Aging Options Blog : Washington Estate Planning Lawyer & Attorney : Rajiv Nagaich : Aging Options Law Firm : WA Elder Law, Wills & Trusts

Volatility returned to global financial markets with a vengeance in the just completed second quarter, sending stock prices plunging and convincing investors to buy defensive investments, especially U.S. Treasuries and gold.

With the Dow Jones Industrial Average closing out the quarter at a new low for the year, many now believe that a 2008 collapse is a possibility. But all may not be lost.

Hulbert Financial Digest, which tracks short-term market timing newsletters, says their exposure to stocks fell to just 4.5%, down from 32.6% just one week. 

 And just why is that good news? Well, according to Hulbert (who has been tracking newsletters for 30 years) a majority of the newsletters get it wrong. In fact, if you did the opposite of what timing newsletters suggested, you would be much better off than those who followed their advice.

Better yet, try this advice: ignore all of the siren calls, market prognosticators, and financial experts. The fact is, no one knows where the market is headed.  You will do best when you build a truly worldwide portfolio, create the correct mix between risky and less risky assets, and re-balance it annually. You will undoubtedly sleep better, worry less, and more than likely, end up with more money.

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No annuity is exempt from being counted as an available resource UNLESS procured immediately before submission of the Medicaid application.   Anytime I hear use of annuities as a pre planning tool it throws up a red flag of bad information being provided. 

For Married couples an alternative to the gifting route you could utilize a Medicaid Qualifying Annuity to shelter some costs. Medicaid qualification criteria look to the income of the applicant and the assets of both spouses. One requirement of this annuity is that the State of Washington must be named as the primary beneficiary before the community spouse. Another downside to using an annuity to convert resources to income is that the income that comes in the name of the community spouse will most likely preclude you from requesting an income allocation from the applicant to the community spouse.

For single person, under Medicaid rules, you are not able to utilize an annuity in the traditional sense of sheltering your excess assets by converting them into a stream of income. However, since you will be gifting some of your assets, which will cause a period of ineligibility, you can minimize your penalty by annuitizing a sum which, when added to your monthly income, will give you adequate income to meet your monthly long-term care costs. 

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 As you may already know we are in uncertain tax planning times. In 2010 there is no estate tax unless Congress takes steps to finalize some solution. Next year the estate tax exemption is slated to be $1,000,000, the same amount it was in year 2000 with a tax rate that can go up to 55%.

Currently, the Senate is about to introduce a bill seeking a $5,000,000 per person exemption with a maximum estate tax rate of 35%; while thehouse had passed a bill in 2009 with a $3,500,000 exemption amount with a 45% highest tax bracket. In a politically active year it is expected that Congress will do something, but that should not be taken for granted.

For that reason, in my view it would be prudent to plan your estate around the $1M exemption amount. This is done by implicating the use of trusts whereby each of you (married Couples) agree to leave your share of the estate to a credit shelter trust instead to each other. This allows the surviving spouse's share of the estate to be no more than his or her half of the total community estate, and hopefully less than $1M. This was the planning many of you had undertaken before and that should be continued, but with a twist.

The twist being that the trust should also make provisions to make the assets in the trust invisible to the long term care financing system or Medicaid. This way, if the surviving spouse needs long term care AFTER the death of a spouse, the assets in the trust cannot be required to be spent down to $2,000, thus assuring the surviving spouse that he/she will not be left penniless and some of the assets will end up as an inheritance with your children. The chances are remote that you will need Medicaid, but the provisions are prudent in these uncertain times.

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Typical concerns about Powers of Attorney 

I'm afraid that the person I appoint won't manage my affairs properly

giving someone the potential power to manager affairs can be frightening. This is why it is important for you to appoint someone you trust to be your attorney. She must use your finances as you would for your benefit. Giving someone a power of attorney does not limit your own rights in any way. It simply gives the other person the power to act when or where you cannot act.

Does a power of attorney take away my rights?

Absolutely not. Only a court can take away your right to manage her own affairs, through a conservatorship or guardianship proceeding. In attorney simply has the power to act along with you, and as long as you are competent, you can revoke the power of attorney.

I don't have anyone I trust enough to give them power over my affairs

if you do not have someone you trust to a point, it may be more appropriate to have the probate court looking over the shoulder of the person who is handling your affairs through a guardianship. In that case, you may use a limited durable power of attorney to simply nominate the person you want to serve as your guardian. Most dates require the court to respect your nomination "except for good cause for disqualification."

What if I change my mind?

You may revoke your power of attorney at any time. You need to send a letter to your attorney telling her that her appointment has been revoked. From the moment the attorney received a letter, she can no longer act under the power of attorney. If you have recorded the power of attorney with the land records of your County or at the probate court, you must record the rev

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Excuse #1: My estate is too small.

For many individuals, especially those with smaller estates, the most important documents are a durable power of attorney and medical directives. While a will protects your estate after you're gone, a durable power of attorney and medical directives protect you while you're still here.

Excuse #2: Joint ownership of accounts with my children is an adequate plan.

No it isn't. Unless there is only one child. It is impossible to keep separate accounts for more than one child equal. This is especially true if the parent becomes incapacitated and no linger has control over the accounts. Trying to save a few dollars by managing an estate in this fashion runs the serious risk of causing discord in a family for generations to come. Why take the chance?

Excuse #3: I don't want to pay a lawyer to draw up the plan.

Software is available that produces most of the estate planning documents an attorney will prepare. The chances are good, however, that such "one size fits all" approaches will prove inadequate in any specific case. In fact, few clients just need a simple will. If there's anything about your situation that's not plain vanilla, you need to see a lawyer (and only a qualified lawyer can tell you if your situation is indeed plain vanilla). The problems you may create by not getting competent legal advice probably won't be yours, but may well be your children's. Don't risk leaving such a legacy.

Excuse #4: I just haven't gotten around to it.

Reading this blog is the first step towards getting around to it. 

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What is the similarity between the characters in the musical “Fiddler on the Roof” and attorneys? Tradition! 

All of my clients deal with estate planning issues: The majority of my clients

who have planned their estates have done so under the traditional notions of estate planning which, unfortunately, leaves them largely exposed to the threat of uncovered long-term care costs.

Traditional estate planning involves preparation of wills or trusts, powers of attorney, living wills and advance directives. These documents are generally

based on one of two notions. The first is that one day you will go to sleep and never wake up, and the biggest issue the estate plan needs to address is to make it easier for your loved ones to administer your estate. Alternatively, the plan will ensure that your appointed agents will be able to manage your

financial and health care affairs without missing a beat should you face

incapacity. But these solutions do not address the more urgent threat or the real issue of uncovered medical costs and depletion of the estate assets to support quality-of-life goals.

As discussed above, estate taxes no longer touch most estates. The real threat to an estate today, therefore, is not estate tax but rather the threat of

uncovered long-term care costs. Understanding that the role of the estate planning process is to evaluate potential threats that could erode your estate and afford appropriate protective measures to avoid such erosion, the process generally falls short unless it includes guidance and assistance

to your chosen fiduciaries on how they can approach the issue in a more reasoned and educated manner. The guidance and assistance is designed to aid in asset preservation through the employment of legal solutions and management of quality of life of you and involved family members.

Elder law attorney practising Life Care Planning addresses both these issues. They do so by understanding that most families dealing with disability or death of a family member seek not simply to protect assets, rather they seek to make sure that the protected wealth is used to address the care needs of the incapacitated and all those affected by the incapacity; or to bring peaceful closure to a chapter in their lives stemming from the demise of a loved one.

Through Life Care Planning much can be done to assure that should incapacity strike, quality of life of the incapacitated individual and that of others will be maximized and the affected family members will not be stressed to a breaking point dealing with the complications stemming from the incapacity.

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My father, in his late 80s, is considering marrying a lady who is not in the best physical health.  I own property with him together, what implications are there when you place property into a safe harbor trust?

 It depends how you go about doing it.  There are two ways.  If you make it irrevocable right off the bat, placing it out of both your and your dad’s estate, the trust will have its own tax life, which will generally be very expensive.  As long as your dad is living, you may want to have it be under your or your father’s estate, whoever is in the lower tax bracket, to bounce the taxes off to. 

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My wife and I both are going to be eligible turning 62 this year, and she didn’t work near as much as I did, so her benefits are much reduced. I understand she can draw 50% of what my Social Security is.  She turns 62 sooner than I do and will begin drawing from hers, and I would like to wait until I’m a little older to start drawing.  Can she convert to 50% of my social security when I start drawing mine?

Yes. Right now she will not be able to take 50% of your social security. She gets 50% of your social security when you turn retirement age. She can collect 50% of her social security right away.  When you decide to draw yours, she can switch over to the higher social security under your name. 

If you wait all the way until 71, you will get a much higher check.

If you start the process of taking social security at age 62, and you take that money religiously and put it into a bank account as if you do not have it.  At age 66, you can take that money plus interest, keep your interest, and give the money back to social security.  This will increase your benefits as if you never took the money out in the first place.  The problem with this course is that if you are working, it may become a little complicated. 

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My father passed away and I am the executor of the estate. I now have everything reduced to cash. My dad had some losses in his long-term brokerage account and the longer we leave the money in there, the more we will be recovering. How much time do I have to distribute everything and pull the money from the brokerage account?

Legally you are required to close the estate as swiftly as possible. By being the executor, you're an officer of the court. That means you are supposed to follow the rules the way they are written. They require the executor to act as swiftly as possible to allow the beneficiaries can get all the money. There is no time-line per se. I would guide my client in this particular situation would be to get all the children to agree and file the report to the court stating your reason for withholding the distribution of the funds.
 

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