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Planning Your Estate

Planning Your Estate

When it comes to planning an estate there are as many variations as there are people and families. There is no one size fits all, although there are certain planning considerations common to all.

If you are single, healthy, and have no children and like most everyone are below $7.1 million of assets, you need the basic documents, which are a will or revocable trust to pass on assets to whoever you wish to inherit. But if you have elderly parents, who are at the age where they may need long term care, it may be wise to set up a trust that will not count against them if they need Medicaid to pay for care. You also need a durable power of attorney so that a trusted person, usually a family member, can handle your financial affairs if you cannot. You also should have a living will naming a health care representative to make medical decisions for you if you cannot. A HIPAA form to talk with medical providers is advisable.

If you are single and have children, all of the above are necessary, but the size of the assets and the age and health of the children may add additional planning needs. Leaving several hundred thousand dollars to a minor child, who will get full control of the assets at age eighteen is asking for trouble. The same is true if the children are adults but relatively young, as they do not have the maturity or experience to handle large sums of money. Friends or relatives or outright scammers may show up and a good deal of your nest egg may not end up helping them.
This is where a trust is advisable, so someone you trust can handle the assets for the benefit of the children until they get older and wiser. 

The larger the assets, the longer the trust can hold the money for them, but the money can still be used for them. They just can’t take it out for that shiny Maserati or that new love of their life.

Married people with children want to provide for each other, and if both are gone, for
their children. For people not at risk of long-term care, the normal approach is to do a will or trust, or both, to leave assets to your spouse, but if both are gone, to the mature adult children. As always, each spouse should have a durable power of attorney, living will, and HIPAA form. The power of attorney law changed in 2016, and even though an older one is still valid, it is wise to update to the newer version, and to include the power to get a Qualified Domestic Relations Order to transfer IRA’s or 401k’s from a sick spouse to the healthy spouse without paying income taxes. This can save tens of thousands of tax dollars if one spouse needs homecare or nursing home care.

People ask if they should put their children’s names on their bank accounts and
investments or give their house to their children in case they get sick. This is not usually wise and can put the parent’s assets at risk if the child is sued, gets divorced or gets sick, and the best child in the world cannot control those things from happening. This is where more sophisticated planning is needed. Certain types of trusts can hold property and after five years, the property does not count against the parents, even if the parents go into a nursing home. These types of trusts should be considered for people who have health issues that will debilitate them, or who are getting up to the age brackets where long term care may be needed. For those who plan ahead, such trusts can save hundreds of thousands for the family.

Avoiding probate is desirable, and trusts, joint accounts, or naming beneficiaries on
accounts can accomplish that. But here is a catch. In Connecticut, none of these avoid the probate fee, which is not based on property passing through probate, but is based on the value of the assets which must be listed on the inheritance tax return, even though there is no tax if total assets are below $7.1 million, which is true for the vast majority of people. But, there will be a probate fee.

Another planning situation is where one spouse has a condition that will worsen and
require long term care. Usually, the house and assets can be protected for the healthy spouse, but unless a special will with a trust inside is done for the healthy spouse, some or all of the assets will be lost if the healthy spouse dies first. In every case where one spouse needs long term care, it is critical that the healthy spouse has such a will, called a testamentary trust will, to protect almost all the assets. “Almost” is used because in Connecticut there is a law that says a surviving spouse must get the use of one third of the assets, even if the will says nothing goes to the
spouse. But with a testamentary trust will, the amount that has to be given to the surviving spouse is very small.

Last, for those married, people with over $7.1 million in assets there are techniques to protect double that amount. That also goes for doubling the federal tax exemption, currently at $11.7 million.

Whatever your age, every adult with assets needs to do estate planning based on their family situation, age, health and kind of assets. That planning can be very simple or complex, but you will sleep better at night when it’s done and your family is protected.
Attorneys Stephen O. Allaire (Of Counsel) and Halley C. Allaire are partners in the law firm of Allaire Elder Law.
Attorneys Stephen O. Allaire (Of Counsel) and Halley C. Allaire are members of the National Academy of Elder Law. Attorneys, Inc.
Allaire Elder Law is a highly respected, and highly rated law firm with offices in Bristol, CT.
We can be contacted by phone at (860) 259-1500 or by email.

If you have a question, send a written note to us and we may use your question in a future column.




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