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

My wife and I are both 67 yrs. old and have not yet started taking our S.S.I. My reasoning, we do not need the income now but will need all we can get when we do take it. When I turned 65 yrs. old I had an appointment at the S.S. office and was told that I would not receive my full benefit due to Double Dipping rules.

One of my seminar attendees raised the above question; I thought to share the answer with everyone. I am making some assumptions here. The primary assumption is that when a person is looking to apply for social security benefits at age 65 and he or she has not yet reached full retirement age. They will be subject to double dipping rules that would reduce the social security income by the amount of earned income.  After full retirement age that reduction does not apply.  However, just because you can claim social security income does not mean you should.  I am attaching a link to an article that you will want to look at before making a decision.  In my personal opinion, if you can delay the payments, do so.  Or, take the income and bank it and then return it at a later time and still claim the higher income.  You are allowed to keep the interest from the money and only return the principal.  The article does clarify this issue. 

http://crr.bc.edu/images/stories/Briefs/ib_9-9.pdf

http://crr.bc.edu/briefs/strange_but_true_free_loan_from_social_security_4.html

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

 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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

My husband died and I have two adult married daughters. I was wondering if they could be put on the house title with me now. If I suddenly need a nursing home or something, the state couldn't take my home. Or should I turn the title over to them now, and how long of a period do I have until they cannot come after the home, though I may have to give up the reduced property taxes.

If protecting the assets from uncovered long-term care costs is the primary motive, you cannot add their name and hope it is protected, you must give up the ownership of the home. I am always suspect of that because what happens if they are sued or have a divorce? It must be done very carefully. If you do not need long-term care assistance for the next 5 years, transferring the house out may trigger a 5 year penalty period in which you will not qualify for Medicaid assistance. You should check your other assets as well, because they may trigger other 5 year penalties if not handled at the same time. Once the children receive the assets, they may wish to place it in a safe harbor trust. This way if the kids are sued or get a divorce, at least your house assets may not come into play for their creditors.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

I heard something about converting a traditional IRA to a Roth IRA and how it would be a better way to pass an IRA on to one's children?

Traditional IRAs are taxable instruments of which when you pass to your children, you are passing the tax ramifications as well to them.  In other words, if you have a traditional IRA with $400,000, when you turn 70, you have to start taking out a minimum required distribution.  All that is considered taxable income. 

The issue then becomes, what are my opportunities? We now have something called a Roth IRA, in 2010, there is an opportunity for people to roll their money from a traditional IRA to a Roth IRA.  The difference is that with a Roth IRA, the withdrawals are totally tax free.  Once you have transferred it out of a traditional IRA to a Roth IRA, your children can inherit this without any tax consequences. 
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

What is the difference between a safe harbor trust and other trusts?

That is one of the basic fundamental things we discuss. A typical trust is a revocable living trust. One of the ways to plan your affairs is to use a revocable living trust. What this trust does is, it allows you to put away the assets you own from your name into the name of the trust, for the purposes of avoiding probate.

The second type of a trust is called a tax trust, or a credit shelter trust. This says that in any community property state, like Washington, between a married couple, the husband and wife will generally own 50% of the assets each.  This type of trust basically says, that when the first spouse dies, instead of leaving the money down for the surviving spouse, their one half, or a portion of it, will go into the credit shelter trust, allowing avoidance of estate sales taxes. This is also a type of a safe harbor trust.

The safe harbor trust that I talk about is much like the credit shelter trust, but it has a different code, title 19. This basically follows the same husband and wife scheme. This money will no longer will be visible for programs such as Medicaid, VA, housing, and food.

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

My sister-in-law has power of attorney over her mom, who has advanced Alzheimer’s disease.  She wants to move some stocks out of a mutual fund into a different one because it is doing poorly, and the investment company does not recognize power of attorney.  How can this be?

It cannot be.  This is also not the first time I have heard about it.  If the power of attorney was written over three or four years ago, they do not know if it has been changed or revised, and they consider it a big risk for them.  But the fact of the matter is, even if a person creates a power of attorney in 1901, it would still be valid today.  The way to overcome that is two things. First, whoever is trying to use the power of attorney, can prepare something called an affidavit in support of power of attorney, whereby, under penalty of perjury, you swear that this is the power of attorney that was created and no other power of attorney to your knowledge has been created since, and I am in good faith using my power of attorney to further the benefits of the person who gave me this power. If you can present that document to the financial company and they still refuse to honor it, you will have to go to court and get an order from a judge requiring the institution to accept the power of attorney, and the penalty is they may have to pay all the fees and costs associated with obtaining this order. 

So generally, what we do is to write the letter to the institution telling them that this is the valid power of attorney, based on the specific rules and requirements, and attached they will find a copy of the affidavit in support of power of attorney.  If they still choose not to honor it, we will take them to court. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

How often can banks inspect your property to check the condition and could this be a problem for seniors? Especially considering the maintenance of the grounds?

Generally this is not a problem.  The contract does state that you have to maintain your house. They will usually send somebody on an annual or bi-annual basis to do a drive-by or come by and take a look at your house.  This frequency is established when you take the loan and depending on how the old house is.  When the loan is taken, they will do an initial inspection where someone will come and inspect the house rather thoroughly.  Many times I will see loans subject to conditions that the person who is making the loan made these improvements. At that point they may schedule someone to do follow up and a walk-in. The downside is that they are in the drivers seat as to how frequently to schedule inspections or what repairs must be made.  But it has not been a problem. I have yet to come across a case of absurd requirements.  

In terms of the grounds, it usually does need to be kept in good order, and many times this involves mowing the lawns and people frequently hire others to mow the lawn and do repairs of the grounds.

I do think reverse mortgages are generally a good idea. However, the caution I tend to give people is that they make sure they want and have the means to age in place.  It is not something you should be doing if you are considering moving within the next 3-5 years.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

I heard the inheritance tax rates are going to increase taxes by as much as 45%, is this true and when will this happen?

The rates are going down to 45%. Under the old regime, tax rates used to be up to 55% at the federal level. The state and estate taxes reach between 10% and 19% in addition to the federal taxes.  For estate tax purposes, the exemption for 2009 is 3.5 million. In 2010, if congress does not take any action, estate taxes will be no more, but then in 2011, if congress again does not take any action, estate taxes will be back down to 1 million dollars. For the state of Washington, there is a 2 million dollar exemption regardless of what the federal exemption is.  But I do think something will happen before Dec. 31^st, but I’m just not sure what. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

What can be done when both parents are in declining health, and do not want to leave their house?  
                                        
If power of attorney has not been prepared, a guardianship is something to consider. A guardianship is where an attorney will go to court, and have the parents declared incompetent.  However, this can be considered by the parents to be a slap on their face.  And in this case, the court may not impose a guardianship due to the fact that the parents likely have enough mental capacity to understand the decisions they are making and the risks they are taking.  And so, in my opinion, a guardianship is a poor solution.

Even with power of attorney, children may not be in a position to enforce their decision to move the parents to an assisted living facility, due to the fact that the power of attorney can be revoked.  

Another solution would be to try to talk to the parents, and convince them to move. But this may end up alienating the relationship between the children and the parents.  The children may need to try to understand that the parents may not consider their advice in the same manner that they would consider advice from someone in the professional field.  This is one situation where the care and management aspect is so appropriate, such as a care manager or social worker, because the parents do not want to leave their home although the children do not consider it a safe situation. 

Care managers or social workers help to create a plan that can work to provide things such as a personal emergency response system that allows them to continue to live safely at home. This may be a solution that both parties can agree with. 
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

*

We would like to help pay off our children’s houses.  Both owe approximately $100,000 each.  Is there any way to do this considering the gift taxes and other obstacles?

You can do it.  The limit, which is $13,000 per year, per person, has nothing to do with estate gift taxes.  According to the law, any American can gift up to $1,000,000 in their lifetimes without worrying about any gift taxes. The IRS holds a ledger with the amount of $1,000,000.  Only when the amount exceeds $13,000 does a person needs to contact the IRS. 

So a gift of $100,000 can be done without worrying about gift taxes or income taxes.  The only thing that would need to be done is to file a gift tax return(pdf), in which case the IRS will reduce your $1,000,000 lifetime exemption accordingly.  In this specific case the IRS will reduce the $1,000,000 by $87,000 each.  
 

The other impacts that this gift may have is that if either parents requires medicaid within the next five years it may become complicated.  However, if done properly, this would not be a problem either.  Since this will be done without medicaid in mind, medicaid cannot count this as a penalizing transfer. 

But the problem is that medicaid presumes that no one ever makes a gift for reasons other than qualifying for medicaid.  Therefore, some documentation will need to be secured before making the gift in order to stop this from coming back to haunt you. 
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

An original appraisal was given, and the appraised value decreases monthly.  Every month, the banks withdraw from that.  If after 20 years, there is nothing left to withdraw, can I be kicked out of my house?

No. They cannot kick you out. The worst thing that can happen is that they can say you have no more equity that you can access from this house anymore.  As you grow older, the amount of equity, and the percentage you can access grows.  But they can never kick you out of the house so long as you are living there.  This government program was initiated in order to allow seniors to access their home equity without jeopardizing their right to be able to live there.  

The other end of the spectrum is that if you pass away and the value of your house is down. If the amount you have taken out over your lifetime exceeds the value of the house, you will still be covered by PMI insurance.  This protects your children and your family from having to step in and take care of it. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

My father passed away in PA, my brother is currently the executor. He is claiming the executor fee is 10% and wants to take 10% from the inheritance.  There is no documentation.  Is this legitimate and what can the rest of us do?

Unless the will spells out that he will be paid, he does not get the fee. If he wants to be paid or resign, someone else can step into his position as the executor and do the same job for no cost.  When we prepare wills, we do cover this issue because sometimes it does take a considerable amount of time to do it.  There is no percentage that an executor is entitled to, and in the state of WA, it is limited to what is reasonable.  This tends to be between $2500-$5000 at most.  You may have to go court and file a petition stating that it is an unreasonable amount, and that you do not wish to see paid as someone else can fulfill that position. 


 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

How can a Power of Attorney help keep you out of a nursing home?

A  Power of Attorney is more powerful that you think and a document that is not given much thought. To clarify, a power of attorney is a document that you sign to name a person of your choice, who you wish to appoint as your surrogate to act on your behalf should you be unable to act on your own behalf. This may be because you are out of town or are physically or mentally incapacitated to a point that you cannot attend to your own affairs. 

Think about how you and I decide who to name as our surrogates. We simply choose the people we love and trust the most without giving much thought to the types of decisions they will have to make. In reality the most difficult decision our surrogates will make is to step in when they see us slowing down in life. 

We say to them that if you see that we cannot manage our own affairs, we trust you that you will make all the right decisions, including the decision about our housing needs. And when our surrogates find us not being able to address our own needs independently they will turn to the medical community for help. And our medical community views nursing homes and assisted living facilities like the rest of us view McDonalds. Cheap, convenient and available. Little attention is given to the effects and quality of the food.  Same way, the doctors and medical providers generally do not explore the issue in any detail because institutional care is an easy fix. 

This is the reason why many of us end up in nursing homes though we could well be able to stay at home. So, what you want your power of attorney to do is not just to give responsibility to your surrogate, but also to direct that your surrogate use the resources in your estate to seek out the assistance of a qualified geriatric care manager who can provide your surrogate options that should be considered about your care needs. Including whether you could stay at home and if so what services would be needed to accomplish the objective; if you could not stay at home what alternatives exist between home and nursing home and associated costs. 

With this information your surrogate could make the final determination, but at least it will be based on a thorough review of the facts by an objective independent professional. In the end, you are not a burden on your surrogate and your quality of life is much improved because of this directive. Not to mention the analysis of whether Medicare or Medicaid could cover some of the costs. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The knowledge that we will eventually die is one of the things that distinguishes humans from other living beings. At the same time, no one likes to swell on the prospect of his or her own death. But if you, your parents and other loved ones postpone planning until it is too late, you runt the risk that your intended beneficiaries - those you love the most - may not receive all that you would hope.

We should begin a discussion of estate planning with a consideration of what "estate" and "estate plan" mean.  An "estate" is simply everything a person owns: bank accounts, stock, real estate, motor vehicles, jewelry, household furniture, retirement plans, life insurance. An "estate plan" is the means by which the estate is passed to the next generation. This can be accomplished through a variety of instruments. Most retirement plans and life insurance policies pass to named beneficiaries, chosen when you take out the policy or at a later date. Property that is jointly owned passes to the surviving joint owner. Trust assets are distributed according to the terms of the trust. Property  held in an individuals name alone comes under the instructions laid out in a will, or in the absence of will, under the rules of "intestacy" set out in state law.

Problems often arise when people don't coordinate all of these methods of passing on their estate. A well-drafted estate plan also permits you to save as much as possible on taxes, court costs and attorneys' fees. Most importantly, it affords the comfort  that your love ones can mourn your loss without being simultaneously burdened with unnecessary red tape and financial confusion.........

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This is one of most common question I get  asked all the time from my clients & radio listener, should i have a Will or Trust ? Let me start by explaining the difference between a Will & Trust .

Will & Trust do exactly the same that who gets what when I die. But they work totally differently.

Will is a very simple document, where I write down my wishes, name the  beneficiaries of my estate & let  my family members  know who gets what when I die. And when I die, my estate will go through  probate. Lot of people are scared of probate process. I am hear to tell you that probate isn't a scary process. It usually takes 4-5 months to complete the whole process & during the process all my creditors will be notified & required to submit any claim if they are owed any money before the assets from my estate are transferred to my beneficiaries. Once the probate process is complete, no one can come to the  beneficiaries of my estate and claim their inheritance.

On the other hand Trust is a business arrangement, it basically says I can avoid probate when I die, if I don't owe any money to anyone. When I create a trust, I give up the ownership of all my assets ( like house, cars, stocks, bank account etc) to the trust. One of the biggest benefit of Trust is protecting my assets from creditors. Trusts are private documents and only those individuals with direct interest in the Trust have any right to know of Trust assets and distribution.

In my personal opinion, I will create a Trust if my estate is worth more than 4 million dollar, I am in a second marriage situation, my kids will fight over the inheritance, or  I have real estate in more than one state. Other than that Will should do fine for me ...............

• Email This
• Print
• Comments
• Trackbacks
• Share Link