When Is It Time to Service Your Estate Plan?

If you own a car, then you know it requires regular servicing in order to perform well and be reliable. More than likely, your car came with a recommended schedule for service, based on how many miles it has been driven. After a certain number of miles, you need to change the oil, replace the brake pads, rotate the tires, and so on.
If you have a newer car, you probably have an irritating dash light that comes on when it's time for service and stays on until the mechanic resets it. Either way, whether you pay attention to the odometer or rely on that dash light, it's pretty easy to know when it's time to service your car. And if you keep driving it without servicing it, it's a sure bet your car will let you down.
Like your car, your estate plan needs "servicing" if it is going to perform the way you want when you need it. Your estate plan is a snapshot of you, your family, your assets and the tax laws in effect at the time it was created. All of these change over time, and so should your plan. It is unreasonable to expect the simple will written when you were a newlywed to be effective now that you have a growing family, or now that you are divorced from your spouse, or now that you are retired and have an ever-increasing swarm of grandchildren! Over the course of your lifetime, your estate plan will need check-ups, maintenance, tweaking, maybe even replacing.
So, how do you know when it's time to give your estate plan a check-up? Well, instead of having mileage checkpoints, your estate plan has event checkpoints. Generally, any change in your personal, family, financial or health situation, or a change in the tax laws, could prompt a change in your estate plan. Use the list at the end of this newsletter to guide you.
It's a good idea to review your estate plan every year. Set aside a specific time every year (your birthday, anniversary, family gathering) to review it. Keep these events in mind each time you read through your documents. If you think a change may be in order, don't write on your actual document; contact your attorney. Most changes can be handled by a simple amendment that is attached to your current will or trust.
Planning Tip: Like your car, your estate plan needs regular "servicing." Set aside a specific time every year (your birthday, anniversary, family gathering) to review it. Become familiar with it. Keep it current so it will perform the way you want when you need it.
What Do You Do with Your Estate Plan?
Think for a few moments about what would happen if you became incapacitated or died today. Would your spouse, family and successor trustees know what to do?
Would they know where to find your estate planning and health care documents? Do they know whom should be notified? Do they know what insurance you have and the benefits they can apply for? Do they know what assets you own and where they are located? Do they know who your attorney and accountant are? If you own a business, do they know what to do to keep it operating? Do they know whom to call if they need help?
You don't have to tell your family everything about your assets right now. But it is very important that they know where to find this information when they need it. So, organize it and let someone know where to find it. The point is to try and make things as easy as you can for your loved ones.
Give copies of your signed health care documents to your physician and designated agent. Keep the originals (titles, estate plan, health care documents) in one safe place like a fireproof safe or safe deposit box. (Be sure to add your successor trustee to your safe deposit box so he or she will have easy access.) You may also want to give a copy to your successor trustee; at the least, go over the main provisions with him or her.
Gifting...An Easy and Satisfying Way to Reduce Estate Taxes
If you have a sizeable estate, you may want to consider giving some of your assets now to the people or organizations who will receive them after you die.
Why? First, it can be very satisfying to see the results of your gifts - something you can't do if you hold onto everything until you die. Second, gifting is an excellent way to reduce estate taxes because you are reducing the size of your taxable estate. (Just make sure you don't give away any assets you may need later.) And third, it costs you less in the long run.
One of the easiest ways to gift is through annual tax-free gifts. Each year, you can give up to $13,000 to as many people as you wish. If you are married, you and your spouse together can give $26,000 per recipient per year. (This amount is now tied to inflation and may increase every few years.)
So if, for example, you have two children and five grandchildren, you could give each of them $13,000 and reduce your estate by $91,000 each year - $182,000 if your spouse joins you.
You can also give an unlimited amount for tuition and medical expenses if you make the gifts directly to the educational organization or health care provider. Charitable gifts are also unlimited.
You do not have to give cash. In fact, appreciating assets are usually the best to give, because any future appreciation will also then be out of your estate. For example, if you want to give your son some land worth $52,000, you can give him a $13,000 "interest" in the property each year for four years.
As long as the gift is within these limits, you don't have to report it to Uncle Sam. Just the same, it's a good idea to get appraisals (especially for real estate) and document these gifts in case the IRS later tries to challenge the values. You should do this under the watchful eye of your attorney or tax advisor.
What if you want to give someone more than $13,000? You can, it just starts using up your $1 million federal gift tax exemption. If your gift exceeds the annual tax-free limit, you'll need to let Uncle Sam know by filing an informational gift tax return (Form 709) for the year in which the gift is made. After you have used up your exemption, you'll have to pay a gift tax on any gifts over $13,000 (or whatever the annual tax-free amount is at that time). The gift tax rate is equal to the highest estate tax rate in effect at the time the gift is made. In 2009, it is 45%.
Even though the gift and estate tax rates are the same, it costs you less to make the gift and pay the tax while you are living than it does to wait until after you die and have your estate pay the estate tax. That's because the amount you pay in gift tax is no longer in your taxable estate.
Event Checkpoints for Your Estate Plan
You and Your Spouse

• You marry, divorce or separate
• Your or your spouse's health declines
• Your spouse dies
• Value of assets changes dramatically
• Change in business interests
• You buy real estate in another state

Your Family

• Birth or adoption
• Marriage or divorce
• Finances change
• Parent/relative becomes dependent on you
• Minor becomes adult
• Attitude toward you changes
• Health declines
• Family member dies

Other

• Federal or state tax laws change
• You plan to move to a different state
• Your successor trustee, guardian or administrator moves, becomes ill or changes mind
• You change your mind

Planning Tip: Many people have set up revocable living trusts to avoid the costs, delays and publicity of probate after they die. But all too often they do not change titles of their assets to the name of their trusts. This process is called "funding" the trust. If you have not funded your living trust, you have simply wasted your money. Any assets still titled in your name will have to go through probate - just what you were trying to avoid. Talk to your financial advisor team about funding your living trust right away. And be sure to title new assets in the name of your trust as you acquire them.

VA Benefits For Long-Term Care of Veterans and Their Surviving Spouses

By Valerie L. Peterson, Executive Director, ElderCounsel, LLC

Many wartime veterans and their surviving spouses are currently receiving long-term care or will need some type of long-term care in the near future. The Veterans Administration has funds that are available to help pay for this care. Unfortunately, many are not aware that these benefits even exist, and they are often overlooked by families with veterans or surviving spouses who need additional funds to help care for them.

These following three types of benefits are “pension benefits.” The veteran (or surviving spouse) does not need to have service-related injuries, but must meet certain eligibility requirements for wartime service, age and/or disability, and income/assets.

Pension with Aid and Attendance. This is the most widely known benefit and offers the highest possible monthly payment. It provides benefits for a veteran or surviving spouse who requires the attendance of another person to assist in activities of daily living (eating, bathing, dressing and undressing, cooking, etc.), is blind, or is a patient in a nursing home. Assisted care in an assisted living facility also qualifies. Currently, this benefit can provide up to $1,704 per month to a veteran, $1,094 to a surviving spouse, or $2,020 to a couple. An independent and well veteran who has an ill spouse with medical expenses that deplete their combined monthly income can receive up to $1,338 per month. A physician’s statement that verifies the claimant’s condition and need for assistance is required.

Pension with Housebound Allowance, which has a slightly lower benefit, will help those who do not qualify for Aid and Attendance, and who wish to remain in either their own home or the home of a family member. This pension requires that the individual needs regular assistance, but the criteria is not as limited as for those who would qualify for Aid and Attendance. Care can be provided by family members or outside caregiver agencies. A physician’s statement documenting the claimant’s medical needs is required.

Basic Pension is for veterans and surviving spouses who are age 65 or older or are disabled, and who have limited income and assets. No physician’s statement documenting a medical need is required.

Qualifying for Benefits
A veteran must first meet certain wartime service and discharge requirements before being considered for any type of pension benefit. Additionally, a surviving spouse must meet certain marriage requirements to the qualified veteran.

A claimant (the veteran or surviving spouse filing for benefits) must be 65 or older, or be permanently and totally disabled, which is defined as a) being in a nursing home; b) determined disabled by the Social Security Administration; c) unemployable and reasonably certain to continue so throughout life; or d) suffering from a disability that makes it impossible for the average person to stay gainfully employed.

Income and asset requirements must also be met. When determining eligibility, the VA looks at a claimant’s total net worth, life expectancy, income and medical expenses. A married veteran and spouse should have no more than $80,000 in “countable assets,” which includes retirement assets but does not include a home and vehicle. This amount is a guideline and not a rule.

Income for VA Purposes (called IVAP) must be less than the benefit for which the claimant is applying. IVAP is calculated by subtracting countable medical expenses from the claimant’s gross income from all sources. Countable medical expenses are recurring out-of-pocket medical expenses that can be expected to continue through the claimant’s lifetime.

Note: It is possible to reduce a claimant’s assets and income to a level that will be acceptable to the VA. For example, excess liquid assets (for example, cash or stocks) could be converted to an income stream through the use of an annuity or promissory note. However, because the claimant may need to qualify for Medicaid in the future, it is critical that any restructuring or gifting of assets be done in a way that will not jeopardize or delay Medicaid benefits. An attorney who has experience with Elder Law will be able to provide valuable assistance with this.

Applying for Benefits
It often takes the VA more than a year to make a decision, but once approved, benefits are paid retroactively to the month after the application is submitted. Processing time can be greatly reduced by having the proper documentation (discharge papers, medical evidence, proof of medical expenses, death certificate, marriage certificate and a properly completed application) at the time of application.

Because time is critical for these aging veterans and their surviving spouses, application should be made as soon as possible. And while it is possible to do this without legal assistance, an Elder Law attorney who has experience with securing VA benefits will undoubtedly be able to help the process go as smoothly and quickly as possible.

For more information, visit http://www.va.gov.

National Estate Planning Awareness Week

Congress has designated the third week in October as National Estate Planning Awareness Week (October 15-21, 2012).

Estate planning is one of the most overlooked areas of personal financial management. It is estimated that 70% of American’s do not have an estate plan, many mistakenly believe that this process is for the wealthy or the retired. Estate Planning is for everyone!

Estate planning is an important process that can help protect you, your family, and your assets. Proper estate planning saves you and your loved ones money, passes your assets in the way you desire, provides direction during incapacitation, determines care for your children, and bestows peace of mind.

National Estate Planning Awareness Week is the perfect time to make sure your affairs are in order in the event of sickness, an accident, or untimely death. Contact your estate planning professional to begin your estate plan today. If you already have a plan, it’s a good time to review your plan to make needed adjustments to beneficiary designations or modify retirement accounts and insurance policies.