Want to avoid probate? Want it to protect assets? Want to make things easier for your family should you pass away? Everyone’s answer is yes, so here is a comparison of revocable and irrevocable trusts. The obvious difference is that “revocable” means you can change it or terminate it at any time, as long as you are still alive and capable. You cannot revoke an irrevocable trust. The most critical difference is that a revocable trust does not protect your assets if you or your spouse need Medicaid or VA or Connecticut programs to pay for long term care, at home, or in a nursing home. That’s because if you can revoke it, and take the assets back, the state quite logically says that asset is still yours. So if the goal is to protect assets in case of long term sickness, a revocable trust does not help. For that, you need an irrevocable trust.
Everyone wants to avoid the nursing home, so if long term care is needed, getting home care help is the answer. How to pay for that care is the question. Using family resources is one option, but that can deplete life savings very quickly, so Connecticut and the Veterans Administration offer several programs to help pay for that care. A wartime veteran who is single and who qualifies could get up to $1,911 per month, and if married, up to $2,266 per month. A widow of a wartime veteran could get up to $1,228 per month..
The President signed a new law titled the SECURE ACT, short for “Setting Every Community Up for Retirement Enhancement.” Catchy acronyms for laws can be deceiving. Critics might call it the GRABER ACT, or the Grabbing Retirement Accounts Back Earlier. The result is to severely reduce the amount children will inherit from parents by requiring them to pay income taxes on Iras and 401ks within ten years of the parent’s death. The law is effective January 1, 2020, and gives small businesses tax incentives to provide automatic enrollment in retirement plans for employees, and permits small businesses to join with other employers to offer retirement accounts to employees. Whether this is practical is very uncertain, and the part that allows states to establish such plans appears to have failed in Connecticut.
Family caregivers often devote an incredible number of hours giving care to parents and other relatives to keep them out of a nursing home. This can not only take an emotional toll on them, but result in financial sacrifice. There are government regulations which permit compensation to family caregivers, but not to the spouse, in certain situations. There are also government programs that could pay eligible family caregivers.
For years traditional estate planning was oriented toward estate tax avoidance and controlling assets for young or inexperienced heirs. Estate tax avoidance is no longer a worry for most Connecticut families because the exemption is $5.1 million on January 1, 2020, and the federal exemption is $11.2 million. That means only a tiny percentage of Connecticut residents will ever pay inheritance tax. But taxes are not the only reason to do estate planning..
With Thanksgiving done and leftovers in the refrigerator it’s time to think of any health issues you may have noticed in the family’s oldest generation. Did grandma or grandpa have difficulty walking? Did they exhibit severe memory problems? If you were at their home, was it tidy, or did it show neglect? Did you notice bills that appeared to be past due, or were financial records scattered about? In general, were you left with a concern that some help or occasional checking on them is needed. If so, here are some thoughts and suggested action which this column has addressed in years past.