Important Documents Locator and Contacts
Clients always ask me how to store their estate planning documents and other important papers once their estate plan is done. I always recommend that they fill out the attached Important Document Locator and Contact Sheet as a part of this process so that family members and friends know who to contact and where to locate important records if necessary. I also recommend that they store their estate planning documents as follows:
Originals. Your original Will should be kept in a safe place, preferably in a fireproof safe or safe deposit box. Your original powers of attorney can be kept in your reference notebook. If you have revised or updated your documents, any old/former documents—including any copies—should be shredded.
Reference Set. If I did your estate plan, you have been provided with a reference set of your documents in an estate planning binder, creating complete set for your records. The copy of the will in this binder is not signed—you have only one valid, executed will, which you should keep pursuant to #1, above. If you decide to provide anyone with a copy of your will, be sure to copy the unsigned, reference will and not the original, signed will.
Copies for Agent. You should provide your agents with copies of your executed Powers of Attorney, both General and Medical. This will enable them to have the documents and act upon them without the necessity of obtaining copies once a disability or other unfortunate circumstance occurs. They should also be told about your complete estate planning binder (if you have one) and where it is located.
Copies for Physicians. You should also provide your physicians with copies of your executed Medical Power of Attorney and Living Will. They will then be able to keep these important documents in your files so that your agents will not have to search for them in the event of illness or accident.
Copies for Home. For clients living alone, especially aged clients, I recommend that copies of your Medical Powers and Living Will be kept in a readily accessible location such as your refrigerator or freezer in the kitchen, along with a note on the refrigerator door indicating that the documents may be found inside. First responders are taught to check the refrigerator door for important medical and pharmacological information. Finding the Medical Power of Attorney and Living Will along with other such information will make their treatment decisions easier, and better insure that your dignity is protected.
Fill out the Important Document Locator and Important Contact Information forms that follow. Keep them in a safe but obvious place such as the inside of a desk drawer or kitchen cabinet near the telephone. This will help your family members and friends in the event of an emergency and also might result in you feeling more organized and in control of your life!
Important Documents Locator and Contacts
DOCUMENT
LOCATION
NOTES
Durable Power of Attorney
Medical Power of Attorney
Original Last Will and/or Trust Documents
Living Will/MOST declaration
Property Deeds
CD Certificates
Personal Banking Accounts
Promissory Notes
Automobile Registrations
Birth, Marriage and Death Certificates
Medical Insurance
Passports
Retirement/Pension Accounts
Life Insurance Accounts
Credit Card Accounts
Stock and Bond Certificates
Long-term care insurance
Safety deposit box information/key
Internet accounts and passwords information
IMPORTANT CONTACTS
NAME
TELEPHONE NUMBER/EMAIL
Agent for health care power of attorney
Agent for general durable power of attorney
Person named as personal representative in will
Attorney
Accountant
Insurance Providers
HomeAutoLife InsuranceLong-term Care
Primary Care Physician
AdultsChildren
Personal friend/housesitterfamiliar with home
Veterinarian
Child care provider
Children’s school contact
Children’s local guardian
Children’s preferred babysitter
If you have a hard time printing these sheets I am happy to email you a copy either as a PDF or as a word document that you can customize to suit your needs. Just send me an email and let me know.
Five Criteria to help choose a Medical Power of Attorney
In completing your POAs its important to choose an appropriate agent. Here are five criteria to think about in relation to choosing an agent for your medical power of attorney.
1. Personal belief: Since the concept of withholding artificial-life support runs contrary to the teachings of some religions and is a very personal decision, it is helpful to find a healthcare agent who understands your feelings in this regard and whose own beliefs are not completely contrary to your own.
2. Communication: It is important to choose someone you are comfortable speaking with about your health care wishes and it should be clear to you that not only do they understand them but they will be able to communicate these to your health care providers and family members if necessary.
3. Practical reality: Its critical that the person you choose is willing to accept responsibility and agree to act as your agent - "ready and able to serve".
4. Voice: In choosing an agent be sure that they will be able to speak up and stand firm on your behalf - even if faced with physicians who are advising otherwise or other close family members who disagree.
5. Availability: Make sure this person is likely to be accessible and capable of serving as your agent well into the future.
How to choose a guardian for your children - 10 tips to help make this decision
Naming Guardians For Your Children: 10 Criteria to Help Clarify This Most Important Decision
1. Relatives: In considering such an important decision - look beyond the most obvious choices. Make a list of all the people you know who you would trust to take care of your children. You don't need to limit your list to close family members. While siblings and parents can be excellent choices, consider also extended family members who are old enough to raise your children - cousins, aunts, uncles, nieces, and nephews.
2. Friends: can make excellent guardians as well -so to the above list, consider adding close friends, the parents of your children's friends (who most likely have quickly become your friends, as well), even teachers or child care providers with whom you and your children have a special relationship.
3. Financials: Don't overemphasize the size of someone's home. Don't eliminate anyone from consideration because you don't think they have the finances to take care of your children. You should be able to take care of the expenses associated with raising your children through appropriate life insurance. In fact, if necessary, you can instruct your trustee to provide funds for your chosen guardian to build an addition to their home or move to a larger home to accommodate your children.
4. Nurturing Environment: Ask yourself who will provide the most loving, nurturing, supportive environment for your kids. Consider who on your list would truly love your children if appointed their guardian. If they have children of their own, how will your children fit in with family? Who do you see your child with - day in and day out - back and forth to school, summer holidays, sports events, doctors appointments, hugs, etc.
5. Values. Ask yourself who on your list most closely shares your values with respect to your religious beliefs, moral values, child-rearing philosophy, educational values, and social values.
6. Practical considerations. How would raising children fit into their lifestyle?
--If someone you are considering is older, do they have the necessary health and energy?
--Do they have other children? How would your children get along with theirs? How close do they live to other important people in your children's lives.
--If a couple divorced, or one person died, would you be comfortable with either of them acting as the sole guardian? If not, you need to specify what you would want to happen.
7. There is no such thing as "perfect." Most likely, no one on your list will seem perfect, but if you truly consider what matters to you most, you will make the right choice. Trust your instincts. If one couple or person meets all of your criteria, but doesn't feel right, don't choose them. By the same token, if someone feels much more right than any of the others on your list, there's a good reason for it. Make your primary choice and a secondary choice. It's essential that both you and your spouse agree.
8. Consider selecting a temporary as well as a permanent guardian. Temporary guardians may be appointed if both parents become temporarily unable to care for their children - for example, as the result of a car accident. Depending on your choice for permanent guardians, you may want to designate different people to act as temporary guardians. If your choice for a permanent guardian lives a considerable distance away, choose someone close by to serve as temporary guardian. If you're temporarily disabled, you'll want your children close by. And you won't want their lives unnecessarily disrupted by moving them to a new town and school. If you have no relatives or close friends nearby, consider families of your children's friends.
9. Talk with everyone involved. If your children are old enough, talk with them to get their input as well. And be sure to confer with the people you'd like to choose, to ensure they're willing to be chosen and would feel comfortable acting as guardians.
10. Follow through. Once you've made your choice, there are steps you can take to make sure the potential guardians you've chosen will have the guidance and support they need.
--Create a set of guidelines to convey information about your children, your parenting values and your expectations for your children.
--Make sure your estate planning is complete and that you will have the funds to provide for your children's care in trust. This also enables you to set out the terms of the trust in advance (at what ages money should be distributed and for what expenses).
--Keep your guardian choice up to date - if something changes in regards to your choices - make sure your documents are updated.
I hope this information helps clarify this most important decision. The most important thing to remember really is that if you don't make this decision - someone else may end up trying to decide this for your children - for you.
Medical Power of Attorney: Your Agent and You!
Medical power of attorney: When choosing an agent for your medical power of attorney for health care its important to select someone who will respect your wishes for the care and control of your body should something happen to you. They need to have a good idea of what your feelings and beliefs are in this deeply personal area. Here are some areas to explore with your agent about you:
Lifestyle: How essential are these in terms of your quality of life?
1. Being able to eat and drink 2. Being able to enjoy entertainment, movies, TV, reading, listening to music 3. Physical movement and being able to get outdoors 4. Attending outside activities such as church or other programs 5. Avoiding pain and discomfort 6. Being with loved ones 7. Being self‐sufficient and able to communicate
8. Spirituality. How much of your comfort and support comes from your spiritual practices such as personal pray, meditation, or interaction with a spiritual or religious community?
9. Last days. What are your wishes in regards to the last days of your life? For instance, quiet meditation, lots of friends, or close family members only.
By getting your powers of attorney in place and conveying your wishes to your agent your wishes will be honored and your loved ones spared confusion and last minute guess work.
Disclaimer -- Content is general information only. Information is not provided as advice for a specific matter, nor does its publication create an attorney-client relationship. Laws vary from one state to another. For legal advice on a specific matter, consult an attorney.
Do I need a Revocable Living Trust? or Will a Will do...
Estate Planning: The Use of a Last Will versus a Revocable Living TrustMany clients come in asking about setting up a Trust as opposed to a Will in terms of their estate planning. Trusts are very trendy right now, especially in states like California where the probate process is expensive and complicated.
Each of these estate-planning tools has pros and cons. The following information is meant to make sure you understand the differences and enable you to make an informed decision about which estate-planning method is right for you.
When a Last Will is used, it does not become an effective document until death. A Last Will requires the property of the decedent to go through the probate process prior to being distributed. Probate is the process by which a Last Will is presented to the court, the court authorizes the representative of the estate to take possession of the decedent’s assets, the creditors of the decedent are notified, and, approximately four months later, the representative pays the creditors and then distributes the assets to the intended beneficiaries.
When a Revocable Living Trust is used, the assets titled in the name of the trust are not part of the decedent’s estate, and do not need to go through the probate process. As soon as the individual who set up the trust dies, the alternate trustee named in the trust is entitled to take control of the assets without any court involvement. Importantly, this process also happens when the person who set up the trust becomes incapacitated.
Colorado has an informal probate process. The probate court is minimally involved with the process, and thus most probates here are both inexpensive and efficient. However, as noted above it does take about four months to complete the process. In a Revocable Living Trust based plan, the immediate ability of the alternate trustee to access the assets in the trust upon the incapacity or death of the settlor of the trust is definitely an advantage if time is a consideration.
If you choose to use a revocable-living trust based estate plan, your personal residence, vacation home, and investment accounts and other types of property are usually transferred into the name of the trust, requiring retitling of these assets, but tax advantaged retirement accounts are usually not. This process of retitling the assets is one of the two disadvantages of using a Revocable Living Trust when compared to a Last Will-based estate plan. The second disadvantage to the Revocable Living Trust is that it is typically more expensive than a Last Will based plan.
I generally recommend a Last Will based estate plan here in Colorado because of our informal probate process. I recommend a Revocable Living Trust based plan to my clients who meet any of the following criteria:
➢ complex asset management needs or diverse types of investment assets since Revocable Living Trusts provide a very strong asset management tool; ➢ property outside the state of Colorado (since such property can be placed in the Trust, no additional probate proceeding will need to be opened in the other states); ➢ the need for privacy (Wills are filed at death and become pseudo-public documents) or the wish that their at-death disposition not be public; and ➢ impending disability (at the disability of the individual, the alternate trustee will be able to take control of the assets in the trust).
Feel free to call or email me if you have further questions regarding the differences between these two types of plans.
Can I provide for my pets in my estate plan?
Clients often ask me if they can provide for their pets in their estate plans. The answer is yes – Colorado does allow for Pet Trusts – and many people use these as a means to ensure that their beloved companions (dogs, cats, horses, exotic birds etc.) are provided for if they are either disabled or upon their death.
Pet Trusts are extremely useful in a number of situations. For most household pets, Pet Trusts are used as just-in-case planning, very similar to naming a guardian in your Will for minor children. For pets with a very long lifespan, such as many types of tropical birds, Pet Trusts may be viewed as a necessity so that pet owners can provide certainty of care for pets that will almost certainly outlive their human companions. Pet Trusts are also useful to provide continuity of care for pets in the event of the disability of a human companion.
In general, trusts need certain types of beneficiaries before they will be recognized and upheld by the law. Typically, these types of beneficiaries have been either ascertainable individuals or charities. Therefore, historically, it was difficult to provide for the continuing care of pets after death. In the past, estate planning to care for pets involved leaving assets to a trusted friend or family member with the understanding that they would use the assets to care for the pet. Although this method has certainly worked, there have undoubtedly been times when the pets have not been taken care of in the way that their human counterparts would have expected or the pets have not been cared for at all, with the trusted friend or family member using the assets for self-benefit instead of the benefit of the pet. Finally, the most obvious choice of an individual to care for a pets physical needs may not be the best choice of an individual to manage the assets placed in the trust for the benefit of the pet.
Several states now have legislation that specifically authorizes the establishment of trusts to benefit pets and other animals. Colorado law, reflected in Colorado Revised Statues Section 15-11-901, allows a pet owner to put aside assets and ensure that the assets are used for the benefit of the pet.
My best friend, Luke.
PET TRUSTS IN COLORADO
Many Colorado estate planners draft their Pet Trusts to allow pet owners to leave assets for the benefit of their pets as well as to allow the pet owners to designate both a Pet Guardian to manage the care of the pet and a Trustee to manage the assets in the trust and make appropriate distributions to the guardian. Because of this separation of duties, the creator of the Pet Trust can ensure that the best person is selected to care for the pet and the best person is selected to manage the assets funding the trust for the pet.
SPECIFICS OF THE COLORADO PET TRUST
Under Colorado law, Pet Trusts operate in the following manner:
- Assets can be placed in trust for the benefit of a pet.
- The trust can be written so that if the pet is pregnant at the time the trust goes into effect, the trust will remain in force to provide care for the offspring of the pet.
- The trust will remain in effect until there is no living animal covered by it, unless an earlier termination is provided for in the trust itself.
- The trustee is not allowed to use any portion of the principal or income of the Pet Trust for the trustee’s benefit or in any way that is not for the benefit of the animals covered by the trust.
- The creator of the trust has complete freedom to designate where any assets left in the trust upon its termination should go.
- The appropriate use of the trust funds can be enforced by a Trust Protector designated in the trust instrument, by any person having custody of an animal for which care is provided by the trust, by any beneficiary designated by the trust creator to receive assets at the termination of the trust, or, if none of the above, by an individual appointed by a court if someone makes an application to the court to review the use of the funds.
- If there is ever a situation in which a Pet Trust comes into effect but there is no trustee able or willing to serve, a court has the authority to designate a trustee and make other orders and determinations so that the intent of the creator of the pet trust will be carried out.
WHEN TO SET UP A PET TRUST
- Pet Trusts can be set up at death, at disability, or immediately upon signing a trust instrument.
- Pet Trusts are typically set up in a Last Will so that upon the death of the creator of the Will, the Pet Trust is established and funded.
- However, Pet Trusts can also be established in a Revocable Living Trust so that upon the disability of the creator of the Revocable Living Trust, a Pet Trust will be established to provide for continuity of care of the pet or pets.
- Additionally, at any other time, any individual can set up a stand-alone Pet Trust to establish a Trustee and fund a trust for the benefit of a pet.
Copyright Tanya R. Shimer LLC. All Rights Reserved.
Colorado Law and Pre- and Postnuptial Agreements.
What is a Marital Agreement? Pre- and postnuptial agreements (marital agreements) are important tools for couples to manage their assets and avoid conflict, both before and during their marriage and as part of the process of separating if the marriage ends. Prenuptial agreements are contracts executed prior to marriage and post-nuptial agreements are contracts made between the spouses during the marriage, that allow the parties to agree to and delineate the division of assets should a legal separation, divorce or death occur. These agreements are legally binding contracts which can protect both parties by creating a plan that if conscionable will be enforceable and predictable – thereby taking the potential conflict out of the difficult process of separating.
Every couple should consider a marital agreement as a potential tool to enable them to plan for the future, protect their assets and avoid conflict. Couples who do not have a marital agreement are subject to the provisions of the Colorado Uniform Dissolution of Marriage Act, which will determine their rights in the case of separation or divorce; and the Colorado Probate Code, which will determine the rights of the surviving spouse and other heirs, upon death if proper estate planning has not been completed.
How Colorado Law Works for Couples without a Marital Agreement Individuals that are married and living in Colorado have statutory rights if the marriage terminates by divorce. Colorado law defines two types of property that can exist during the marriage. Separate property is the property owned prior to the marriage, and all property received by gift or inheritance during the marriage. Marital property includes all property earned by either spouse during the marriage, including deferred compensation; and all income and appreciation on separate property, whether realized or not - regardless of how the property is titled. When a couple divorces in Colorado, each party keeps his or her separate property - if it was kept separate during the marriage and not co-mingled with marital property. If the parties cannot reach an agreement about the division of property during a divorce, the court is directed to divide the marital property in the proportion that it deems just after considering all relevant factors.
In addition to dividing marital property, a divorce court can award maintenance if it finds that one of the parties lacks sufficient income or property to provide for his or her reasonable needs. The amount and length of a maintenance order is determined by the court’s just determination after considering all relevant factors. Colorado courts have been unpredictable in awarding maintenance and thus it could have a significant financial impact on both parties. Why Should Couples Consider Marital Agreements Marital agreements can be used to define the parties’ rights in regards to the appreciation of separate property and all marital property accrued during the marriage. Couples who have children from previous marriages are able to provide for these children and protect their inheritance in the event of a divorce from a subsequent spouse. If one of the spouses owns a business, a marital agreement can ensure that the new spouse does not become entangled in the company should a separation occur. Marital agreements identify, define, and resolve legitimate issues related to the couples’ finances, estate plans and business interests – while the parties are free of the emotional turmoil created during a separation process. Advantages of premarital agreements for both parties include: Avoiding litigation costs Protecting against fears of family members such as children from previous marriages Protecting family assets Protecting business assets Protecting against creditors Predetermined and thus predictable disposition of property
Contents of a Colorado Prenuptial Agreement A marital agreement may address the following issues: 1. Spousal Maintenance: whether it is waived, set at a predetermined amount, based on years of marriage, etc. 2. Division of property and debts: whether assets acquired after the marriage are kept separate; whether future appreciation on existing assets are separate property; how to apportion pension funds, retirement benefits or other intangible assets. 3. Inheritance: a spouse may agree to waive his or ability to take an elective share of the estate thereby protecting children from a previous marriages’ legacy. 4. Rights and obligations under insurance policies, employee benefit plans, and other assets such as these. 5. Waiver of Rights Upon Death: a common provision in prenuptial or postnuptial agreements designed to prevent probate laws or prior wills from trumping the terms of the prenuptial or postnuptial agreement. 6. Alternative Dispute Resolution: a provision requiring the complaining party to mediate or arbitrate any dispute and preventing him or her from filing a costly lawsuit. 7. Attorney’s fees: who pays for attorney’s fees if the parties are unable to abide by the terms of the agreement. If the parties have children during the marriage, a marital agreement cannot legally bind either party to agreements made regarding child support, physical custody, parenting time and decision-making authority. The parties may agree on proposed terms for these issues but these terms would be subject to the court’s later approval.
What does a Marital Agreement do? A marital agreement allows the engaged or married couple to negotiate around Colorado law in order to define separate property and marital property. By means of a marital agreement you can define separate property to include all income from and appreciation on your separate property. You can also protect your earned income by defining that as separate property, so that assets purchased or investments made with your earned income will remain your separate property upon divorce. Thus, by altering the definitions of separate property and marital property from those provided by statute, you can protect not only the core of your separate property which you amassed prior to your marriage, but also the earnings from and appreciation on that property. If you wish to restrict your spouse's rights upon divorce to your earned income, including retirement benefits, you can do that as well. Spouses can waive their rights to maintenance payments in a marital agreement or they can agree to a certain amount of maintenance to be paid to the less wealthy spouse in the event of a divorce. However, if at the time of a divorce, the court determines that the spousal maintenance terms in the agreement are unconscionable, the court can render that portion of the prenuptial null and void.
Finally, a marital agreement can allow couples to determine what rights a surviving spouse will have upon the first spouse's death. For example, in many marital agreements, each spouse waives his or her right to reject the terms of the others' will and elect to take up to half of the estate outright (depending on the length of the marriage). Such a waiver ensures that the estate plan of the first spouse to die will be honored by the surviving spouse.
Why Couples Choose to Alter Spousal Rights Provided by Law. Couples choose to alter their statutory rights for a number of reasons. Some people simply wish to have certainty as to property rights and maintenance payments upon a potential divorce. By entering into a marital agreement, they eliminate much of the financial uncertainty associated with a divorce. A fairly negotiated marital agreement can provide some assurance to the wealthier spouse as to the extent of the financial impact of a divorce and provide the less wealthy spouse with some guarantee to his or her entitlement to property distribution and maintenance.
People who have children from a previous marriage may wish to protect their assets for these children's benefit. A marital agreement that addresses the rights of a surviving spouse can protect the deceased spouse's estate for the benefit of children from a previous marriage as well.
Sometimes parents encourage their adult children to enter into a marital agreement in order to protect assets owned by the child that were accumulated by previous generations. Usually, a wealthy family wants to ensure that assets that have been gifted to adult children do not become vulnerable to the spouse in a divorce situation.
Enforceability of a Marital Agreement. Colorado adopted the Colorado Marital Agreement Act in 1986. This statute allows the waiver of statutory property and maintenance rights of spouses either before or during a marriage. Thus, the general statutory rule is that marital agreements are valid and binding contracts. However, one party can have the agreement voided if he or she did not sign it voluntarily or if the other party did not provide a fair and reasonable disclosure of his or her property and financial obligations.
When one spouse challenges the validity of a prenuptial, the court will look at several factors to determine whether the agreement should be enforced. The two most important factors the court considers are the adequacy of the financial disclosure and whether either party was under duress when signing the agreement. Full and complete disclosure of all assets is required prior to the signing of the prenuptial agreement because a party cannot knowingly waive rights unless he or she has sufficient information about the potential value of those rights. Duress is reviewed as a question of fact and the court may consider factors such as the timing of the agreement (i.e., was the spouse forced to sign it right before the wedding, etc.) and whether each spouse had independent counsel. It is extremely important that both parties have their own legal adviser during the preparation and execution of a marital agreement.
© 2012 Tanya Shimer All Rights Reserved.
Estate Planning Basics: What should be covered in any estate plan
Foundational Planning – the Basics
The foundation of all estate plans contains:
Last Will or a Revocable Living Trust,
a Financial Power of Attorney,
a Medical Power of Attorney, and
a Living Will.
The combination of these documents allows you to designate how your assets and health will be managed if you ever become disabled. Further, the Last Will or Revocable Living Trust provides for the distribution of your assets upon your death – to the individuals or organizations you choose and in the manner you decide.
A good estate plan with careful planning should allow you to:
During life:
--Manage and enjoy your assets as completely as possible
--Transfer assets to the next generation while minimizing transfer tax upon the transfer or at death.
--Meet your charitable or religious contribution goals
If you become disabled:
--Have at least one primary and one alternate financial decision maker legally recognized and ready to assist you.
--Have at least one primary and one alternate medical decision maker legally recognized and ready to assist you
Upon death:
--Designate who will receive your assets at your death
--Specify how those individuals will receive your assets
--Designate a guardian and trustee for your minor children
--Minimize any transfer taxes
--Ideally and with careful planning, replace any value lost to taxes
Why do I need a will?
Wills are important. A will ensures that whatever personal belongings and assets you have will go to family or beneficiaries you designate. Without a will, the court makes these decisions.
If you have children, a will ensures that your wishes regarding your children will be clear. You will be able to designate a guardian for your children's daily care. By completing a will, you will also be able to name a trustee who will be responsible for taking care of your financial resources for your children until they are adults.
Depending on the size of your estate, careful estate planning in a will can create significant tax benefits. If you have a will and other foundational estate planning documents taken care of you will also avoid subjecting your family and loved ones to confusion and anxiety at a difficult because your wishes will have already been made clear to them.
What does a will allow me to do?
In your will, you can name:
Your beneficiaries. You may name beneficiaries (family members, friends, spouse, domestic partner or charitable organizations, for example) to receive your assets according to the instructions in your will. You may list specific gifts, such as jewelry or a certain sum of money, to certain beneficiaries, and you should direct what should be done with all remaining assets (any assets that your will does not dispose of by specific gift).
A guardian and trustee for your minor children. You may nominate a person to be responsible for your child’s personal care if you and your spouse die before the child turns 18. You may also name a trustee—who may or may not be the same person—to be responsible for managing any assets given to the child, until he or she is 18 years old or older, depending on your wishes.
A personal representative. You may nominate a person or institution to collect and manage your assets, pay any debts, expenses and taxes that might be due, and then distribute your assets to your beneficiaries according to the instructions in your will. Your personal representative serves a very important role and has significant responsibilities. It can be a time-consuming job. You should choose your personal representative carefully.
Asset protection/tax planning. A properly designed estate plan should:
-- protect your assets, your person, and your business from a possible future disability;
--protect your assets from liability during and after your life;
--distribute your assets tax efficiently at your death; and
--ensure that assets left to young beneficiaries are left inside of a structure such as a trust that will provide management and protection of these assets for them.
Special needs planning. Planning for a family member with special needs is often a difficult endeavor for families and is especially important for families with significant assets. Many planning techniques are available to ensure that a loved one with special needs is provided for without jeopardizing their ability to receive the public benefits they need and to protect them from fraud.
© 2012 Tanya Shimer All Rights Reserved.
Medicaid Planning and the Use of Trusts
Colorado Statutory Exception Trusts and Third-Party Special Needs Trusts: Planning with and using these tools in Colorado for Medicaid qualification and continued benefit
Medicaid is a public assistance program funded jointly by each state and the federal government.
Medicaid covers various medical services and is a needs-based program where eligibility is determined by three requirements:
1. The Categorical requirement, which refers to the medical needs of the individual;
2. The Income requirement, which limits the amount of income an eligible recipient may receive; and
3. The Resource requirement, which requires that to qualify for Medicaid benefits, the applicant must have no more than $2,000 in countable assets.
Medicaid Qualification
If an individual has more than $2,000 in countable assets, which would otherwise disqualify that individual from receiving Medicaid benefits, the individual may, with proper planning, convert assets to qualify.
First, the individual may convert “countable assets” into “exempt assets” by shifting value. This can be accomplished by, among other things, improving the home, purchasing a vehicle equipped for wheelchair transfer, or purchasing irrevocable pre-paid funeral services. Additionally, with enough time, an individual who may need to qualify for Medicaid in the future can give away assets to family members or others without adverse qualification consequences. It is important to consult with a trusted professional about these alternatives before implementing them.
The Resource Requirement and the Use of Trusts in Medicaid Qualification
There are two situations that could hinder the ability of an individual to either qualify for Medicaid or continue to receive benefits. The first situation arises when an individual with more than the maximum amount of “countable assets” needs to qualify for Medicaid and does not have the ability or time to convert enough of these assets to “exempt assets”. A Statutory Exception Trust may be a solution for this situation. The second situation arises when an individual has or will qualify for Medicaid but has family or friends who wish to provide assets to the individual for care. Without planning, the assets put aside for the Medicaid recipient would diminish the amount of value Medicaid would provide over the life of the recipient. A Third-Party Special Needs Trust may be a solution in this situation.
Statutory Exception Trusts
In those instances where an individual will have more than the $2,000 allowed under the resource requirement at the time of Medicaid qualification, one of two statutory exception trusts may enable the individual to become Medicaid qualified. These trusts operate by allowing a Medicaid applicant to place assets in trust, for the applicant’s future benefit, yet have the assets excluded from his or her countable assets. The first such trust is known as a Disability Trust and must be established for the benefit of a disabled individual who is under the age of sixty-five. At the termination of the trust, the remaining assets must be used to repay Medicaid for benefits received during the beneficiary’s lifetime. The second trust is known as a Pooled Trust and must be managed by a non-profit corporation such as The Colorado Fund for People with Disabilities. There is no age restriction as with the disability trust. At the termination of the trust, the remaining assets are retained by the trust for charitable purposes. Therefore, although the statutory exception trusts allow an individual with assets in excess of the $2,000 maximum under the Medicaid resource requirement to qualify for Medicaid benefits, the individual’s assets may not be preserved for transfer to family members at the individual’s death.
The Third-Party Special Needs Trust
In those instances where a family member or other person wishes to provide benefit to the Medicaid recipient, a Third-Party Special Needs Trust may be used to eliminate the reduction in benefits (or disqualification) that would otherwise happen if such person put assets aside directly for the care of the Medicaid recipient. These trusts are powerful tools to allow a loved one to ensure assets are made available for the disabled individual, during that person’s lifetime. After the death of the disabled individual, the remaining assets in the trust are not used to repay Medicaid or for charitable purposes but instead may be moved to other family members. The assets in these trusts are not available for Medicaid purposes because the trust is discretionary) and the trust is written so that it places a prohibition on distributions to the Medicaid beneficiary that would affect Medicaid qualification.
There is a third trust, known as a “Miller trust” or “Utah Gap Trust,” that can be used to provide an exception to the income requirement.
Planning with these trusts should only be initiated by families using the guidance of a trusted and experienced professional.
© Tanya Shimer. All rights reserved.
Once my estate plan is done, what do I do with my documents to ensure safe keeping?
Its important to store your legal documents I a safe place where your representatives can find them.
Many clients have asked how to care for their estate planning documents once they are completed, I suggest the following:
1. Originals. The originals are very important. They should remain in your care and control, and neither I nor anyone else should be entrusted with them. Your original signed will should be kept in a safe place, preferably in a fireproof safe or safe deposit box. Your original powers of attorney can be kept in your reference notebook. In addition, any old/former documents—including any copies—should be destroyed. Many clients ask whether copies of former estate planning documents should be retained “just in case.” The answer is no. All such documents should be destroyed to avoid any confusion as to their validity. Use your best judgment in storing and protecting these documents.
2. Reference Set. If I did your estate plan, you have been provided with a reference set of your documents in your binder. These are yours to be read and to which you may refer with any questions or concerns. The unsigned copy of your will in this binder is not to be signed or presented as a valid document—you have only one valid, executed will. If you decide to provide anyone with a copy of your will, be sure to copy the unsigned, reference will and not the original, signed will. With the quality of today’s copiers, I do not wish to be presented with a document purporting to be an original and have any questions as to whether or not it is the original or a copy.
3. Copies for Agent. You should provide your agents with copies of your executed Powers of Attorney, both General and Medical. This will enable them to have the documents and act upon them without the necessity of obtaining copies once a disability or other unfortunate circumstance occurs.
4. Copies for Physicians. You should also provide your physicians with copies of your executed Medical Power of Attorney and Living Will. They will then be able to keep these important documents in your files so that your agents will not have to search for them in the event of illness or accident.
5. Copies for Home. For clients living alone, especially aged clients, I recommend that copies of your Medical Powers and Living Will be kept in a readily accessible location such as your refrigerator or freezer in the kitchen, along with a note on the refrigerator door indicating that the documents may be found inside. First responders are taught to check the refrigerator door for important medical and pharmacological information. Finding the Medical Power of Attorney and Living Will along with other such information will make their treatment decisions easier, and better insure that your dignity is protected.
© 2012 Tanya Shimer All Rights Reserved.
What does a will actually do?
Your will is a legal document in which you give certain instructions to be carried out after your death. For example, you may direct the distribution of your assets (your money and property), and give your choice of guardians for your children. It becomes irrevocable when you die. In your will, you can name:Your beneficiaries. You may name beneficiaries (family members, friends, spouse, domestic partner or charitable organizations, for example) to receive your assets according to the instructions in your will. You may list specific gifts, such as jewelry or a certain sum of money, to certain beneficiaries, and you should direct what should be done with all remaining assets (any assets that your will does not dispose of by specific gift). A guardian and trustee for your minor children. You may nominate a person to be responsible for your child’s personal care if you and your spouse die before the child turns 18. You may also name a trustee—who may or may not be the same person—to be responsible for managing any assets given to the child, until he or she is 18 years old. A personal representative. You may nominate a person or institution to collect and manage your assets, pay any debts, expenses and taxes that might be due, and then distribute your assets to your beneficiaries according to the instructions in your will. Your personal representative serves a very important role and has significant responsibilities. It can be a time-consuming job. You should choose your personal representative carefully. Asset protection/tax planning. A properly designed estate plan will, at a minimum: (i) protect your assets, your person, and your business from a possible future disability; (ii) protect your assets from liability during and after your life; (iii) distribute your assets tax efficiently at your death; and (iv) ensure that assets left to young beneficiaries are left inside of a structure such as a trust that will provide management and protection of these assets for your beneficiaries.
Why do I need a will?
Wills are important. Regardless of how much or how little money you have, a will ensures that whatever personal property and assets you do have will go to family or beneficiaries you designate. Without a will, the court makes these decisions.If you have children, a will is essential, to ensure that your wishes regarding your children will be clear. In your will, you will be able to designate a guardian for your children who will be responsible to care for your children should something happen to you. In addition to naming your children’s guardian, by completing a will, you will also be able to name a trustee who will be responsible for taking care of your financial resources for your children until they are adults. There are other benefits to having a will, and depending on the size of your estate careful planning can reap significant tax benefits. You will also avoid subjecting your family and loved ones to confusion and anxiety at what is already a difficult time by making your wishes clear.
© Tanya Shimer. All rights reserved.