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It is difficult to perform estate planning without taking finances and taxes into consideration. Instead, many people who perform successful planning discover that these three topics are interchangeably related. In the last year, several new topics have been introduced that redefine how each of these three areas.
This article takes a brief look at some new and exciting estate planning strategies.
# 1 – Upstream Gifting
The California Court of Appeals recently decided the case of Winston v. Winston-Levin, which reviews some important estate planning considerations. In 1986, Robert Levin created a revocable trust, which he later revised several times. Sadly Robert passed away in 2015, and litigation occurred concerning subsequent revisions to the trust when Robert’s daughter from a previous marriage initiated legal action against Robert’s widow.
The California court subsequently voided a revision to Levin’s trust and ordered the widow to return property she had received according to these changes. The daughter subsequently appealed arguing that the court had mistakenly voided the entire revision rather than just the portions that benefitted the widow.
The California Court of Appeals ultimately found that the trial court had made the correct decision and that only voiding provisions related to the widow would not carry out the deceased man’s wishes.
Adding trust instruments to your estate plan can help a surviving spouse and other beneficiaries have access to assets while the rest of the estate is wound up. Especially if there are young children or children with special needs ensuring continuity of financial security to survivors is at the forefront of individuals making end of life decisions. There are many types of trust instruments, such as a marital “A” trust or a bypass “B” trust. These trusts can also be revocable and irrevocable.
Revocable or living trusts
A revocable trust permits the passing of assets outside of probate, the legal proceeding that winds up and settles the estate of the deceased person. Also known as a living trust, you (the grantor) are able to retain control of the assets during your (the grantor’s) lifetime. A living trust is flexible. They can be dissolved at any time should you wish to change the beneficiary or you yourself need access to the trust assets for any reason. Once you (the grantor) dies, the living trust becomes irrevocable. A living or revocable trust is subject to estate taxes, unlike an irrevocable trust. Lastly, you are able to name yourself the trustee or co-trustee and retain complete ownership and control over all of the trust assets during your lifetime.
The usage of 529 plans is growing substantially. While for years, many families relied on these plans to fund college, these plans are also capable of being utilized to manage wealth, minimize taxes, and make multi-generational gifts.
This article takes a brief examination of the advantages as well as limitations that 529 plans can provide.
Avoid Gift and Estate Tax Rules
This is the last post in our in-depth series of trusts and why and how to include them in your estate plan. For prior topics, click here. We were last discussing common mistakes we see in the establishment of trust instruments. Our last post examined failing to fund the trust. The next topics surround beneficiary designations and policy titling.
No. 3 – Unintended beneficiaries of retirement accounts and life insurance policies
Trust funds include life insurance proceeds and other accounts and policies payable to beneficiaries. If those accounts and policies do not properly designate your trust as a primary or contingent beneficiary, then those funds will pass to the beneficiary directly, disregarding any of your instructions from the trust document. The result of the distribution may be that your beneficiary receives more or less than you attended or sooner than necessary, defeating the purpose of the establishment of the trust.
State plans for medical assistance under federal Medicaid law must comply with certain requirements located in Title 42 U.S.C. § 1396a.4, but do not always do so. In 2018, the United States District Court for the District of Alaska in the case of Disability Law Center of Alaska v. Davidson denied a motion for summary judgment on three claims alleging that Davidson who in her position as the commissioner of the Alaska Department of Health and Social Services had violated federal Medicaid law.
The violations of which the Center was accused were: failure to provide adequate notice on how to apply for and access applied behavioral therapy, not reimbursing for ABA under the program, and not providing ABA services under the program with reasonable promptness. In arriving at its decision, the court noted that the Disability Law Center had the burden under federal law of establishing that Davidson had deprived them of the following rights: the right to notice of availability of ABA services, the right to be reimbursed for ABA therapy, and the right to have ABA therapy provided.
The court’s subsequent decision subsequently supported the position that any state that has elected to participate in federal Medicaid programs must be prepared to provide services identified under the federal statute as mandatory. This case underscores the right that many individuals in the United States have to Medicaid benefits.
One of the common responses that many people have as they learn about estate planning is that there are a number of estate planning documents. In addition to things like wills, living wills, advance directives and powers of attorney, there also also a number of other important documents.
In New York there are Medical Orders for Life-Sustaining Treatment (MOLST) forms. This article briefly reviews what MOLST forms do and situations where you might need one of these documents.
The Role of MOLST Forms
We’ve been examining adding a revocable (a/k/a living or inter vivos) trust or irrevocable trust to your estate plan. Trust instruments are an important part of your estate plan, particularly if you have a spouse and young children you wish to provide for upon your death. When mistakes are made, in establishing or setting-up a trust, the errors are borne by your survivors.
When problems arise in trusts they tend to involve issues with trust funding, policy titling, and beneficiary designations. When neglected these issues have their way of creeping into the lives of your loved one and will require significant amounts of money and time being spent that could have otherwise been avoided. What follows is a primer on the top 4 scenarios your survivors will need to get through to correct any problems associated with trust funding, policy titling, and beneficiary designation.
No. 1 – Avoiding probate
In 1997, Ashley Sveen purchased a life insurance policy. Later that year, Ashley married Kaye Melin and named Melin as primary beneficiary on his life insurance policy. Sveen also named his two adult children as contingent beneficiaries.
Several years later, Minnesota amended its revocation on divorce. Sveen and Melin divorced in 2007, but Sveen never changed the beneficiary designation on his life insurance policy. After Sveen passed away in 2001, the insurance company that held the policy requested a court make a judgment on whether Melin or Sveen’s children should receive benefits from the policy.
The United States District Court of Minnesota then granted summary judgment for the Sveen children and awarded them life insurance proceeds. The United States Court of Appeals for the Eighth Circuit reversed and remanded this decision. Subsequently, the court found that the policyholder’s ability to opt out of the law by redesignating his former wife as the beneficiary of the policy did not resolve the issue.
By the time that the legendary screen actor and comedian Groucho Marx became a senior citizen, he had a difficult time making a number of decisions regarding his daily life.
During this time, Marx’s companion, Erin Fleming, was accused of elder abuse and experienced a deterioration in his relationship with Marx’s children. This was made complex by Fleming’s decision to push Marx to perform. Later, after Marx became incapacitated, Fleming was appointed as guardian and temporary conservator of Marx’s valuable estate. Marx’s grandson was later named permanent conservator.
Following Marx’s death, the fight for assets from the late legend’s estate continued on for years. A judge later resolved the debate in favor of Groucho’s children and ordered Fleming to repay a large amount that she had stolen from Marx’s bank accounts.
New York Estate Planning & Elder Law Blog