Richmond Virginia Estate Planning, Elder Law, And Asset Protection

Do I Need a Revocable Living Trust?

A revocable living trust is a legal document you create that names a trustee to manage and administer your property. If you’re a competent adult, you can establish an RLT. As the grantor, or creator of the trust, you can name any competent adult as your trustee, or you can use a bank or a trust company for this role. The grantor can also act as trustee throughout his lifetime.

Investopedia’s article from last fall entitled “Should You Set up a Revocable Living Trust?” explains that after it’s created, you must retitled assets—like investments, bank accounts, and real estate—into the trust. You no longer “own” those assets directly. Instead, they belong to the trust and don’t have to go through probate at your death. However, with a revocable living trust, you retain control of the assets while you’re alive, even though they no longer belong to you directly. A revocable living trust can be changed, and any income earned by the trust’s assets passes to you and is taxable. However, the assets themselves don’t transfer from the trust to your beneficiaries until your death.

Avoiding probate is a major benefit of a living trust, but other benefits like privacy protection and flexibility make it a good choice. A living trust can be used to help control a guardian’s spending habits for the benefit of minor children. It can also instruct another individual to act on your behalf, if you become incapacitated and need someone to make decisions for you. Should you become impaired or disabled, the trust can automatically appoint your trustee to oversee it and your financial affairs without a durable power of attorney.

Although there are several advantages to establishing a revocable living trust, there also some potential drawbacks:

Expense. Establishing a trust requires legal assistance, which is certainly an expense.

Maintaining Records. Over time, you will need to monitor the trust and make adjustments as needed (they don’t automatically adapt to changed circumstances, like a divorce or a new grandchild). There’s the trouble of ensuring that future assets are continuously registered to the trust.

Re-titling Property. When your RLT is established, property must generally be re-titled in the name of the trust, requiring additional time. Fees can apply to processing title changes.

Minimal Asset Protection. Despite the myth, a revocable living trust offers little asset protection beyond avoiding probate if you retain an ownership interest, such as naming yourself as trustee. (Please note, though, that an estate planning lawyer may recommend a different type of living trust that can provide you with asset protection.)

Administrative Expenses. There can also be additional professional fees, such as investment advisory and trustee fees, but that’s normally true only if you decide to appoint a bank or trust company as the trustee.

There’s No Tax Break. Your assets in the RLT will continue to incur taxes on their gains or income just as they do now, and be subject to creditors and legal action, just as you are now.

Compared to wills, revocable trusts provide much greater privacy, more control and flexibility over asset distribution; not just what you leave, but how you leave it. With a revocable living trust, you and your attorney do most of the work up front, making the disposition of your estate easier and faster –and less stressul — after your death. However, an RLT requires more effort, and there is an expense in creating and maintaining it. Typically, the overall cost of trust-based planning is substantially less that planning by will and probate.

Work with an experienced estate planning attorney, if you are considering a revocable living trust.

Reference: Investopedia (Oct. 31, 2019) “Should You Set up a Revocable Living Trust?”

 

Is Alzheimer Preventable?

Yes, roughly a third of Alzheimer’s cases are preventable, according to promising recent research. Instead of new medicines, lifestyle changes may give you the best chance of avoiding these illnesses. In addition, there may be some moves that may surprise you, says Considerable’s article from December entitled “6 steps you can take to cut your dementia risk.”

“There are many things we can specifically address quite effectively through lifestyle changes and practice,” says James E. Galvin, the director of the Comprehensive Center for Brain Health at Florida Atlantic University and author of a 2017 paper in the Journal of the American Geriatrics Society on the science of Alzheimer’s prevention.

“It doesn’t necessarily require medications. There is nutrition, exercise, diabetes, cholesterol, sleep, mindfulness and attitude.”

Know your numbers. Talk with your doctor about whether you have known risk factors, like being overweight, having high blood sugar or cholesterol, getting too little exercise or sleep, or eating a poor diet.  Your genes can also play a part in determining whether you will get Alzheimer’s, but even that risk factor many not produce an inevitable result.

Exercise. Exercising regularly is probably the most important move we can make, followed by treating metabolic illnesses, like hypertension or diabetes, and getting high-quality sleep every night.

Better diet. You can follow the so-called MIND diet, an acronym for the Mediterranean Intervention for Neurodegenerative Delay, which combines two popular diets that both recommend eating more leafy greens, olive oil, berries, nuts and fish, and reducing your intake of butter, red meat and cheese. You should also look at your Vitamin D level, because very low levels have recently been linked to increased risk of dementia.

Good sleep. Too little sleep is a risk factor for dementia. While many people sleep less as they get older, watch your sleep hygiene. Keep your bedroom cool and dark, don’t use electronics in the hour before bed and avoid caffeine late in the day. All of these tips can help you rest for longer. However, research shows that too much sleep is also connected to a higher risk of cognitive decline and early death.

Sudoku is great but… Many say that doing crossword puzzles can help stave off dementia. There is some evidence that puzzles, computer use, arts and crafts, music and continuing education may help protect against Alzheimer’s. Deeper social connections may also decrease your risk of cognitive decline. However, this evidence isn’t as indicative as the case for eating well and exercising, losing weight, treating your high blood pressure and lowering your cholesterol.

Jump in the sauna. A 2016 research paper by Tanjanina Laukkanen of the Institute of Public Health and Nutrition at the University of Eastern Finland reported that sauna use is inversely associated with dementia and Alzheimer’s. In a study of 2,315 men, the study found that the more saunas taken per week, the lower the risk.

“I think the important explanation is that there are quite similar risk factors for memory diseases and cardiac diseases,” says Laukkanen. “It’s been shown that sauna use may decrease blood pressure and have a positive effect on vascular functions.”

Saunas are a national pastime in Finland, so there may be other factors at play. Laukkanen also warns that people with heart disease or low blood pressure should avoid saunas. However, it’s nice to know that a regular steam is another lifestyle change that helps to lower your risk of getting Alzheimer’s disease. Who knew?

Reference: Considerable (Dec. 26, 2019) “6 steps you can take to cut your dementia risk”

 

What Common Prescription Drugs Might Increase Dementia Risk?

The Mayo Clinic tells us that habits and traits familiar to many Americans appear to contribute to occurrences of dementia or Alzheimer’s Disease: smoking, vascular risk factors, including high blood pressure, high cholesterol and diabetes. The typical American diet. But there is some evidence that some common medications may also boost the risk of dementia and Alzheimer’s. Consider anticholinergics. They are a type of medication that blocks the action of acetylcholine, a chemical messenger in the brain that help drive breathing, digestion, urination and other functions, explains Considerable’s recent article entitled “These common prescription drugs might boost your dementia risk.”

These include drugs for depression (like Paxil), psychosis (like Thorazine), Parkinson’s disease (such as Cogentin) and bladder disorders (such as Ditropan).

The study found a nearly 50% increase in chances of dementia among people who received more than 1,095 daily doses of these drugs within a 10-year period— equivalent to a senior taking a strong anticholinergic medication daily for at least three years.

The research, which was published in JAMA Internal Medicine, the University of Nottingham study tracked 284,343 patients age 55 and older between 2004 and 2016.

The researchers analyzed total standardized daily doses (TSDDs) of anticholinergic drugs during that time period.

The University of Nottingham researchers identified each adult’s anticholinergic exposure and saw that the most frequently prescribed anticholinergic drugs were antidepressants, drugs to treat vertigo, motion sickness or vomiting and an overactive bladder.

However, there were some other anticholinergic antihistamines, and gastrointestinal drugs that did not show a connection to a higher incidence of dementia, the researchers said.

While the study shows a correlation between these specific anticholinergic drugs and increased dementia odds, the researchers cautioned that seniors should not discontinue taking any medications without talking with their physician.

Reference: Considerable (Feb. 21, 2020) “These common prescription drugs might boost your dementia risk”

 

C19 UPDATE: Keeping Ourselves and Our Elderly Loved Ones Safer

We have all been warned that our elderly loved ones are at heightened risk during the coronavirus pandemic. Not only are they weaker, but they may live in concentrated senior communities and have underlying health concerns. If you are a caregiver for someone in this high-risk population, here are some tips from Dr. Alicia Arbaje, who specializes in internal medicine and geriatrics at Johns Hopkins.

  1. Keep Yourself Well
    Be sure to follow all the guidelines and precautions about social distancing, hand washing, and cleaning to keep yourself well.
  2. Limit In-Person Visits
    It may be emotionally challenging but keeping in-person visits to a minimum is the best way to reduce the risk of infection. When you can’t be there in-person, use technology to stay in touch. Teach your older loved ones how to use video chat applications. Remember to add captions to your videos if they are hearing-impaired. Also, encourage others to telephone or send cards or notes as well.
  3. Be Creative About Home-Based Projects
    Now may be a great time to encourage your loved ones to record their personal stories, organize family photos or reconnect with old friends online.
  4. Decide on a Plan
    Discuss now your emergency response plan. Who will be the emergency contact? Do you know where the estate planning documents are and can you quickly access them, especially health care directives?

If you or your loved one do not have an updated will or trust and health care documents, please reach out to our office. We can help get planning in place quickly and easily and are even offering virtual meetings now to keep everyone safe.

What if your elder loved one starts to develop symptoms?

If you or your loved one learn that you might have been exposed to someone diagnosed with COVID-19 or if anyone in your household develops symptoms such as cough, fever or shortness of breath, call your family doctor, nurse helpline or urgent care facility. For a medical emergency such as severe shortness of breath or high fever, call 911.

Resource: Johns Hopkins Medicine, Coronavirus and COVID-19: Caregiving for the Elderly, https://www.hopkinsmedicine.org/health/conditions-and-diseases/coronavirus/coronavirus-caregiving-for-the-elderly

Hey Dad, Can I Get an Advance on My Inheritance?

Most parents I talk to want to divide their estate equally among their heirs, but sometimes things just don’t work out that way. That’s especially the case when one child needs more help than another. Therefore, what parents will often do is count the gifts they make during their lifetime as advances against a child’s future inheritance. This doesn’t always go smoothly, says the article “Lifetime advances of inheritances” from California’s Lake County News.

Equalizing distributions to some children to offset any substantial distributions made to offset the total distribution can lead to trouble, if certain legal requirements are not addressed. Virginia law doesn’t spell out a lot of rules on this. Parents can decide how to equalize their estates (or not) in their estate planning documents. Some states are more specific, howver. In California, for instance, there are three different approaches in which lifetime distributions are counted as advances of inheritances at death:

  1. The instrument provides for deduction of the lifetime gift from the at-death transfer
  2. The transferor declares in a contemporaneous writing that the gift is in satisfaction of the at-death transfer or that its value is to be deducted from the value of the at-death transfer and
  3. The transferee acknowledges in writing that the gift is in satisfaction of the at-death transfer or that its value is to be deducted from the value at the at-death transfer.

In the first example, the decedent’s will, or trust expressly says that lifetime distributions are to be counted against the future inheritance. This could state a specific dollar amount or may refer to a ledger that tracks ongoing lifetime gifting. The ledger approach is often used when a child is dependent upon a parent for ongoing support, paying off school loans or paying a mortgage.

The second example, which involves a written record of the gift, was the subject of a recent state appellate court decision. The deceased father kept track of all monetary gifts to his children. The father’s bookkeeper maintained a spreadsheet and was told by the father that the list was important, so that the payments would be deducted from inheritances. At the father’s death, the son had received more than $450,000 more than the daughter. The son contested the daughter’s request for equalizing the inheritance based on the ledger. The appellate court stated that the ledger met the requirements to serve as a contemporaneous written record. The court also found that the permanent ledger was property authenticated and entered into evidence, based on the daughter’s testimony that she found the ledger among her father’s papers and that it was written in her father’s handwriting.

In the third scenario, where there was a written acknowledgment by the person receiving the “advance” that the money was in satisfaction of the at-death transfer, the court found that the requirement was satisfied and the son had acknowledged that the assets given to him were advances on his inheritance.

A better scenario, and one that would have prevented some, if not all, of the litigation described above, would be to have estate planning documents that clearly state whether any disproportionate lifetime gifting to beneficiaries is to be offset with equalizing payments to the other beneficiaries at death. And don’t overlook how insurance or IRA disgnations will impact your overall distribution plan. Your estate planning attorney will be able to create the best plan if your heirs need financial support, following the laws of your state.

Reference: Lake County News (March 14, 2020) “Lifetime advances of inheritances”

 

Charles Nance Richmond Virginia Attorney

C19 UPDATE: The CARES Act Essentials for Individual Taxpayers and Small Business Owners

The recently enacted CARES Act is designed to provide emergency relief to Americans experiencing economic hardships resulting from the COVID-19 Virus.

For Individuals

  • One-time direct deposits of up to $1,200 for individual taxpayers with incomes up to $75,000 and $2,400 for joint filers with incomes up to $150,000. An additional $500 for each eligible child can also
  • Extended unemployment insurance for the self-employed, independent contractors, and gig economy workers–such as Uber drivers.
  • Rules and penalties for some retirement fund distributions and loans have been adjusted or delayed.

For Small Businesses

  • Employers can defer the payment of their portion of 2020 payroll taxes until 2021 and 2022.
  • $350 billion is dedicated to small business relief to prevent layoffs and business closures and includes:
  • Paycheck protection program for up to 8 weeks of payroll coverage.
  • Economic Injury Disaster Loans and Loan Advance federal disaster loans for businesses, private non-profits, homeowners.
  • The 80% rule from the the Tax Cuts and Jobs Act (TCJA) net operating loss is lifted, and losses can now be carried back five years.
  • The excess loss limitation (ELL) rules for pass-through entities are suspended.
  • The limitation on the deduction for business interest expense increased from 30% to 50% for tax years 2019 and 2020.
  • $150 billion is dedicated to state and local governments that are beginning to introduce their own business grant and loan programs in states like Florida, Michigan, and New York. Find specific provisions for your state through your governor’s website; see a full list on the National Governors Association site.

Read more about disaster relief efforts under way on our website.

Resources: Read the full text of the CARES Act: https://assets.documentcloud.org/documents/20059055/final-final-cares-act.pdf

Reference for summary of highlights: https://www.forbes.com/sites/leonlabrecque/2020/03/29/the-cares-act-has-passed-here-are-the-highlights/#257f7e6a68cd

Loss of Stretch IRA is Not Such a Big Deal

Yes, the SECURE Act takes away the use of the stretch IRA, which is the ability to pass an IRA down to a child or grandchild and have them take out withdrawals over their lifetime as part of your estate planning. No big deal, says the article “No stretch IRA? No problem” from Investment News. Here’s why.

Only the biggest IRAs are affected. How many IRAs actually make it to the beneficiary that are large enough to justify stretched payouts? According to the Treasury Department, only about 20% of all individuals who were required to take the Required Minimum Distribution (RMD) actually stick to the schedule and take that amount out. Four out of five people who own IRAs take much more money than the minimum. This reduces the amount in the account that is left for their beneficiaries and reducing and even eliminating the possibility of heirs using the stretch IRA option.

There’s no change to spousal beneficiaries. Most married people leave their IRAs to their spouses, and surviving spouses are exempt from the new stretch restrictions. Spouses who inherit IRAs and other assets still have the same options they had before the SECURE Act was passed. Financially savvy spouses (or those with good advisors) will do a spousal rollover and further delay the “no stretch problem” for another generation. By doing this, they postpone the start of the ten-year payout rule. If they use more of the IRA during their own lifetime, again, there’s not that much to worry about.

Most beneficiaries don’t stretch. Not at all. Windfalls usually don’t last very long. How many beneficiaries wait patiently for 30, 40 or 50 years to deplete an inherited IRA? Not many. For many beneficiaries, the new ten-year rule might actually be more realistic. For the smaller IRAs, it may be more logical to empty the account with a lump-sum distribution, especially if it is distributed among several beneficiaries in low tax brackets. However, if the IRA is a Roth, hang on to it and let it grow, tax-free, for as long as possible.

Most beneficiaries are in lower tax brackets. People like to leave their IRAs to their grandchildren, but most grandchildren, under the SECURE Act, will not be able to stretch IRA payouts over their lifetime. If the grandchild is a minor, then the kiddie tax emerges, and the child might have to pay taxes on any withdrawals at their parent’s tax rates. Do your homework with your estate planning attorney.

While the inherited payout is ten years, the tax hit to younger, usually lower income earners, won’t be as bad. However, the kiddie tax could lead to a huge tax hit for your adult children and grandchildren. Another option is naming multiple grandchildren. More beneficiaries will at least stretch out the tax hit over multiple tax returns.

Speak with your estate planning attorney about what needs to change on your estate plan, in light of the new restrictions created by the SECURE Act, which takes away the ability to pass an IRA down to a child or grandchild and have them take out withdrawals over their lifetime. There are strategies that they can discuss with you to minimize tax liability and manage your family’s inheritance.

Reference: Investment News (March 2, 2020) “No stretch IRA? No problem”

 

How to Plan for Nursing Home Care for Parents

The median annual cost of long term care in a skilled nursing facility in Richmond, Virginia is $99,648, according to a cost of care survey by long-term care insurance company Genworth. You can’t expect Medicare to cover it. Medicaid coverage doesn’t start in, for a single person, until the value of your assets is reduced to $2,000, says The Columbia [S.C.] Regional Business Report’s recent article entitled “Nursing home care requires advance planning.”

Many people don’t know that for a single person to qualify for Medicaid, your assets have to be spent down to almost nothing. Planning for long-term care includes both insurance and financial planning. However, the long-term care insurance options are limited. There are only a few providers remaining in the industry, but it’s worth the effort to see what they have.

Long-term care insurance is a plan that lets you pay a premium in exchange for coverage for a stay in an assisted care facility, full-scale care facility, or even at home. Without a policy, those financial costs can be catastrophic.

Because the cost of long-term care is so high, begin planning for your later years as soon as possible. It’s likely that in the next few decades, as the baby boomer generation requires long-term or assisted living care, paying for it will be a crisis.

For people who are starting to save for future care needs, financial planners earmark 10% to 15% of your income. If you’re older and see that you don’t have enough money saved, they advise that you put away at least 20% of your income. IRS guidelines include catch-up provisions for people older than 50 for IRAs and 401(k)s.

Some group insurance plans offer long-term care options. There are some additions for life insurance policies that could extend living benefits for elder care. You should plan on paying for three years of long-term care.

How to pay for skilled care is just one of the issues a family may face in later years. You also should have a will, advance directives, medical or health care power of attorney and durable power of attorney in place to help your family with difficult decisions. If you are concerended about the cost of long term care in a skilled nursing facility, you need more than a simple will. Remember to make sure the beneficiaries on your insurance plans are up-to-date, in consultation with your estate planning attorney or elder law attorney.

Talk to an attorney about late-life concerns.

It’s never too soon to develop some kind of plan that can ease the financial burden for you and your family.

Reference:  Columbia Regional Business Report (March 10, 2020) “Nursing home care requires advance planning”

 

C19 UPDATE: Beware the Rush to Make Your Own Will Online

With COVID-19 affecting more and more Americans, people across the country are scrambling to set up online wills and end-of-life directives. Over the last two weeks, online will companies have seen an explosion in users, according  to the article, “Coronavirus Pandemic Triggers Rush by Americans to Make Online Wills,” published by CNBC.com.  However, as online wills grow in popularity, we and other estate and elder lawyers increasingly caution against using them, for several reasons.

  • Will the documents be legally valid? Since most of these do-it-yourself wills are created and executed without any oversight from an attorney, a larger number of wills — including online wills — may not be executed in compliance with the proper will formalities, and that could end up invalidating the will.
  • Do you fully understand the questions and consequences of your answers? There are many nuances in estate planning, as well as a good bit of legal jargon. Confusion over the question or the consequences of a decision can result in costly mistakes … and could even mean your will won’t hold up to a challenge in court.
  • What about asset protection? There is more to estate planning than just giving your stuff away after you die. How you transfer ownership of your assets can mean the difference between a protected inheritance and legacy for many generations … or the squandering or loss of a person’s life’s work within a few years … or months … after they pass away.
  • Is there any planning for long-term care? It’s estimated that more than half of people turning age 65 who will need some type of long-term care services in their lifetimes. Proper estate planning should balance the possibility that you will need assistance paying for nursing home care (Medicaid), with other estate planning goals. Mistakes in this area could disqualify you from receiving assistance should you need it.

As COVID-19 keeps people home, meeting with a lawyer to create a will could not be easier. Under Governor Northam’s executive orders, a lawyer’s services have been deemed “essential,” so long as we use apppropriate social distancing. We are doing everything we can to make our services as easy and convenient for you as possible, including meeting over telephone, online video services such as Zoom Meeting, and other innovative ways to ensure you get the planning you need while complying with all safety measures. We are pushing the Governor’s office for relief from traditional rules that a will has to be witnesses “in person”.  There is no change yet, but we’re working on it.

Resource: Coronavirus Pandemic Triggers Rush by Americans to Make Online Wills, https://www.cnbc.com/2020/03/25/coronavirus-pandemic-triggers-rush-by-americans-to-make-online-wills.html

 

Aretha Franklin’s Niece Resign as Executor

Sabrina Owens, the niece of soul singer Aretha Franklin, recently announced her resignation as executor in probate court filings, stating: “Given my aunt’s love of family and desire for privacy, this is not what she would have wanted for us, nor is it what I want … I hope that my departure will allow the business of the estate to continue, calm the rift in my family and allow me to return to my personal life.”

Rolling Stone’s recent article entitled “Aretha Franklin’s Niece Resigns as Estate Executor” reminds us that Franklin died in August of 2018, and, because she reportedly was intestate, Michigan law states that her assets are to be distributed equally among her four sons. Her sons agreed upon Owens as executor, but new family politics came up last May after three wills allegedly authored by Franklin were discovered in a notebook under some couch cushions.

“That is when relationships began to deteriorate with the heirs,” Owens wrote of the discovery of the wills. She added that she accepted the executor role on the condition that “no fractured relationships develop within the family” and that the family “did not end up in court disputes over disagreements with the Estate.” Both, Owens wrote, have happened.

Owens’ resignation, however, will not become effective immediately. Instead, she will keep serving as executor for the immediate future. It’s also unknown who will be appointed executor after she does leave.

Franklin’s youngest son, Kecalf, has attempted to gain control, since one of the documents from 2014 appears to state that Franklin wanted him to take on that role (in August, a probate judge approved Kecalf’s request to have a handwriting expert analyze the documents that were found).

Although Kecalf has the support of his brother Edward, his plan is opposed by Franklin’s third son, Ted White, as well as the guardian for her eldest son, Clarence, who has special needs.

A hearing on the future of the estate is scheduled for early this spring.

The ongoing battles surrounding Franklin’s estate continue, as it gets ready for two significant posthumous projects: one is a biopic movie starring Jennifer Hudson, “Respect.” The other is an installment in the biographical anthology series, “Genius,” with Cynthia Erivo playing Franklin (both are currently in production).

In the last year, Owens, as executor, oversaw the release of the documentary, ‘Amazing Grace,” while at the same time managing the estate’s complicated finances, including $6.3 million owed to the IRS in back taxes.

Reference: Rolling Stone (Feb. 3, 2020) “Aretha Franklin’s Niece Resigns as Estate Executor”

 

Subscribe!

Watch Our Online Masterclass!