Estate PlanningSummer 2019

Use caution creatingan IRA inheritancetrust

When you hold an IRA, those funds can bedistributed to the person you name as beneficiary orto an inheritance trust. Some IRA owners choose atrust because it gives them a degree of control overhow the assets are distributed after they die.

Before you name a trust as the beneficiary of yourIRA, however, consider the pros and cons.

Designating a trust as beneficiary can be useful if theintended beneficiary has financial issues and is not agood money manager. That could mean distributingassets according to a certain schedule or simplywithholding access until the beneficiary is a certainage. The trust can also provide protection fromcreditors, if your heir is likely to owe money in adivorce or file bankruptcy.

A trust can also be used to provide for children froma previous marriage, as long as it meets certainrequirements. It could, for example, allow someoneto leave enough money to care for their spouse, withremaining funds going to their children after theirspouse passes.

That said, designating a trust as the beneficiary of anIRA can be tricky. You’ll need specialized guidance toavoid costly tax mistakes and other unintendedconsequences.

Generally, when someone inherits an IRA, they mustwithdraw a minimum amount each year. Heirs havethe option of stretching payments out over theirexpected lifespan, which means funds can continueto grow with tax-free benefits.

When the beneficiary is a trust, the IRS will “lookthrough” the trust and treat the heir(s) as if theywere the named beneficiary. That way the trust cantake advantage of the same minimum-distributionstrategies.

However, several factors can disqualify the trustfrom this look-through treatment. Trusts in whichthe oldest beneficiary cannot be clearly identified, orwhich name a nonperson beneficiary (such as acharity or estate) won’t qualify for look-throughtreatment. If that happens, payments may becalculated according to the original owner’s lifeexpectancy, as if they were still alive. That couldmean a far more rapid payout than desirable.

On the other hand, if you leave your IRA outright toyour spouse, he or she has the option to roll thosefunds into his or her own IRA and defer distributionsuntil age 70 1/2. Then, when your surviving spouse

Plan to protect kids withspecial needsRaising a child with special needs can be a richexperience. It’s also a costly one that comes withunique challenges for your financial future and estateplans. There is no one-size-fits-all recommendation,but here are some things to consider:

Your future security: Protect your children bysecuring your own financial future. Start saving forretirement as early as possible to take advantage ofcompound interest.

Life insurance: Consider investing in enough lifeinsurance to care for your child’s future financialneeds. Government benefits can cover basic costs, butextra funds can fund additional expenses, such ashiring an additional caregiver after you’re gone. Talkto an advisor about beneficiary designations andconsider a special needs trust. Consider disabilityinsurance, too, to protect your family financially ifyou are living but no longer able to work.

Special needs trust: Assets held in a child’s nameare held against them and could disqualify them fromgovernment benefits. One way around that is to setup a special needs trust. The intent is that a specialneeds trust can supplement a disabled person’sincome in order to pay for extra wants and needs notcovered by government benefits.

Educate your family: If you think your parents oranother family member might leave a legacy to yourchild, make sure they understand the implications ofa cash gift and the benefits of a special needs trust.

529 ABLE (529A): Like a 529 education plan, a529A is a tax-advantaged way to save for your child’sspecial needs education and certain disabilityexpenses. Generally speaking, parents shouldconsider maxing out their own retirement accountsbefore funding supplemental savings tools like these.Be aware that once the account exceeds $100,000,your child will no longer be eligible for SupplementalSecurity Income (SSI) payments.

Adult guardianship. If your child will be unable tomake medical and financial decisions after they turn18, talk to a lawyer about a power of attorney andhealth care proxy or becoming your adult child’s legalguardian. Don’t assume you’ll automatically be ableto make decisions for them just because they’redisabled.

When you have children with special needs, financialplanning takes special care. It can be an emotional,frustrating process. An estate-planning attorney canhelp you be proactive and create a plan so that bothyou and your children are cared for and protected.

Land trusts provideanonymity, tool to avoidprobateA land trust is a private legal agreement that transfersa property title from the owner to a trustee. Thetrustee agrees to hold that title for the benefit ofanother party.

Finding someone’s date ofdeath

Imagine your grandfather left a portion of hisestate to his sister, but Great Aunt Irma hasbeen gone for years. In order to probate hiswill or other legal documents, you may need tofind Irma’s date of death.

If Aunt Irma passed away in the last 50 years,finding this information should be fairlyroutine. Look for a website that offers access tothe Social Security Death Index (SSDI).

This list contains more than 84 millionindividuals whose deaths were reported to theSocial Security Administration.

But the SSDI has little information on peoplewho died prior to 1962. One alternate tool totry is findagrave.com. This site includes burialinformation for millions of individuals, andsome records even contain a photo of the gravemarker.

Increase in nursing homeclosures

Choosing nursing home care can be a big,emotional decision. Long-term care is a sizableinvestment, and many people struggle withentrusting their loved one’s care to someoneelse.

Now some families are dealing with anadditional hurdle, as nursing home closuresare forcing some seniors to relocate, wideningthe distance families must travel to visit.

In what is described as an “epidemic,” ruralnursing homes across the U.S. are closing.

dies, the IRA can be left to younger heirs, using theirlife expectancy to set distributions. With the rolloveroption, couples can extend the tax benefits of an IRAaccount for decades, even generations.

An IRA trust can be useful in the rightcircumstances. Consult an experienced estateplanning professional for assistance in crafting yourstrategy and designing a trust.

Estate planning for taxpayerswithout kidsIf you’re single with no kids, or married without kids,you have some unique estate planning needs. You’llrequire special strategies for health care,emergencies and division of your estate.

Plan for extra care costs. Growing older withouta built-in support team may mean you’ll have extraexpenses for care. You may need to hire people tocheck in with you, to run errands or to drive you toappointments. If you plan to rely on younger familymembers or friends, talk to them about what they’rewilling to do and revisit those conversations often.

Plan for an emergency. Plan to take care ofyourself if you became incapacitated. Certain toolscan make that easier for the people who are going tostep up to help you.

Arrange power of attorney and health careproxies. These documents enable you to designatewho will make financial and health care-relateddecisions for you if you are no longer able.

Consider funding a revocable trust. If you setup a revocable trust and fund it now, your trusteewill be able to use those funds for your care if youbecome incapacitated. Without such a trust,someone close to you would have to petition thecourt to appoint a guardian or conservator. That’scostly, time-consuming and stressful, and putscritical decisions for your well-being in the hands ofa judge.

Make a will. For people without a will, state lawgenerally dictates that assets go to a spouse orchildren. But distributing your assets is morecomplicated if you are single without kids or part ofan unmarried cohabitating couple.

Think about your legacy and how you want yourassets distributed. You may consider gifts to charityor lifetime gifts to certain family and friends, or theuse of age-benchmarks that determine when youngbeneficiaries receive their gifts. A will ensures youget to decide how your assets are distributed, not aprobate court judge.

Talk with your estate-planning attorney to help youreview your finances and assess your plan.

The creator of the trust, known as the trustor, istypically the primary beneficiary for their lifetime.This party retains complete use of the land and ownsthe beneficial interest thereof. Land trusts aregenerally revocable, meaning the trustor may modifyor terminate the agreement while they are still alive.

Land trusts provide a measure of privacy. Once a landtrust is completed, a public records search will nolonger reveal that you are the property owner. Ifpeople don’t know you own certain assets, it coulddeter them from pursuing litigation against youbecause you won’t appear to have sufficient assets tomake a suit worthwhile.

Land trusts have become less common.Today they are often replaced by livingtrusts and transfer on death deeds.

Land trusts are also a tool to avoid probate byallowing you to designate succession of ownership.You can name a contingent beneficiary who willreceive the title when you die, without the cost anddelay of court proceedings.

Land trusts can also facilitate multiple ownership,providing a structure for clear legal division. In somecases, they could improve lending access. Arguably, aland trust could allow you to circumvent a “due onsale” clause that would otherwise prevent you fromselling property or transitioning it into an LLCwithout paying back financing in full, butinterpretations differ on that issue.

Only six states have a land trust statute on the books(Florida, Hawaii, Illinois, Indiana, South Dakota andVirginia), but you can hold land in trust in most otherstates as long as the beneficiary, trustee or property isbased in one of those states.

Land trusts have become less common. Today theyare often replaced by living trusts and transfer ondeath deeds. They can be useful to real estatedevelopers, however, and still have a place in someestate plans.

Work with your estate-planning attorney to decide ifa land trust is right for you.

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With staff shortages and low Medicaidreimbursement rates, these long-term carefacilities can no longer afford to stay inbusiness.

Approximately 63 percent of nursing homepatients have their care funded by Medicaid,according to the American Health CareAssociation. But with reimbursement ratesoften below the actual cost of care, thesefacilities can no longer manage operating costs.In some states, Medicaid programs underfundpatients anywhere from $30 to $40 per day.

For nursing home residents, the stress ofmoving is considerable. These facilities maylack the resources to orchestrate a successfulclosing, meaning residents might not get helpto find a suitable home, belongings may be lostin the move and transfer of vital medicalrecords can be delayed.

The stress associated with moving is so realthat the industry has a name for it: “transfertrauma.” Common outcomes includedepression, agitation, falls, weight loss andnew deficits in self-care.

Even after making it through relocations, manyelders find themselves long distances awayfrom their families. That means fewer visits,greater isolation and increased risk for abuse.

If your loved one is subject to a nursing homeclosure, be sure you know their rights. TheNational Consumer Voice, a nonprofit offeringombudsman support for long-term care,provides information on its website(theconsumervoice.org). The site also has aNursing Home Closures Kit that can help youunderstand if the closure is being conductedappropriately.

Keep in mind that nursing homes with a higherpercentage of private-pay patients are at lowerrisk of closure. Paying for nursing home care isexpensive, but long-term care insurance canhelp cover those costs.

Seniors with the ability to self-pay will havemore options for care, making them lesssusceptible to nursing home closure.

Consider purchasing insurance for yourselfand your loved ones. If your parents will not beable to self-pay for their own long-term care,and you want to ensure they have options,long-term care insurance can be a way toprotect your own time and resources, whilesimultaneously caring for your parents.

Keep tabs on nursing home trends in your areaand talk with an estate planner to evaluatewhether long-term care insurance would makesense for you or someone you care about.

This newsletter is designed to keep you up-to-date with changes in the law. For help with these or any other legal issues, please call today. The information inthis newsletter is intended solely for your information. It does not constitute legal advice, and it should not be relied on without a discussion of your specificsituation with an attorney.