwork is done, you need to focus on making sure that your trust will be able to fulfill the goals you have established it for. Working with an experienced estate planning attorney is an important part of making sure your trust continues to comply with changing laws and continues to retain value so as to meet the goals you have established for it.

Funding Your Trust

Once you have created a living trust, you need to appropriately fund it. One of the basic reasons many people have for establishing a living trust is so that the assets they want to place into it can avoid probate. To that end, it is important to make sure you have properly transferred the correct assets into the trust. Real estate assets are often one of the most important assets for a trust, but you will also want to consider the benefits of transferring your personal assets into the trust as well depending on what your ultimate goals are. Transferring assets to fund the trust can be as simple as changing title to some assets while other can involve a much more complex process.

All trusts have distinct characteristics. Even trusts that have similar structures are still unique because of the assets in them and the goals behind their creation. However, there are still some common steps to establishing a trust. Regardless of the type of trust you are considering, keeping these steps in mind can help you direct your efforts in investigating the type of trust that is right for you and eventually establishing it.

Identify Your Purpose

Why are you thinking about creating a trust? Are you concerned about a family member with special needs being adequately provided for? Are you worried about the costs of long-term health care? Do you want to protect your assets until certain conditions have been met? Do you simply want to protect your assets from the probate process to ensure your heirs have access to them? Whatever the reason for your interest in establishing the trust, it is important to have a clear and concise purpose for creating one. Doing so will help you narrow down your choices and provide needed direction when establishing the terms of the trust itself. At this point, it is also important to explore the potential tax consequences of the types of trusts you are considering. Doing so may open your eyes to some important nuances that can significantly affect your decision in choosing a trust.

It is no secret that we live in an increasingly globalized world. That means it is becoming more and more common for individuals to find themselves abroad for any number of reasons that may include work, family, retirement, or even simply a desire to travel extensively. Whatever the reason for being abroad, United States citizens that are abroad for an extended period of time are likely to acquire some kind of property. In fact, for many individuals the affordable nature of assets abroad is one of the most appealing reasons for going abroad. But what happens to those assets when they are transferred in a comprehensive estate plan? A recent article from the New Jersey Law Journal highlights the fact that international estate planning can be difficult, but an experienced estate planning attorney can make a big difference.

The IRS and Foreign Asset Trusts

One of the most important things to ensure is that any foreign trusts established by U.S. citizens abroad have been established for purposes other than avoiding U.S. taxes. When the individual that creates the trust passes on and it is time for those assets to be distributed to heirs, the IRS will look at the trust’s structure and purpose to determine whether the trust was created for a legitimate purpose or for the sole purpose of avoiding U.S. tax penalties.

An often-overlooked part of estate planning is social security. We often hear that social security is not enough for an individual to live on during retirement, especially given that people are living longer lives and often require additional medical care when reaching an advanced age. However, social security can actually be an important part of your retirement planning – and consequently an important part of your comprehensive estate plan. That means that social security survivor benefits could play a bigger role in your retirement and estate planning than you may have thought.

How do survivor benefits work?

Credits are an important part of determining what social security benefits a person is eligible for, if any. Workers earn credits through their individual earnings each year. The maximum number of credits a worker can earn in a year is four. You must attain a certain number of these credits over your lifetime in order to qualify for certain benefits. If you take a break from working for a number of years, your credits still remain on your social security record and you can begin accumulating them again once you return to the workforce.

A recent study by the UCLA Fielding School of Public Health suggests the number of Americans suffering from Alzheimer’s or other cognitive impairments could more than double by 2060. Currently, an estimated 6 million Americans suffer from the disease and if the study holds to be true, that number could increase to a staggering 15 million over the next few decades.

Published in The Journal of the Alzheimer’s Association, the study examined some of the largest reviews on the rates and progression of Alzheimer’s disease and dementia and applied a computer model that took into account the aging U.S. population. Of the 15 million Americans expected to suffer from cognitive impairments, 5.7 million are expected to have a mild condition while the remainder will likely be diagnosed with dementia due to Alzheimer’s, with 4 million requiring nursing home care.

In a statement to the UCLA Newsroom, the author of the study Ron Brookmeyer said, “There are about 47 million people in the U.S. today who have some evidence of preclinical Alzheimer’s, which means they have either a build-up of protein fragments called beta-amyloid or neurodegeneration of the brain but don’t yet have symptoms.”

With so many different options available when it comes to creating a comprehensive estate plan, it can be difficult to choose the ones that are right for you. More and more often, individuals choose to utilize trusts as a way to preserve assets and ensure that as many assets as possible can be passed on to heirs. Trusts have a lot of advantages that can be very attractive to individuals of both modest and wealthy means. One of the most well-known advantages of a trust is that it will avoid the probate process after a person dies. That means less of the assets will risk being eaten up by costs associated with the probate process, and assets in the trust are often available to heirs much quicker than were those heirs to have to wait for those assets to pass through probate. However, it is a misconception that all trusts avoid probate, and it is important to remember that when choosing the right type of trust for you.

Trusts and Probate

There are two basic types of trusts that most people utilize: revocable and irrevocable. A revocable trust is more common as it can offer an individual more flexibility with the structure of the trust as well as the assets placed in the trust. As the name suggests, it can also be revoked. On the other hand, irrevocable trusts can rarely be revoked or modified after they have been created. Assets put into them are typically permanently in the control of that trust. The more rigid structure of irrevocable trusts makes them less common, but there are many situations where such a rigid structure can actually be beneficial to you. Both of these types of trusts are created by an individual during his or her lifetime, so they may be referred to as a living trust or inter vivos trust.

According to a recent report by CNBC, over half of the revenue generated by the nation’s top five-insurance companies comes from federal government funds provided by Medicare and Medicaid., more than doubling since the Affordable Care Act (ACA) came into effect. Those insurers generated a combined $92.5 billion in revenue from CMS programs in 2010 compared to $213.1 billion in 2016.

Citing analysis from the journal Health Affairs, the article suggests lawmakers could improve the outlook for ACA healthcare exchanges by requiring companies that draw federal funds to offer plans through the ACA marketplace. Such a move could have promising outcomes, given the face that many insurance companies have pulled out of the ACA healthcare markets over increased operating costs.

UnitedHealthcare, Aetna, Anthem, Cigna and Humana reportedly draw 59 percent of their revenue from CMS programs while adding an estimated 23 million individuals to their plans over the same period. The same Health Affairs report also purports those five-major insurance companies have a combined 125 million members across the country and have been quite profitable since all Americans have been forced into buying health insurance coverage.