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Buyer Beware: The Hidden Dangers of DIY Estate Planning – Part 1

Buyer Beware: The Hidden Dangers of DIY Estate Planning—Part 1 

Do a Google search for “online estate planning documents,” and you’ll find dozens of different websites. From LegalZoom® and Willing.com to Rocket Lawyer® and Willandtrust.com, these do-it-yourself (DIY) planning services might seem like an enticing bargain.

The sites let you complete and print out just about any kind of planning document you can think of—wills, trusts, healthcare directives, and/or power of attorney—in just a matter of minutes. And the documents are typically quite inexpensive, with many sites offering “simple” wills for $50 or less.

At first glance, such DIY planning documents might appear to be a quick and inexpensive way to finally cross estate planning off your life’s lengthy to-do list. You know planning for your death and potential incapacity is important, but you just never seem to have time to take care of it.

And even if you realize your DIY plan won’t be as good as those prepared by a lawyer, at least it can serve as a temporary solution, until you can find time to meet with an attorney to upgrade. These forms may not be perfect, you reason, but at least they’re better than having no plan at all.

However, relying on DIY planning documents can actually be worse than having no plan at all—and here’s why:

An inconvenient truth

Creating a plan using online documents, can give you a false sense of security—you think you’ve got planning covered, when you most certainly do not. DIY plans may even lead you to believe that you no longer need to worry about estate planning, causing you to put it off until it’s too late.

In this way, relying on DIY planning documents is one of the most dangerous choices you can make. In the end, such generic forms could end up costing your family even more money and heartache than if you’d never gotten around to doing any planning at all.

At least with no plan at all, planning would likely remain at the front of your mind, where it rightfully belongs until it’s handled properly.

Planning to fail

Many people don’t realize that estate planning involves much more than just filling out legal forms. Without a thorough understanding of how the legal process works upon your death or incapacity, you’ll likely make serious mistakes when creating a DIY plan. Even worse, these mistakes won’t be discovered until it’s too late—and the loved ones you were trying to protect will be the very ones forced to clean up your mess.

The whole purpose of estate planning is to keep your family out of court and out of conflict in the event of your death or incapacity. Yet, as cheap online estate planning services become more and more popular, millions of people are learning—or will soon learn—that taking the DIY route can not only fail to achieve this purpose, it can make the court cases and family conflicts far worse and more expensive.

One size does not fit all

Online planning documents may appear to save you time and money, but keep in mind, just because you created “legal” documents doesn’t mean they will actually work when you need them. Indeed, if you read the fine print of most DIY planning websites, you’ll find numerous disclaimers pointing out that their documents are “no substitute” for the advice of a lawyer.

Some disclaimers warn that these documents are not even guaranteed to be “correct, complete, or up to date.” These facts should be a huge red flag, but it’s just one part of the problem.

This is an excerpt from LegalZoom’s disclaimer:

 LegalZoom’s document service also includes a review of your answers for completeness, spelling and grammar, as well as internal consistency of names, addresses and the like. At no time do we review your answers for legal sufficiency, draw legal conclusions, provide legal advice or apply the law to the facts of your particular situation. LegalZoom and its services are not a substitute for the advice of an attorney. Although LegalZoom takes every reasonable effort to ensure that the information on our website and documents are up-to-date and legally sufficient, the legal information on this site is not legal advice and is not guaranteed to be correct, complete or up-to-date. Because the law changes rapidly, is different from jurisdiction to jurisdiction, and is also subject to varying interpretations by different courts and certain government and administrative bodies, LegalZoom cannot guarantee that all the information on the site is completely current. The law is a personal matter, and no general information or legal tool like the kind LegalZoom provides can fit every circumstance.

Even if the forms are 100% correct and up-to-date, there are still many potential pitfalls that can cause the documents to not work as intended—or fail all together. And without an attorney to advise you, you won’t have any idea of what you should watch out for.

Estate planning is definitely not a one-size-fits-all kind of deal. Even if you think your particular planning situation is simple, that turns out to almost never be the case. To demonstrate just how complicated the planning process can be, here are 4 common complications you’re likely to encounter with DIY plans.

1. Improper execution

To be considered legally valid, some planning documents must be executed (i.e. signed and witnessed or notarized) following very strict legal procedures. For example, many states require that you and every witness to your will must sign it in the presence of one another. If your DIY will doesn’t mention that (or you don’t read the fine print) and you fail to follow this procedure, the document can be worthless.

2. Not adhering to state law

State laws are also very specific about who can serve in certain roles like trustee, executor, or financial power of attorney. In some states, for instance, the executor of your will must either be a family member or an in-law, and if not, the person must live in your state. If your chosen executor doesn’t meet those requirements, he or she cannot serve.

3. Unforeseen conflict

Family dynamics can be complex. That is especially true for blended families, where spouses have children from previous relationships. A DIY service cannot help you consider all the potential areas where conflict might arise among your family members and help you plan ahead of time to avoid it. When done right, the estate planning process is actually a huge opportunity to build new connections within your family, and we’re specifically trained to help you with that. In fact, that’s our special sauce.

We’ve all seen the impact of families ripped apart due to poor planning. Yet, every day we see families brought closer together as a result of handling these matters the right way. We want that for your family.

4. Thinking a will is enough

Lots of people believe that creating a will is sufficient to handle all of their planning needs. But this is rarely the case. A will, for example, does nothing in the event of your incapacity, for which you would also need a healthcare directive and/or a living will, plus a durable financial power of attorney.

Furthermore, because a will requires probate, it does nothing to keep your loved ones out of court upon your death. And if you have minor children, relying on a will alone could leave your kids vulnerable to being taken out of your home and into the care of strangers.

Don’t do it yourself

 

Given all of these potential dangers, DIY estate plans are a disaster waiting to happen. And as we’ll see next week, perhaps the worst consequence of trying to handle estate planning on your own is the potentially tragic impact it can have on the people you love most of all—your children.

 

Next week, we’ll continue with part two in this series on the hidden dangers of DIY estate planning.

If you’ve yet to create a plan, have DIY documents you aren’t sure about, or have a plan created with another lawyer’s help that hasn’t been reviewed in more than a year, meet with us so that we can review your documents. Contact us today to learn more.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents, she ensures you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why our law firm offers a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Call us today to schedule a Planning Session. Mention this article to find out how to get this $500 session at no charge.

 

Lifetime Asset Protection Trusts: Airtight Asset Protection For Your Child’s Inheritance—Part 2  

In Part 1 of this series, we discussed a unique planning tool known as a Lifetime Asset Protection Trust. Here we explain the benefits of these trusts in further detail. 

If you’re planning to leave your children an inheritance of any amount, you likely want to do everything you can to protect what you leave behind from being lost or squandered.

While most lawyers will advise you to distribute the assets you’re leaving to your kids outright at specific ages and stages, based on when you think they will be mature enough to handle an inheritance, there is a much better choice for safeguarding your family’s money.

A Lifetime Asset Protection Trust is a unique estate planning vehicle that’s specifically designed to protect your children’s inheritance from unfortunate life events such as divorce, debt, illness, and accidents. At the same time, you can give your children the ability to access and invest their inheritance, while retaining airtight asset protection for their entire lives.

Last week, we discussed how Lifetime Asset Protection Trusts differ from the standard way that most revocable living trusts and wills distribute assets to beneficiaries. Today, we’ll look at the Trustee’s role in the process and how these unique trusts can teach your kids to manage and grow their inheritance, so it can support your children to become wealth creators and enrich future generations.

Total discretion for the Trustee offers airtight asset protection

Most trusts require the Trustee to distribute assets to beneficiaries in a structured way, such as at certain ages or stages. Other times, a Trustee is required to distribute assets only for specific purposes, such as for the beneficiary’s “health, education, maintenance, and support,” also known as the “HEMS” standard.

In contrast, a Lifetime Asset Protection Trust gives the Trustee full discretion on whether to make distributions or not. The Trust leaves the decision of whether to release trust assets totally up to the Trustee. The Trustee has full authority to determine how and when the assets should be released based on the beneficiary’s needs and the circumstances going on in his or her life at the time.

For example, if your child was in the process of getting divorced or in the middle of a lawsuit, the Trustee would refuse to distribute any funds. Therefore, the Trust assets remain shielded from a future ex-spouse or a potential judgment creditor, should your child be ordered to pay damages resulting from a lawsuit.

Becuase the Trustee controls access to the inheritance, those assets are not only protected from outside threats like ex-spouses and creditors, but from your child’s own poor judgment, as well. For example, if your child develops a substance abuse or gambling problem, the Trustee could withhold distributions until he or she receives the appropriate treatment.

A lifetime of guidance and support

Given that distributions from a Lifetime Asset Protection Trust are 100% up to the Trustee, you might worry about the Trustee’s ability to know when to make distributions to your child and when to withhold them. Granting such power is vital for asset protection, but it also puts a lot of pressure on the Trustee. So you probably don’t want your named Trustee making these decisions in a vacuum.

To address this issue, you can write up guidelines to the Trustee, providing the Trustee with direction about how you’d like the trust assets to be used for your beneficiaries. This ensures the Trustee is aware of your values and wishes when making distributions, rather than simply guessing what you would’ve wanted, which often leads to problems down the road.

In fact, many of our clients add guidelines describing how they’d choose to make distributions in up to 10 different scenarios. These scenarios might involve the purchase of a home, a wedding, the start of a business, and/or travel. Some clients choose to provide guidelines around how they would make investment decisions, as well. This is something we can support you with if you decide to use a Lifetime Asset Protection Trust.

An educational opportunity

Beyond these benefits, a Lifetime Asset Protection Trust can also be set up to give your child hands-on experience managing financial matters, like investing, running a business, and charitable giving. And he or she will learn how to do these things with support from the Trustee you’ve chosen to guide them.

This is accomplished by adding provisions to the trust that allow your child to become a Co-Trustee at a predetermined age. Serving alongside the original Trustee, your child will have the opportunity to invest and manage the trust assets under the supervision and tutelage of a trusted mentor.

You can even allow your child to become Sole Trustee later in life, once he or she has gained enough experience and is ready to take full control. As Sole Trustee, your child would be able to resign and replace themselves with an independent trustee, if necessary, for continued asset protection.

Future generations


Regardless of whether or not your child becomes Co-Trustee or Sole Trustee, a Lifetime Asset Protection Trust gives you the opportunity to turn your child’s inheritance into a teaching tool.

Do you want to give your child the ability to leave trust assets to a surviving spouse or a charity upon their death? Or would you prefer that the assets are only distributed to his or her biological or adopted children? You might even want your child to create their own Lifetime Asset Protection Trust for their heirs.

We offer you a wide variety of options that can be tailored to fit your particular values and family dynamics. Be sure to ask us which options might be best for your particular situation.

Is a Lifetime Asset Protection Trust right for you?


Of course, Lifetime Asset Protection Trusts aren’t for everyone. If your kids are going to spend most of their inheritance on everyday expenses and consumables, they probably don’t make much sense. But if you want the assets you are leaving behind to be invested and grown over the long term, a Lifetime Asset Protection Trust can be immensely valuable.

Meet with us to see if a Lifetime Asset Protection Trust is the right option for your family.

In the end, it’s not about how much you’re leaving your loved ones that matters. It’s about ensuring that what you do pass on is there when it’s needed most and put to the best use possible. Schedule a Planning Session today to learn more.

This article is a service of the Law Firm of Myrna Serrano Setty. We don’t just draft documents, we help you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Call our office today to schedule a Planning Session and mention this article to find out how to get this $500 session at no charge.

Lifetime Asset Protection Trusts: Airtight Asset Protection For Your Child’s Inheritance- Part 1

If you’re a parent, you probably want to leave your children an inheritance. But without taking the proper precautions, the wealth you pass could accidentally be lost or squandered. In some instances, an inheritance can even wind up hurting your kids instead of helping them.

Creating a will or a revocable living trust offers some protection, but in most cases, you’ll be guided to distribute assets through your will or trust to your children at specific ages and stages, such as one-third at age 25, half the balance at 30, and the rest at 35.

If you’ve created estate planning documents, check to see if this is how your will or trust leaves assets to your children. If so, you may not have been told about another option that can give your children access, control, and airtight asset protection for whatever assets they inherit from you.

We always offer parents the option of creating a Lifetime Asset Protection Trust for your children’s inheritance. A Lifetime Asset Protection Trust safeguards the inheritance from being lost to common life events, such as divorce, serious illness, lawsuits, or even bankruptcy.

But that’s not all they do.

Indeed, the best part of these trusts is that they offer you—and your kids—the best of both worlds: airtight asset protection AND use and control of the inheritance. What’s more, you can even use the trust to incentivize your children to invest and grow their inheritance.

Not just for the super rich

Lifetime Asset Protection Trusts are not just for the super wealthy. Indeed, these protective trusts are even more useful if you’re leaving a relatively modest inheritance because they can be used to educate your children about how to grow your family wealth, instead of quickly blowing through it.

And without such guidance, most people blow through their inheritance very quickly. In fact, one study found that, on average, an inheritance is totally gone in about five years due to debt and poor investment. Another study found that one-third of people who receive an inheritance actually had a negative savings within just two years.

Also, the smaller the inheritance, the more at risk it is of getting wiped out by a single unfortunate event like a medical emergency.

Regardless of how much financial wealth you have (or don’t have), if you plan to leave your kids anything at all, you should do everything you can to make it more likely that they grow what’s left behind, instead of losing it. This way, your resources can have a truly beneficial effect on their lives—and even the lives of future generations.

A Lifetime Asset Protection Trust can achieve each of those goals and so much more.

Not all trusts are created equal

Most lawyers will advise you to put the assets you’re leaving your kids in a revocable living trust—and this is the right move. But as mentioned earlier, most lawyers would structure the trust to distribute those assets outright to your children at certain ages or stages.

And if you’ve used an online do-it-yourself will or trust-preparation service like LegalZoom®, Rocket Lawyer,® or any of the newer options frequently coming online now, you will most likely be offered only two options: outright distribution of the entire inheritance to your kids when you die, or partial distributions when they reach specific ages and stages as described above.

Either of those options leaves their inheritance—and your hard-earned and well-saved money—at risk. Indeed, once assets pass into your child’s name, all of the protection previously offered by your trust disappears.

For example, say your son racked up debt while in college, which can sometimes happen. If he were to receive one-third of his inheritance at age 25, creditors could take his inheritance if it’s paid to him in an outright distribution.

The same thing would be true if your daughter gets a divorce after receiving her inheritance, only it would be her soon-to-be ex-spouse who would claim a right to the funds in a divorce settlement. And despite what you may have heard about an inheritance remaining separate property, once it’s in your child’s hands, outright and unprotected, those assets are at risk.

There’s just no way to foresee what the future has in store for your kids—these kind of events happen to families every day. And that’s not even taking into consideration that your kids might simply blow through the money and spend it all on unnecessary luxuries.

Airtight asset protection – and easy access

Lifetime Asset Protection Trusts are specifically designed to prevent your hard-earned assets from being wiped out by such risks. And at the same time, your children will still be able to use and invest the funds held in trust as needed.

For example, even though the assets are held in trust, your kids would be able to invest those funds in things like stocks, a business, or real estate, provided they do so in the name of the trust. Plus, if your child needs to pull money out to pay for college, a new home, or medical bills, they can do that by asking a Trustee—who’s chosen by you to oversee the money—for a distribution.

Or, as will cover next week, you may even allow your child to become Sole Trustee at some point in the future, allowing him or her to make decisions about the trust’s management.

Obviously, creating a trust like this requires significant understanding of how to properly draft the trust, so don’t attempt to do create one without our guidance. And as you’ll see next week, Lifetime Asset Protection Trusts offer additional benefits that can be used to teach your kids how to invest and grow their inheritance, so that the assets you leave behind can be passed on to their children and beyond.

Next week, we’ll continue with part two in this series on Lifetime Asset Protection Trusts.

We can guide you to make informed, educated, and empowered choices to protect yourself and the ones you love most. Contact us today to get started with a Planning Session.

This article is a service of the Law Firm of Myrna Serrano Setty, P.A. We don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session,  during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love.

Call our office today to schedule a  Planning Session. Mention this article to learn how to get this $500 session at no charge.

Understanding Your Life Insurance Settlement Options

After a life insurance policy holder dies, the way in which proceeds from a life insurance policy are paid to the beneficiary (or beneficiaries) is known as the settlement option. And you might be surprised to learn that there are a variety of settlement options available besides the most common method—a lump-sum payout.

Depending on the life insurance company and policy, these options may be selected by the policy holder ahead of time or chosen by the beneficiary upon the insured’s death. Whether you’re the policy holder or beneficiary, it’s important that you understand these options in order to maximize the policy’s financial benefit and reduce potential taxes.

Here are six popular life-insurance settlement options:

#1 Lump sum

The beneficiary receives the full death benefit all at once in a single payment.

#2 Interest Income

The insurance company retains the original death benefit and makes interest-only payments to the beneficiary. The original benefit may be paid in full to the beneficiary after a certain time period or to a contingent (alternate) beneficiary upon the primary beneficiary’s death.

#3 Fixed Amount

The beneficiary is paid a fixed amount on a regular basis until the total death benefit (plus any interest accrued) has been paid out. If the beneficiary dies before all of the funds have been paid, a contingent beneficiary may receive the remaining amount.

#4 Fixed Period

The beneficiary receives regular payments of both principal and interest over a fixed period of time, typically up to 30 years. If the beneficiary dies before the time period is over, the remaining balance may pass to a contingent beneficiary.

#5 Life Income

The beneficiary receives guaranteed payments over the remainder of his or her life. The amount of the payments is determined by the insurance company and based on the beneficiary’s age and gender. The payments continue until the beneficiary dies. If he or she dies earlier than expected, the insurance company keeps the unpaid amount.

#6 Life Income Period Certain

Unlike the life income option above, where payments stop when the beneficiary dies, this option guarantees fixed payments for a certain time period such as 10 or 20 years. If the beneficiary dies before the term expires, a contingent beneficiary may receive the remaining payments.

What about taxes?

Life insurance payouts made in a lump sum are not subject to income taxes. With other settlement options that pay out in installments over time, the original death benefit (principal) is not taxed, but any interest that accrues IS taxed as income when it is paid to the beneficiary.

Choosing a settlement option

We can advise you on the settlement option that’s best suited for your particular needs. We can also support you in putting in place planning tools like trusts to protect the proceeds once they’re paid out. Schedule an estate Planning Session today to learn more.

A Bitter Battle Over Guardianship. Who will be Emani’s Legal Guardian?

Nipsey Hussle was an American rapper, entrepreneur, community activist and father of two young kids. He was murdered in March 2019.  In the aftermath of his murder, his family and ex-girlfriend have been locked in a bitter battle for custody of one of his young children. And as this ugly drama plays out in the courtroom and tabloids, it highlights the single-most costly estate-planning mistake a parent can make.

Hussle, 34, whose given name was Ermias Ashgedom, was gunned down outside his South Los Angeles clothing store in March. His alleged killer, Eric Holder, was arrested and indicted for murder a few days later. The rapper’s death is particularly tragic, as his debut album, Victory Lap, was recently nominated for a Grammy Award.

Yet even more tragic is what’s happening to Hussle’s kids. Because Hussle never named legal guardians, the decision of who will raise his two children—daughter Emani, 10, and son Kross, 2—is now up to the court. And this mistake is already having terrible consequences.

In addition to not naming guardians for his kids, Hussle also failed to create a will, which makes their guardianship even more contentious. Hussle’s estate is estimated to be worth $2 million, and under California law, without a will, that money is to be split equally between his two kids.

Given that both children are minors, however, they’re ineligible to access their inheritance until they reach the age of majority. This means that whomever ultimately wins guardianship of the children will likely gain control over their money as well.

Caught in the middle

Guardianship of Hussle’s son Kross, while still undecided, is currently not a source of conflict. Kross’s mother is actress Lauren London, who was Hussle’s longtime girlfriend, and  Kross had been living with London at the time of his father’s death. She petitioned the court for her son’s guardianship, and there’s little doubt she’ll get it.

Who will be awarded guardianship of Hussle’s daughter Emani, however, is far less clear.

Since the day of the shooting, Hussle’s sister, Samantha Smith, has been caring for Emani, who was living with her father when he was killed. Following Hussle’s shooting, Smith petitioned the court to obtain Emani’s guardianship. But Emani’s mother, Tanisha Foster, an old girlfriend of Hussle’s, is also seeking guardianship.

Though Foster and Hussle shared custody of Emani, at the time of the rapper’s death, Hussle’s ex had reportedly not seen the child in months. Yet Foster claims that Emani was just visiting her dad on the day he was killed and that Smith and the rest of Hussle’s family are refusing to return her.

Smith and Hussle’s family contend that Foster is unfit to raise the child due to her criminal past. Foster has a criminal record dating back to 2006, and she currently has a warrant out for her arrest after skipping a court hearing for a DUI charge.

Yet Foster claims that her criminal history is irrelevant, and that as Emani’s mother, she’s the one who should be named as guardian. She’s also claiming that Smith unlawfully took custody of her daughter on the day of Hussle’s shooting.

For now, the court is siding with Smith, ruling in May that Hussle’s sister can retain temporary custody of Emani, pending a final decision on her guardianship. That decision will likely be made in a court hearing scheduled for October.

Don’t leave your child’s life in a judge’s hand

As Hussle’s case so dramatically demonstrates, your death can strike at any time, so if you’re the parent of minor children, it’s imperative that you select and legally document long-term guardians for your kids. In fact, naming guardians for your children should be your number-one planning priority.

The fact that Hussle didn’t create a will is obviously another terrible mistake. But when it comes to your children’s lives, all the money in the world is meaningless in comparison. For this reason, we’re going to focus solely on the consequences resulting from Hussle’s failure to name legal guardians, and how easily the whole ugly mess could have been avoided.

As we’re seeing with Hussle, leaving it up to the court to name guardians for your kids
can lead to conflict, as otherwise well-meaning family members fight one another over custody. This process is not only costly, but it can be terribly traumatizing for everyone involved, especially your kids.

Hussle’s case also shows how agonizingly slow this process often is. There have already been numerous court hearings related to Emani’s custody since her father’s death in March, and though the October hearing could finally decide her fate, it’s just as likely that the decision could be postponed again. Indeed, these custody battles often drag on for years, making the lawyers wealthy, while your kids are stuck in the middle.

But the most tragic consequence of Hussle’s failure to name legal guardians is that a judge will be the one who decides who’s best suited to care for his kids.

Though we can’t be sure exactly who Hussle would have wanted to raise Emani, it’s almost certain he wouldn’t have wanted a total stranger to make that decision for him. Yet, because he didn’t take the time to document legal guardians, that’s exactly what’s going to happen.

Kids Protection Plan®

We help parents choose and legally document long-term guardians for children. The founder of the Personal Family Lawyer® program, Alexis Katz, wrote a best-selling book on the subject titled Wear Clean Underwear!: A Fast, Fun, Friendly and Essential Guide to Legal Planning for Busy Parents.

As a mother and one of the country’s leading estate-planning experts for families, Alexis was shocked to discover that the plan she created for her own daughter under the traditional planning model would have left her child at risk of being taken into the care of strangers, if anything happened to her and her husband. To address this gap in her plan, Alexis created a unique system known as the Kids Protection Plan®.

The system is a comprehensive methodology to guide you step-by step through the process of  legally documenting guardians for your kids, for the short-term, long-term, and so much more. Attorney Myrna Serrano Setty has trained to support you to put in place the Kids Protection Plan® for your minor children and/or children with special needs.

Get started immediately

Our law firm implements the Kids Protection Plan® to provide a broad array of protective measures and materials designed to provide for the well-being, care, and love of your kids no matter what happens. Meet with us to ensure that your children and family never fall victim to the same tragic circumstances as Hussle’s.

 

This article is a service of the law firm of Myrna Serrano Setty, Esq. We don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer an estate Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Call us today to schedule a Planning Session and mention this article to learn how to get this valuable session at no charge.

Call us at (813) 514-2946

Tools for Parents of Children With Special Needs

Parents want their children to be taken care of after they die. But children with disabilities have increased financial and care needs, so ensuring their long-term welfare can be tricky. Proper planning by parents is necessary to benefit the child with a disability, including an adult child, as well as assist any siblings who may be left with the caretaking responsibility.

Special Needs Trusts

The most comprehensive option to protect a loved one is to set up a special needs trust (also called a supplemental needs trust). These trusts allow beneficiaries to receive inheritances, gifts, lawsuit settlements, or other funds and yet not lose their eligibility for certain government programs, such as Medicaid and Supplemental Security Income (SSI). The trusts are drafted so that the funds will not be considered to belong to the beneficiaries in determining their eligibility for public benefits.

There are three main types of special needs trusts:

  • A first-party trust is designed to hold a beneficiary’s own assets. While the beneficiary is living, the funds in the trust are used for the beneficiary’s benefit, and when the beneficiary dies, any assets remaining in the trust are used to reimburse the government for the cost of medical care. These trusts are especially useful for beneficiaries who are receiving Medicaid, SSI or other needs-based benefits and come into large amounts of money, because the trust allows the beneficiaries to retain their benefits while still being able to use their own funds when necessary.
  • The third-party special needs trust is most often used by parents and other family members to assist a person with special needs. These trusts can hold any kind of asset imaginable belonging to the family member or other individual, including a house, stocks and bonds, and other types of investments. The third-party trust functions like a first-party special needs trust in that the assets held in the trust do not affect a beneficiary’s access to benefits and the funds can be used to pay for the beneficiary’s supplemental needs beyond those covered by government benefits. But a third-party special needs trust does not contain the “payback” provision found in first-party trusts. This means that when the beneficiary with special needs dies, any funds remaining in the trust can pass to other family members, or to charity, without having to be used to reimburse the government.
  • A pooled trust is an alternative to the first-party special needs trust.  Essentially, a charity sets up these trusts that allow beneficiaries to pool their resources with those of other trust beneficiaries for investment purposes, while still maintaining separate accounts for each beneficiary’s needs. When the beneficiary dies, the funds remaining in the account reimburse the government for care, but a portion also goes towards the non-profit organization responsible for managing the trust.

Life Insurance

Not everyone has a large chunk of money that can be left to a special needs trust, so life insurance can be an essential tool. If you’ve established a special needs trust, a life insurance policy can pay directly into it, and it does not have to go through probate or be subject to estate tax. Be sure to review the beneficiary designation to make sure it names the trust, not the child. You should make sure you have enough insurance to pay for your child’s care long after you are gone. Without proper funding, the burden of care may fall on siblings or other family members. Using a life insurance policy will also guarantee future funding for the trust while keeping the parents’ estate intact for other family members. When looking for life insurance, consider a second-to-die policy. This type of policy only pays out after the second parent dies, and it has the benefit of lower premiums than regular life insurance policies.

ABLE Account

An Achieving a Better Life Experience (ABLE) account allows people with disabilities who became disabled before they turned 26 to set aside up to $15,000 a year in tax-free savings accounts without affecting their eligibility for government benefits. This money can come from the individual with the disability or anyone else who may wish to give him money.

Created by Congress in 2014 and modeled on 529 savings plans for higher education, these accounts can be used to pay for qualifying expenses of the account beneficiary, such as the costs of treating the disability or for education, housing and health care, among other things. ABLE account programs have been rolling out on a state-by-state basis, but even if your state does not yet have its own program, many state programs allow out-of-state beneficiaries to open accounts.

Although it may be easy to set up an ABLE account, there are many hidden pitfalls associated with spending the funds in the accounts, both for the beneficiary and for her family members. In addition, ABLE accounts cannot hold more than $100,000 without jeopardizing government benefits like Medicaid and SSI. If there are funds remaining in an ABLE account upon the death of the account beneficiary, they must be first used to reimburse the government for Medicaid benefits received by the beneficiary, and then the remaining funds will have to pass through probate in order to be transferred to the beneficiary’s heirs.

Get Help With Your Plan

However you decide to provide for a child with special needs, proper planning is essential. We can help!

This article is a service of Myrna Serrano Setty, Esq. Myrna doesn’t just draft documents. We help you ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Call our office today to schedule a  Planning Session and mention this article to find out how to get this $500 session at no charge.

 

What to Look For in a Pre-Paid Funeral Plan

Prepaying for your funeral is one way to ease the burden on your family following your death and make sure your wishes are carried out. But pre-paid funeral plans come with risks, so you need to exercise care when purchasing a plan.

Funerals are expensive and can take a lot of effort to plan. To help relieve your family of some of this expense and effort, you can pay for your funeral in advance with a pre-paid funeral plan purchased through a funeral home. In addition to making things easier for your family during a difficult time, pre-paid funeral plans can also be a good way to spend down money in order to qualify for Medicaid.

However, consumers lose money every year when funeral homes go out of business before the need for the funeral arises. If the funeral home mismanages your funds, there may be no way to recover them. In addition, customers are not always entitled to refunds if they change their minds, and some funeral homes sell policies that require additional payments or that can’t be transferred if the customer moves.

If you decide to go ahead with a pre-paid funeral plan, the following are things to consider:

Shop around.

Prices among funeral homes can vary greatly, so it is a good idea to check with a few different ones before settling on the one you want. The Federal Trade Commission’s Funeral Rule requires all funeral homes to supply customers with a general price list that details prices for all possible goods or services. The rule also stipulates what kinds of misrepresentations are prohibited and explains what items consumers cannot be required to purchase, among other things.

Make sure you have a reputable funeral home.

There have been cases of unscrupulous funeral providers taking advantage of customers, so make sure you choose a funeral home with a solid reputation.

Read the contract carefully.

Before signing, it is important to know what you are agreeing to. Can you cancel the plan and get a refund? Is the plan transferable if you move to another area? Are you paying just for merchandise or for funeral services as well? If prices for funeral merchandise and services rise, will your estate be responsible for paying additional costs?

Find out where your money goes.

The pre-paid plan should provide information on what the funeral home will do with the money you pay them. Some states have protections in place to make sure the money is safeguarded, but other states offer no protections. Is the money put into a trust account? What happens to the interest income? Is there a plan if the funeral home goes out of business? What happens to any money left over?

Make sure the plan won’t affect Medicaid benefits.

If you are buying the policy as part of Medicaid planning, you must purchase an irrevocable plan, which means you can’t cancel or change it once it is bought.

Once you’ve purchased a plan, be sure to tell your family about the plan you’ve made and let them know where the documents are filed. If your family isn’t aware that you’ve obtained a plan, then the plan is useless.

 

This article is a service of Myrna Serrano Setty, Esq. Myrna doesn’t just draft documents. We help you ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Call our office today to schedule a  Planning Session and mention this article to find out how to get this $500 session at no charge.

 

Part 2: Use Estate Planning to Avoid Adult Guardianship and Elder Abuse

Part 2: Use Estate Planning to Avoid Adult Guardianship and Elder Abuse

In  Part 1 of this series, we discussed how some professional adult guardians have used their powers to abuse the seniors placed under their care. Here, we’ll discuss how seniors can use estate planning to avoid the potential abuse and other negative consequences of court-ordered guardianship.

As our senior population continues to expand, an increasing number of elder abuse cases involving professional guardians have made headlines. The New Yorker exposed one of the most shocking accounts of elder abuse by professional guardians, which took place in Nevada and saw more than 150 seniors swindled out of their life savings by a corrupt Las Vegas guardianship agency.

The Las Vegas case and others like it have shed light on a disturbing new phenomenon—individuals who seek guardianship to take control of the lives of vulnerable seniors and use their money and other assets for personal gain. Perhaps the scariest aspect of such abuse is that many seniors who fall prey to these unscrupulous guardians have loving and caring family members who are unable to protect them.

In Part 1 this series, we detailed how criminally minded individuals can take advantage of an overloaded court system and seize total control of seniors’ lives and financial assets by gaining court-ordered guardianship. Here we’ll discuss how seniors and their adult children can use proactive estate planning to prevent this from happening.

It’s important to note that any adult could face court-ordered guardianship if they become incapacitated by illness or injury, so it’s critical that every person over age 18—not just seniors—put these planning vehicles in place to prepare for a potential incapacity.

Keep your family out of court and out of conflict

Outside of the potential for abuse by professional guardians, if you become incapacitated and your family is forced into court seeking guardianship, your family is likely to endure a costly, drawn out, and emotionally taxing ordeal. Not only will the legal fees and court costs drain your estate and possibly delay your medical treatment, but if your loved ones disagree over who’s best suited to serve as your guardian, it could cause bitter conflict that could unnecessarily tear your family apart.

Furthermore, if your loved ones disagree over who should be your guardian, the court could decide that naming one of your relatives would be too disruptive to your family’s relationships and appoint a professional guardian instead—and as we’ve seen, this could open the door to potential abuse.

Planning for incapacity

The potential turmoil and expense, or even risk of abuse, from a court-ordered guardianship can be easily avoided through proactive estate planning. Upon your incapacity, an effective plan would give the individual, or individuals, of your choice immediate authority to make your medical, financial, and legal decisions, without the need for court intervention. What’s more, the plan can provide clear guidance about your wishes, so there’s no mistake about how these crucial decisions should be made during your incapacity.

There are a variety of planning tools available to grant this decision-making authority, but a will is not one of them. A will only goes into effect upon your death, and even then, it simply governs how your assets should be divided. To this end, a will does nothing to keep your family out of court and out of conflict in the event of your incapacity—nor does it help you avoid the potential for abuse by professional guardians.
Your incapacity plan shouldn’t be just a single document. It should include a variety of planning tools, including some, or all, of the following:

  • Healthcare power of attorney: An advanced directive that grants an individual of your choice the immediate legal authority to make decisions about your medical treatment in the event of your incapacity.
  • Living will: An advanced directive that provides specific guidance about how your medical decisions should be made during your incapacity.
  • Durable financial power of attorney: A planning document that grants an individual of your choice the immediate authority to make decisions related to the management of your financial and legal interests.
  • Revocable living trust: A planning document that immediately transfers control of all assets held by the trust to a person of your choosing to be used for your benefit in the event of your incapacity. The trust can include legally binding instructions for how your care should be managed and even spell out specific conditions that must be met for you to be deemed incapacitated.
  • Family/friends meeting: Even more important than all of the documents we’ve listed here, the very best protection for you and the people you love is to ensure everyone is on the same page. As part of our planning process, we’ll walk the people impacted by your plan through a meeting that explains to them the plans you’ve made, why you’ve made them, and what to do when something happens to you. With a team of people who love you, watching out for you and what matters most, the risk of abuse from a professional guardian is low.

It could be a good idea (though it’s not mandatory) to name different people for each of the roles in your planning documents. In this way, not only will you spread out the responsibility among multiple individuals, but you’ll ensure you have more than just one person invested in your care and supervision. In that case, it’s even more critical that everyone you’ve named understands the choices you’ve made, and why you have made them.

Don’t wait to put your plan in place

It’s vital to understand that these planning documents must be created well before you become incapacitated. You must be able to clearly express your wishes and consent in order for these planning strategies to be valid, as even slight levels of dementia or confusion could get them thrown out of court.

Not to mention, an unforeseen illness or injury could strike at any time, at any age, so don’t wait—contact us right away to get your incapacity plan taken care of.

It’s crucial that you regularly review and update these planning tools to keep pace with life changes, including changes in your assets or the nature of your relationships. If any of the individuals you’ve named becomes unable or unwilling to serve for whatever reason, you’ll need to revise your plan. We can help with that, too.

Retain control even if you lose control

To avoid the total loss of autonomy, family conflict, and potential for abuse that comes with a court-ordered adult guardianship, meet with us. While you can’t prevent your potential incapacity, you can use estate planning to ensure that you at least have some control over your how your life and assets will be managed if it ever does occur.

If you haven’t planned for your incapacity, schedule a Planning Session right away, so we can advise you about the proper planning vehicles to put in place. And if you already have an incapacity plan, we can review it to make sure it’s been properly set up, maintained, and updated.

This article is a service of Myrna Serrano Setty, Esq. Myrna doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Call our office today to schedule a Planning Session. Mention this article and learn how to get this $500 session at no charge.

Use Estate Planning to Avoid Adult Guardianship and Elder Abuse

Do Right By Your Pet. Be careful with your Will.

Are you a pet parent? Many people consider their pets as members of their family. So it’s only natural you’d want to make sure your pet is provided for in your estate plan, so when you die or if you become incapacitated, your beloved companion won’t end up in an animal shelter or worse.

However, under the law, pets are considered personal property. So you can’t just name them as a beneficiary in your will or trust. If you do name your pet as a beneficiary in your plan, whatever money you tried to leave to it would go to your residuary beneficiary (the individual who gets everything not specifically left to your other named beneficiaries), who would have no obligation to care for your pet.

Be careful when relying on a Will

Since you can’t name your pet as a beneficiary, you might consider leaving your pet and money for its care in your will to a trusted person who would be your pet’s new caregiver. But note that your pet’s new caregiver would not be legally obligated to use the funds properly,  even if you leave them detailed instructions for your pet’s care. In fact, your pet’s new owner could legally keep all of the money for themselves and drop off your beloved friend at the local shelter.

You’d like to think that you could trust someone to take care of your pet if you leave him or her money in your will to do so. But it’s impossible to predict what circumstances might arise in the future that could make adopting your pet impossible.

Also, a will is required to go through the court process known as probate, which can last for months, leaving your pet in limbo until probate is finalized. And remember that a will only goes into effect upon your death, so if you’re incapacitated by accident or illness, it would do nothing to protect your companion.

Pet trusts offer the ideal option

Consider a pet trust in a revocable living trust in order to be completely confident that your pet is properly taken care of and the money you leave for its care is used exactly as intended.

By creating a pet trust, in a revocable living trust, you can lay out detailed, legally binding rules for how your pet’s chosen caregiver can use the funds in the trust. And unlike a will, a pet trust does not go through probate, so it goes into effect immediately and works in cases of both your incapacity and death.

Also, a  pet trust allows you to name a trustee, who is legally bound to manage the trust’s funds and ensure your wishes for the animal’s care are carried out in the manner the trust spells out. And to provide a system of checks and balances to ensure your pet’s care, you might want to name someone other than the person you name as caregiver as trustee.

In this way, you’d have two people invested in the care of your pet and seeing that the money you leave for its care is used wisely.

Do right by your pet

To ensure your pet trust is properly created and contains all of the necessary elements, meet with Myrna Serrano Setty. With Myrna’s guidance and support, you’ll have peace of mind knowing that your beloved pet will receive the kind of love and care it deserves when you’re no longer around to offer it. Contact us today to get started.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents, she  ensures you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why Myrna offers a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love.

Call us today at (813) 514-2946 to schedule a Planning Session. Mention this article to learn how to get this valuable session at no charge.