ASSET PROTECTION- WHAT DOES THAT MEAN

A person interested in conserving their assets and conveying them to the next generation may have heard of the concept of asset protection. You will find it is not as simple as giving your assets to the kids and hoping for the best.  The tools used vary greatly and one should consider the least costly and most efficient process after evaluation of all the possible solutions.  The difficulty is that asset protection can mean a lot of different processes and legal tools, some simple and some very complex.  This is an area where expert advice is absolutely required.

The general rule is that your assets should be available to satisfy your expenses and payment of your creditors.  In order to shield assets from creditor claims, it is necessary to anticipate and plan in advance the transfer of title to assets before the claims arise.  Otherwise, the transferring party has likely engaged in a fraudulent conveyance, which a court can reverse.  The various forms in which  asset protection can arise might be as simple as incorporation of improvements into personal residential property,  placing property in a limited liability company, forming a family limited partnership, creating a domestic asset protection trust, (which is an irrevocable trust), or creating an offshore trust, held in a foreign country.

The complexity and cost of such transactions varies greatly.  The right choice takes into consideration many factors, including your age, health, trustee selection, potential beneficiaries, potential liability sources, and goals.  When done well, the party creating an asset protection plan can rest knowing that their goal of preservation of property has been accomplished.

A SURVIVING SPOUSES’ RIGHTS

In Ohio and in addition to other rights, a surviving spouse has a number of basic rights available to them in a probate estate. The purpose of these legislated rights is to attempt to assure surviving spouses are not impoverished or that they have resources for necessities on the death of their husband or wife. Our legal system has generally memorialized these rights in Ohio Revised Code Section 2106. The rights include but are not limited to the following which I have listed in no certain order. A spouse has a right to two automobiles of limited value that are not specifically listed in the Last Will and Testament. He or she has a right to live in their home (aka “the mansion house”) for up to a year if it is not transferred or bequeathed to them otherwise. They have the right to purchase property from the deceased spouse’s estate. He or she has a right to an “allowance for support.” This allowance depends on the money available in the estate and other factors. Additionally, the survivor receives preferential treatment on appointment as the fiduciary to their spouse’s estate. If the surviving spouse wishes to exercise any of their rights, they have 5 months after the appointment of an executor or administrator of an estate to do so. The decision to make is whether they would like to elect to take under the will or to take against the will (which means exercising the rights listed above). Depending on the estate and situation, it may behoove a widow or widower to elect against a will if they were not adequately provided for in the will. Now one reality to watch out for is a situation where the surviving spouse is completely cut out of an estate by the late spouse. Sometimes this is unintentional or intentional and almost always because the late spouse received bad counsel from whoever they held as advisors. Your advisor should be an attorney who can explain the positive and negative ramifications of an estate plan. There are many, many non-attorneys in Ohio doing a disservice to citizens by looking (and sounding) sophisticated regarding estate planning but lacking the professional competence to advise on such heavy matters.

EXPLORING PRE NEED FUNERAL PLANNING

 

Pre-Need planning is a wonderful gift to those you love. As a rule of thumb, a pre-need funeral contract refers to the purchase of funeral goods and services before a person passes away. Why would someone want to pre-plan?

The pre-arrangement allows the person to speak directly to the funeral director about his or her own funeral wishes and preferences. By having pre-planning the service, the individual is providing significant relief to surviving family members from having to make decisions during a time of tumult and grieving in addition to relieving the survivors from a financial burden. Additionally, there is a Medicaid planning benefit to planning as well. Persons who currently qualify for Medicaid assistance or who anticipate qualifying may pre-pay their funerals without impacting their Medicaid eligibility. As this is an exempt purchase. The drawback to pre-planning is that the person is tying up the money.

Now there are really two types of pre-need contract: a guaranteed price contract and a non-guaranteed. In a guaranteed price contract the funeral home guarantees the funeral goods and services the planning person selects at the amount of money stated in the agreement. Which means there will be no need for additional payment later.selected for the amount of money stated in the contract. This means that you or your estate will not be required to pay any additional cost for the guaranteed items. The “non guaranteed contract” treats the amount paid for planning as a deposit against the final costs which is determined at the time of the actual funeral services provided.

If the contract does not guarantee the prices charged, the price of the funeral will be determined at the time the services and merchandise are provided. Any amount you pre-pay will be considered as a deposit to be applied toward the purchase price.

Some good questions to ask (in addition to your wishes) during your pre-planning session are:

* Where will the pre-need funds be deposited until they are needed?
* Will I receive verification from the financial institution that the prepaid funds have been deposited in the trust account?
* If the funds are used to purchase an insurance policy, will I receive verification that the policy has been purchased?
* What is covered by the price guarantee?
* Is the pre-need contract irrevocable or revocable?
* If the contract is revocable, how can I cancel the contract?

I have had to handle funeral arrangements for family, friends and client and can tell you. It is a marvelous relief to know a plan was already in place for our loved one.E

TAX PLANNING – AGAIN

I spent over 30 years analyzing and planning estates for my clients to minimize the bite of estate tax. The mechanisms were complex, not logical, and for many a burden. But in those days before tax reform, the family business, the family farm, and live savings were all exposed to state and federal estate tax that made such planning necessary to minimize their impact.

They’re gone – almost. The Ohio estate tax is gone and the federal filing threshold is $5.9M. But now, the most important tax issue is basis and capital gains tax for beneficiaries. Since property transfers to the next generation more often now in the form of an IRA, annuity, or some survivorship designation, it is important, if you want to preserve assets, to understand how each works and the income tax impact on beneficiaries.

You can do this planning yourself if you understand this, but most don’t. Don’t leave this to chance – come talk to us because the tax bite can still hurt.

THANKFUL

I frequently have opportunity to view people, especially seniors and those taking care of seniors, in situations that are challenging them – financial, health, family situations, etc – and the way they respond to perceived crisis.

For many, challenges early in their life conditioned and toughened them so they can still puzzle through a new challenge.  For those of more fortunate circumstances and few life challenges, the experiences of failing relatives is terrifying and upsetting.  “But Dad has always……” (But Dad can’t any more), or “We might lose all……” (Yes, life has no guarantees to preserve inheritance) or “Why us? (Why not?)

But those with faith in the Lord rise up as on eagle wings, sometimes shedding tears, but smiling internally and eternally as they know the future.  Those clients are more resilient, understanding, and survive by keeping things in biblical perspective. If one trait were used to describe these clients, it is “Thankful” in all things.  Nothing guarantees that we will not have trials or that our children will inherit what we have, but if we are thankful for all we receive, there is a special joy and contentment that you have to see to believe.

In this blessed Christmas season, my hope is that you will be thankful for all, as I am thankful for all of you.

DEPRESSION AND THE CAREGIVER GUILT

I regularly meet with sons, daughters, and spouses of an elder client who is failing. These close relatives often attempt to be the “care giver” for the failing elder, fulfilling their wish to remain at home.
While that is a laudable goal and one that many share, I always caution the caregiver to be very careful about burnout from trying to do too much, both mentally and physically. Care giving for a failing elder is stressful and when it is an around-the-clock obligation, the health of the caregiver is sometimes at risk.
Solutions are very family specific, depending upon who is available. One important theme is for a caregiver to be self-forgiving. I like the myths that my friends at Right at Home, a home health agency recently listed. Each of these (with my paraphrasing) is not true:
• I need to be perfect – no;
• I should only have positive thoughts about what I am doing – no;
• I shouldn’t talk about what I’m experiencing – no;
• I shouldn’t let others know about what is going on – no;
• My needs need to take a back seat to the services I am providing –no;
• Other caregivers are better at this than me and have a better attitude –no;
• I should do it all myself – no.
Caregivers – protect yourself. Dark, cold winter days will increase the chance for depression. Get some relief and thank you for what you do.

Protecting Americans from Tax Hikes Act of 2015 (aka PATH Act)

On December 18 last year, the above named act was signed into law. The PATH Act made permanent dozens of provisions which were set to expire. These provisions are no longer subject to expiration. This is not to be taken as tax or legal advice but merely to focus a light on the possibilities which exist for tax and legal planning toward the end of the year. Here is a sampling of the newly permanent benefits which might be of interest to different taxpayers.

1. Above the Line Deduction for Teachers’ Classroom Expenses. Kindergarten thru 12 grade teachers can deduct up to $250 of unreimbursed expenses relating to books, equipment, supplies and even some software. While that does not sound like a lot to many educators, just remember the old adage, “it all adds up” or “a nickel richer.”

2. Deduction of Mortgage Insurance Premiums. 2006 Legislation created an itemized deduction for premiums paid or accrued on qualified mortgage insurance. Generally, this type of insurance is acquired in connection with debt on a qualified residence.

3. Qualified Charitable Distributions from IRAs. In years past, persons age 70 ½ or older can exclude from gross income up to $100,0000 in “qualified charitable distributions” from either a traditional IRA or a Roth IRA. These distributions are not deductible as charitable contributions, but the exclusion from gross income is even a better result for the taxpayer. A qualified charitable distribution is any distributions from an IRA made by the trustee directly to the public charity.

4. College Tuition. Through 2016 there continues to be an above the line deduction for “qualified tuition and related expenses”. The deduction limit is $4,000 with the full deduction only available to taxpayers with adjusted gross incomes of $65,000 or less (or $130,000 for married filing jointly). If income exceeds the aforementioned limits then the maximum deduction is $2,000.

5. Conservation Easements. The limitations for contributions of property for purposes of conservation have also been expanded. It used to be in exchanged for placing qualified property into conservation like a land trust, the taxpayer could deduct 30% for any one year and carryover up to five years. Now, the he or she may deduct up to 50% of his or her contribution base with a carryover of 15 years. If he or she is what is a called a “qualified farmer or rancher” the 50% limitation increases to 100% with the 15 year carryover. To be “qualified”, the farmer or rancher’s gross income from farming or ranching concerns must exceed 50% of their total gross income. You can see where there may be opportunity for planning in situations where the taxpayer does not have an aversion to these types of conservation efforts.

These are just a few expansions available to individual taxpayers. The purpose of this article is not for tax or legal advice. Again, we are simply focusing a light on the possibilities which exist for tax and legal planning as we come toward the end of another tax year. All readers should consult with an independent professional prior to taking any action. We hope your fall continues to be wonderful as you bring in your harvest.

Is That A Loan or A Gift?

My dad always said, “Do not loan it, unless you are willing to give it away.” You know the scenario. Your neighbor or brother borrows your bolt cutters and “man they’re gone!” You have a better chance of retrieving keys from a river of molten lava than seeing those bolt cutters or your mom’s cake pan return to their proper place. Now imagine what it looks like when the receiver thinks the property (i.e. cash, vehicle, even house) is a “gift”, while the giver thinks it is a “loan.”

 

 

Yep, I’m sure you’re chuckling but you know it’s true. As attorneys we experience this all the time. I had a client whose ex-in-laws demanded repayment of a “loan”. The exes gave some property to the client and client’s spouse during the marriage. Now that the marriage was no more, the exes are calling the gift a loan, demanding repayment with interest in an amount pulled out of thin air. The problem was there is nothing in writing.

 

 

There are numerous practical problems in gifting. First, will the contested amount be worth your time and money with an attorney. Think of a $500 lawnmower. Who is going to engage a lawyer at $200-400/hour for the hope, as there are no guarantees of winning any suit in court, to get a used $500 lawnmower or $500 back. Second, they say relationships are the only thing you take to heaven. How many relationships have been ruined over “stuff”? I will not represent someone whose core purpose is to harm others.

 

 

Remember this: If you are loaning it out, be willing to give it away. If you are not willing to give it away, get it in writing and preferably secure your loan with right to the borrower’s property in a proportionate amount. If the amount is significant to you, engage an attorney in the beginning. It will save you a lot of future angst. Finally, if it is a gift, there are scenarios where memorializing it in writing is not only prudent but wise.

AGE in PLACE- WHERE?

“Aging in Place” has become a preference I often hear from clients. It is usually shorthand for a fear of spending last days in an institution like a nursing home.

The reality, as shown by joint study done by an investment firm and AgeWave, shows many seniors have already moved or planned to move to a place they will own – a newer home with modern appliance, no steps, and much less maintenance, such as a condominium. And why are they moving? As reported by Caring Right At Home, a major supplier of home health care, many move to be closer to family (29%), reducing home expenses (26%) and because of changes in their health (17%).

It is not just “downsizing” but what I call “right sizing”, as people realize the large house with stairs and a lawn to maintain isn’t necessary after the kids have left. Because of modern medicine, we are living longer and tend to be more active – not just my grandparents sitting on the porch in a rocking chair. Why spend the time maintaining a home?

Regardless of location, the majority of seniors want long-term care in their home for as long as they are able, so watch for the continued growth of the home care agency. Since, in Ohio, licensing is not required, check out carefully the experience and customer satisfaction stats for any potential caregiver, or see us about making a family member that designated person. Live until you die!

PLANNING FOR CHRONIC ILLNESS

Sayings are repeated because they contain some real truth. Two that I often repeat to clients are: “Life is what you experience while you are planning other things” and, in contrast, “Failure to plan Is  planning to fail”. Both contain truth and apply when you or a spouse receive a diagnosis of a long term and perhaps fatal, chronic illness.

 

Aside from the personal sorrow and fear when the diagnosis comes, we need to be responsible for those in our families who will be involved in care-giving and care decisions. That is done with a thorough review of the health prognosis, evaluation of assets, projected care costs, and projected impact on the family. Elder law attorneys (like us) are used to dealing with these complicated questions and helping families find the right answers for them. Frequently, it may mean modification of a house for wheelchairs and access, changing the registration of title and accounts, moving to a single-floor residence, adding on a suite to a child’s home, preparing care agreements, setting up trusts for long-term care, investigating financial resources, including Medicaid and veterans benefits, identifying care-givers, and, most of all – making the best of the situation for all the loved ones who will be affected.

 

There are answers but usually not ones you can “do yourself”, because the issues are complicated. We look forward to talking with you in a no-cost initial conference that can lead to the best answers.