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Not Easy to Get, But Worth It - VA Long-Term Care Benefit

A survey conducted by the National Association of Area Agencies on Aging, National Council on Aging and UnitedHealthcare reveals a frightening statistic in the United States of Aging survey.  97% of professionals supporting people 60 and older believe that seniors will not be able to afford their health care costs as they age. Only 3% are very confident older Americans will be able to manage health care costs. Not a pretty picture.

The high and ever-increasing cost of long-term care is the leading reason that professionals do not believe that seniors will be able to afford their health care. The median price of a private room in a nursing home now costs about $91,000 - an increase of 4% from last year. The survey on aging, reported on in an article in Forbes, offers a glimmer of hope with a look at a little-known program from the VA:  "The VA Program That Pays For Long-Term Care for Vets."

About half of us will someday use nursing home care, and many others will need long-term care in assisted living facilities or at home.

But here's a little good news… there's a little-known Veterans Administration (VA) program that pays for some long-term care costs for vets and their families. It's called the Aid and Attendance Benefit. This benefit has been around for over 60 years and covers some expenses for in-home care, nursing homes and assisted living facilities. This benefit is available to honorably-discharged wartime veterans over age 65 and their widowed spouses who are eligible for a VA pension and require the "aid and attendance" of another person or are housebound. The VA calls this "additional pension benefits for care assistance in the home or in an assisted living community."

Aid and Attendance pays up to: $1,788 per month to a single veteran, $1,149 to a surviving spouse, $2,120 to a married veteran and $2,837 to a veteran couple. The benefit is tax-free. To qualify, the applicant must either:

• Require      assistance with Activities of Daily Living (ADLs) like dressing,      bathing,  and eating;
• Be      bedridden;
• Be a      nursing home patient due to mental or physical incapacity; or
• Have      eyesight limited to a corrected 5/200 visual acuity or less in both eyes      or concentric contraction of the visual field to five degrees or less

Of course there's the catch: applying for and receiving the money is a real pain in the bottom. The VA estimates it can take on average about five months for an Aid and Attendance claim to be processed after a veteran applies to a VA regional office. Even so, some applicants have been crushed with red tape and much longer waits.

The article tells the story of Frank Fassnacht, an 84-year-old former Disney projectionist now living in a Motion Picture & Television Fund home. He applied for the benefit three years ago, and still no luck. Because of the VA's high turnover rate, it's hard to find a consistent person to help you.

One other thing to note: a veteran may be turned down for the Aid and Attendance benefit if his or her assets are too great. The VA doesn't have a strict rule on how much assets one can have, but it's typically no more than $80,000 (not including your home), depending on age.

The article advises you to seek the assistance of an elder law attorney to apply. The rules and paperwork can be a super difficult, so a qualified attorney can really be a help. He or she can also assist you in preserving assets. Also, you should be ready to document your long-term care expenses and provide all the application materials.

For more information contact Robert A. Gordon of Redkey Gordon Law Corp, an experienced elder law attorney.

Reference: Forbes (July 10, 2015) "The VA Program That Pays For Long-Term Care for Vets."

Should You Consider a TOD (Transfer on Death) Registration for Brokerage Accounts?

Certain assets, including life insurance, IRAs, 401(k) plans and other retirement accounts pass directly to beneficiaries outside of your will. Typically, brokerage accounts pass only through your will, and then only after probate. But there is a way to ensure that brokerage accounts transfer at death to your beneficiaries.

A recent item in Kiplinger's, "How Your Brokerage Account Can Bypass Probate" explains how to use a transfer on death (TOD) registration to have your brokerage accounts transferred directly to your beneficiaries upon your death. This is a special kind of investment account that is recognized under state law and it may solve the challenges posed by having your estate pass through probate, which can be an expensive and time-consuming process. In some states, a "TOD" can also be used to allow real estate to be transferred. An experienced estate attorney is needed to understand where this works best, and what it can and cannot accomplish.

A TOD lets you keep control over the account, and you are able to change the beneficiary designation any time you'd like.

Another nice thing about a TOD, according to the Kiplinger article, is that it's very explicit as to who inherits the account. It's not lumped in with all of the other assets passed through your will. A TOD can help eliminate disputes among family members—one of the critical rationales for estate planning in the first place—so you'll have peace of mind knowing that you assets will go to the intended individuals.

A TOD account permits the assets remaining in the investment account when the account owner dies to pass directly to the beneficiaries named by the account owner. This occurs outside of probate, so there are no court filings or long delays. Typically, the beneficiaries of the TOD account need only show the holder of the investment account (usually a brokerage firm) an original death certificate of the owner. That's all they have to do to gain control of the account.

If you want to divide your estate among more than one beneficiary—like, give a third to each of your three daughters—it may be a good idea to transfer the brokerage account through your will. The issue with using a TOD in this situation is that you could designate one TOD beneficiary of your brokerage account (Sarah), and leave an equal amount of money to the other girls, Kate and Laura. However, if your brokerage account loses money or goes way up in value before you pass away, Sarah could end up inheriting an amount of money very different than the other girls. If you do this through your will, you can divide the total assets in exactly equal portions.

Talk with Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning lawyer to find out how to best use a TOD and whether there are other strategies that will work well for your specific situation.

Reference: Kiplinger.com (July 12, 2015) "How Your Brokerage Account Can Bypass Probate."

New Laws May Impact Your Estate Plan –Schedule a Check Up with Your Estate Planning Attorney

Ensuring that your assets are pass on to heirs in a way that you wish is not always easy because of the many options available and the fact that the tax laws are always changing. While certain facts are relatively fixed – i.e., beneficiary designations on life insurance policies and retirement plans avoid having these particular assets subject to probate, others are subject to change. Keep up with these changes by meeting with your estate planning attorney on a timely basis.

The use of trusts to help estates avoid probate is well established in any estate planning law practice, but when laws change, estate planning must change also. An explanation comes from The (Anderson, IN) Herald Bulletinarticle, "Changes in laws can affect your estate planning," which explains how the revocable grantor trust works and why it was created: to help people avoid probate.

A revocable grantor trust roles include the grantor (the person making the gift), the trustee in charge of the trust (typically the grantor), the income beneficiary (also usually the grantor), and the remainder beneficiary. Taxes that are generated from investments and income are reported on a standard tax return. When assets are placed in a trust, individuals have control and the use of the assets. Ownership is structured so that there is no probate. Individuals should fund the trust with as many assets with which they are comfortable (except IRAs and retirement accounts).

The article notes that under previous laws, a lot of time would be taken in deciding whose trust would be funded with what assets. Typically, two trusts would be set up right away for married couples, with the idea that when the first spouse passed, the survivor would be able to use unified credit to avoid tax liability. Before a recent law change on "portability," or the application of the tax credit, individuals had to use it or lose it. As a result, spouses would have to have two trusts—both revocable—and when one spouse passed, their trust would become irrevocable. Income typically would all be paid out to the surviving spouse. However, the assets remained in the trust for subsequent beneficiaries.

With portability, a person doesn't have to use it or lose it when the first spouse dies. This change makes it imperative that people re-examine their trusts and fund a single trust.  But, before you go and make changes, you need to sit down with your estate planning attorney to see if your estate plan needs to be updated.

The article acknowledges that we all like to compartmentalize decisions, and that it's especially easy to do so with estate planning. Who wants to talk about what's going to happen after you're dead? Not a popular topic with most people. Even so, poor planning—or no planning—can really impact investments and tax planning, as well as plant the seeds for a major headache for your heirs. Talk over all of these important matters with Robert A. Gordon of Redkey Gordon Law Corp, an experienced estate planning attorney, so that you can make informed decisions about the future.

Reference: The (Anderson, IN) Herald Bulletin (July 10, 2015) "Changes in laws can affect your estate planning."

Estate Planning 101 – Communicate with Your Heirs

While some estate planning is better than none, most Americans don't speak with their heirs about basic issues – like where the wills can be found – and most wills are not updated.  A recent study from the Center on Wealth and Philanthropy at Boston College, estimates that between 2007 and 2061, as much $59 trillion will be transferred from 93.6 million American estates. The numbers are clear, but little else is.  How assets are being distributed, what plans are in place for potential beneficiaries and other critical issues are murky at best, and in most cases, completely undefined.

If you've got heirs, you may want to do something few Americans do – tell them where your will can be found, and discuss your intentions for your estate.  These two conversations would put you miles above what happens to most heirs, according to "5 Biggest Estate Planning Mistakes You Can Make," seen in The Street.  More than half (56%) of U.S. parents may have a will or living trust document, according to a caring.com survey of adult children, but one-third of parents (27%) don't have estate documents in place, and 16% of adult children have no idea about what's in their parents' estate plans. Looks like we are setting up for a generational scavenger hunt: even when parents have an estate in place, most adult children don't know where the documents - 52%.  Even worse, 58% don't know what the estate planning documents say!

The article cautions that even when you have a will or a trust, there's no absolute guarantee that your assets will be distributed without a hitch. Wills and trusts have kept families in litigation and at odds with each other for years if the estate plan isn't administered properly. To make things easier for your family and make sure your wishes are carried out properly after you pass, try to steer clear of these monstrous errors:

1. Sibling Rivalry. When people fight over their parent's estate, they typically hand over a sizeable piece of their inheritance to the attorneys hired to represent them. If the deceased's children didn't get along while their parent was alive, it will be only the same or worse now. Parents should mitigate this by discussing their estate plans with their heirs before they die. A little explanation reminds us, can go a long way.

2. Unanticipated surprises. What other kind of surprise is there? "Planned surprises?" One critical issue that's many times winds up in litigation is the way that the estate taxes are apportioned. They are either written in the will or totally neglected. So for example, the will might say, "I give my house to my daughter Betty, and the estate taxes on this is paid out of revenue." This way you make sure that your estate will be taking care of the estate taxes on the items distributed.

3. Forgetting about your estate plan. Update, update, update! Keep up with your estate planning attorney and let him or her know about new news—like your recent divorce and remarriage or the birth of your first grandchild. If you fail to account for these types of life changes in your family life, you are leaving estate planning leaves your legacy up for grabs. If you thought a divorce, a remarriage, or the blending of families is a major deal during life, after your death—if you don't address your specific wishes—if may be even a bigger nightmare. Talk to an estate planning attorney about a trust for this situation to shield everyone from potential legal repercussions and to ensure your assets go where you designated.

That survey also found that of those that have a will, only 40% have updated it in the last five years, and 25% of adult children don't know if their parents' will has ever been updated.

4. Think about whether to name co-trustees. Some people feel better with their estate planning knowing that their spouse or child will be part of the process. But if they don't have the time, patience and business sense to handle the responsibility and liability of the position of trustee, there's no reason for co-trustees and added stress. This "two-headed" approach may work in some situations but the reason for having only one trustee is that he or she can make swift and decisive decisions. It's hard for a trustee to do so when he or she is acting by committee, even if it's only two people.

5. Watch for undue influence. Personal caregivers can help with the care for your mom or dad, but some have placed themselves in estate plans by exerting pressure and by unscrupulous means during a very fragile and vulnerable time.

Avoid these and other mistakes that can derail your estate planning strategy. Talk to Robert A. Gordon of Redkey Gordon Law Corp, a qualified estate planning attorney and create a sound and safe estate planning strategy.

Reference: The Street (July 13, 2015) "5 Biggest Estate Planning Mistakes You Can Make."

IRS Wins Huge Settlement with Estate of Late NBA Owner Bill Davidson

The Internal Revenue Service has won a settlement of $388 million from the estate of Detroit Pistons owner Bill Davidson. According to the IRS, the estate owned more than $2 billion in additional taxes. To gain some perspective:  in 2013, the US Treasury took in a total of $12.7 billion in estate tax revenue. Davidson, who made his fortune in glass and auto products, was best known to the public as the team owner of the Pistons, the W.N.B.A.'s Detroit Shock and the N.H.L. Tampa Bay Lightning.

In an article that appeared in Forbes, "IRS Grabs $388 Million From Billionaire Davidson Estate," the case against Davidson's estate is explained in detail. Two years ago, Davidson's estate filed a matter with the U.S. tax court that challenged the agency's assessment of additional taxes. The claimed that the estate owed $187 million in gift taxes, $152 million in estate taxes, and $49 million in generation-skipping taxes, plus a $133,000 gift tax penalty bill.

Two problems factored into to these deficiencies. The IRS claims that the Davidson estate undervalued some corporate stock and improperly valued the self-cancelling installment notes (SCINs). The IRS said that the estate also underestimated the value of privately held stock held in trust for Davidson's children and grandchildren.

SCINs are legitimate tax planning devices, but there is some gray area in the way they are structured. In this instance, the IRS questioned the calculations used and said the basketball team owner was, in effect, making taxable gifts he should have reported. The IRS requires a fair exchange of assets for the notes.

It's not just billionaire NBA owners who have these issues, but also those estates with hard-to-value assets and those wanting to take advantage of new legal estate planning techniques like these SCINs. Even smaller estates tax under the estate exclusion may need to file estate tax returns, and face unlimited audit times for hard-to-value assets.

Speak to Robert A. Gordon of Redkey Gordon Law Corp, a qualified estate planning attorney about SCINs and other techniques for your estate.

Reference: Forbes (July 8, 2015) "IRS Grabs $388 Million From Billionaire Davidson Estate."