Cleveland, Ohio estate planning and elder law attorney, Daniel A. Baron, offers the following information on the definition of ADL’s and IADL’s and how to plan on Long Term Care as part of your Estate and Medicaid Plan: As we are all well aware, there is only one alternative to aging. If you are fortunate […]
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on the differences between and Grantor and a Non-Grantor Trusts and further considerations to as part of your Tax and Estate Plan:
Understanding tax benefits and pitfalls of a trust and putting together a trust which is most beneficial for your personal situation is best left to an experienced trust attorney who can explain the differences in trusts and customize your Estate Plan.
Consequently, understand that the term used; Grantor Trust and Non-Grantor Trust are important. These terms mean very different things but are both associated with tax implications.
The Grantor is the party who establishes the trust and maintains control while living and mentally capable.
Some examples of Grantor Trusts
When setting up your trust as part of your Estate Planning, tax planning is an integral part of each and every plan and is as individual as you are.
Planning for Tax implications
How is the trust going to be taxed? Does the American Tax Relief Act of 2012 (ATRA) affect the taxes of your trust? By setting up a Grantor Trust you can realize a number of tax advantages. Some of these advantages are but not limited to:
Plain and simple, the assets of the trust grows, which in turn benefits the beneficiaries without paying income tax. Essentially this is a tax free gift.
Non Grantor Trust
A Non-Grantor Trust is where the donor of the assets relinquishes all control within the trust. The donor of the trust funds is not a beneficiary or a trustee and has no input on how the funds are disbursed or controlled. When the donor establishes a Non-Grantor Trust (aka irrevocable trust) they give up their rights to amend, revoke, or terminate the trust as this now becomes the functions of the trustee(s) either acting by themselves or with a Trust Protector.
Although the assets used to establish the trust were once owned by the donor, they are now owned by the trust. Any income being generated from the assets now is the sole responsibility of the trust. As is with the Grantor Trust, any distribution to a beneficiary must now the proper IRS forms issued and provided to the recipient.
When a non-grantor trust is established it becomes a taxable entity and a Federal Employer Identification Number is issued. This also means that an income tax return needs to be filed on behalf of the trust each year.
Understanding tax benefits and pitfalls of a trust and putting together a trust which is most beneficial for your personal situation is best left to an attorney who can explain the differences in trusts and customize your Estate Plan. Contact Daniel A Baron of Baron Law Cleveland, Ohio at 1-216-573-3723.
Cleveland, Ohio estate planning and elder law attorney, Daniel A. Baron, offers the following information on Long Term Care and incorporating it into your Estate Planning:
If you are over aged 65, a fall could leave you incapacitated or worse, it could be fatal. Having a Non-fatal fall could leave you unable to care for yourself for either a short period of time or a long period of time. Should this happen, who is going to pay for your Long Term Care?
One in every three Americans falls each year. Falls for the elderly are the leading cause of non-fatal and fatal injuries for those aged 65 or older.
If you happen to fall you run the risk of:
If you should take a fall and you are over the age of 75 the chances of you being admitted to a skilled nursing facility are four times greater.
Even if you should fall and do not sustain a major injury, you become fearful of falling again and thus becoming less active. With this said, there are steps you can take to reduce your risk of falling.
Information Source – National Council on Aging
Six steps to Reduce Your Risk of Falling
In order to help your aging loved one, friend, or neighbor follow these steps to reduce their risk of falling.
Enlist their support in taking simple steps to stay safe. For example:
Discuss current health conditions
Ask about their last eye checkup
If you are noticing your aging loved one, friend, or neighbor is holding onto the walls, furniture or someone else while walking or if they have difficulty arising from a chair:
Talk about their medications
Do a walk-through safety assessment of their home
There are many simple and inexpensive ways to make a home safer. For Professional Assistance, contact an Occupational Therapist. Some examples for making your loved ones home safer:
For more information on reviewing your goals for Long Term Care as part of your Estate Planning, contact Daniel A. Baron of Baron Law at 216-573-3723.
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers information on The Marital Deduction as well as other Tax Planning Advice and what to make part of your Estate Planning.
What are the benefits?
The most important deduction a married couple has is the The Marital Deduction. The amount of assets which can be passed upon death from one spouse to the other is unlimited and is also used to defer ALL estate taxes until the surviving spouse passes. Current tax laws allow one spouse to give the other spouse assets where there is little to no tax imposed upon the transfer of these assets. No matter what the value of the assets which are being transferred, whether it is $50,000 or $50,000,000.
What if there is a divorce?
If you happen to be divorced from your spouse, you can still pass assets to the ex-spouse after you pass with little or no tax being imposed if it is stated in the divorce decree.
My spouse is not a U.S. Citizen – Do the same tax laws apply?
The Marital Deduction is unlimited as long as both spouses are U.S. Citizens. So what happens when one of the spouses is not a US Citizen?
Should the first spouse to pass away be a U.S. Citizen and the surviving spouse a noncitizen of the U.S., unfortunately the unlimited marital deduction for Federal Estate Taxes is not available.
However, the taxes can be deferred by setting up a Qualified Domestic Trust (AKA QDOT), and having the assets pass through this specialized trust.
Should you own real property, consider adding this to the trust as the taxes will be deferred until the noncitizen spouse passes away.
For more information on The Marital Deduction and implementing other tax savings ideas as part of your Estate and Tax Planning, contact Daniel A. Baron of Baron Law to maximize tax savings upon your passing. Contact us today at 216-573-3723.
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers the following helpful answers to Powers of Attorney:
Can the Power of Attorney be used by the agent to take my money or property without my permission?
Unfortunately, you can run the risk that the agent you choose to give your Power of Attorney could abuse the power by spending your money or taking your money without your knowledge or worse without your permission. Because the agent can use the Power of Attorney to access your bank account and sell your property, it is prudent that you not give your Power of Attorney to anyone you do not trust. If you happen to have an unscrupulous agent, it can be very challenging to get back funds or property taken by the agent, because the agent usually has no money left to return as they have used it all for their benefit. The person acting as your Power of Attorney has the power to sell your property, or mortgage it. It cannot be stressed enough that you chose your Power of Attorney very wisely.
If I think someone is using my Power of Attorney to steal from me, what can I do?
If you are suspicious that your agent is abusing their powers, revoke the Power of Attorney immediately.
Next, without delay, notify all banks, brokerage firms, or other financial institutions in which you have money that you have revoked the Power of Attorney.
Finally, go to the probate court. You may either by yourself or through an attorney. Demand that the agent you suspect of absconding with your funds file a detailed account showing how your money was spent. A filing fee will need to be paid by you and you may need to possibly pay the agent for the cost of preparing the accounting documentation. Next, the court will hold a hearing at which time you can challenge the any or all of the information given in the detailed accounting. Ultimately, if the court finds the agent took your money without your authorization, you can sue the agent and/or possibly press criminal charges.
Can I revoke my Power of Attorney?
The Power of Attorney cannot be used unless the agent has it or it, or at least a copy and either you or they have given to banks, financial institutions, or others so that they think you want the agent to act on your behalf. If you have not given the Power of Attorney to anyone, you can revoke it by destroying the document.
If the eventuality the Power of Attorney has been given to the agent, an institution, or has already been recorded, you should execute immediately a revocation of the Power of Attorney that is witnessed and acknowledged in the same manner as the first Power of Attorney. Then; just as you distributed the Power of Attorney initially, you will need to furnish a copy of the Revocation to the banks, brokerage firm, or any other financial institution, and anyone else that may have a copy of the original Power of Attorney form that they know the Power of Attorney is no longer valid.
A Power of Attorney is only one of the many parts to a comprehensive estate plan. For information regarding living wills, trusts, power of attorney, or a pour-over will, or further questions on Powers of Attorney, contact Daniel A. Baron of Baron Law today at 216-573-3723.
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers the following helpful answers to your questions about the difference between a Living Will and a Last Will and Testament.
Confusing these terms happens quite frequently as there are those that think that these are one in the same, however, they are entirely two distinct legal documents which cover many different needs.
A Living Will, what is it and do I need one?
Should you become extremely ill or completely incapacitated and cannot convey their medical care wishes; having a living will in place, (which is a legal document AKA as an advance directive), gives instructions as to the medical care you wish to receive.
Some of the details of a Living Will would include
Also, at this point it would be wise to consider having a Power of Attorney put in place in the event that you do become incapacitated so that there is someone making sure that your wishes are carried out as you have communicated in your Living Will. Naming a Power of Attorney can be done at the time of penning your will.
Last Will and Testament, is it different than a Living Will?
Your last will and testament, also simply known as a will, is a legal document that stipulates the transferring of your estate to somebody else by sale or gift upon your demise. Should you pass away without a will, your assets then become “intestate”. At this time state intestacy laws govern the distribution of your assets.
If you have minor children, you should unquestionably have a will. At the same time of the writing of your will, it is possible for you to name a guardian for your minor children. You can also name the guardian to manage the minor’s financial affairs or another party to act on behalf of the children.
As you are drafting your will, it will be necessary for you to select an Executor of your estate. The Executor is one who carries out the will’s requests throughout the process of probate.
Living Will and Last Will – when do they take effect?
Now that you are aware of the differences between a Living Will and a Last Will, you may question as to when the two take effect.
Keeping in mind that the Living Will outlines your medical wishes should you become incapacitated or seriously ill and unable to convey your wishes, this comes into play while you are still alive but unable to voice your wishes.
To stipulate your wishes of how to distribute your estate upon your passing comes into play by using a Last Will and Testament .
So as you can see a Living Will and a Last Will and testament are two separate, but very important legal documents for everyone to have in place.
Living Will vs. Last Will?
If you are pondering the questions as to whether you need a last will or a living will. The answer to that question should be very easy; just about everyone should have both. Each of these important documents are ones that every person doing their Estate Planning should secure as these offer you the peace of mind that your wishes will be followed when you can’t make them known due to a serious illness and/or incapacitation or death.
Having a last will and testament, also makes the probate process go more smoothly, and with a living will, it can provide direction to your loved ones or Power of Attorney, in making challenging decisions during a stressful and difficult time.
So when is the best time for me to get a living will and a last will?
Unless you have a crystal ball which states otherwise, the future is uncertain. Securing both a living will and a last will and testament and recording your wishes is best done sooner than later.
Both a Living Will and a Last Will and Testament are only two of the many parts to a comprehensive estate plan. For information regarding living wills, trusts, power of attorney, or a pour-over will, or further questions on Powers of Attorney, contact Daniel A. Baron of Baron Law at 216-573-3723 to make an appointment.
Cleveland, Ohio estate planning attorney, Daniel A. Baron, offers the following regarding living wills:
Before you can answer this question you must first understand what a Living will is and what purpose it serves.
A Living Will is one form of Advance Directive which clearly defines your wishes for medical care should the following occur:
A Living Will clearly states your health care intentions. This document allows you to make decisions while still cognitive such as:
The Living Will document also allows you to list any further specific instructions for your care if you become fully incapacitated.
Another form to consider securing in conjunction with a Living Will is a Health Care Proxy which is a specific Power of Attorney. A Health Care Power of Attorney authorizes a specific person you have chosen to act on your behalf to make all medical decisions (or to make sure that your medical wishes in your Living Will that you have set forth are followed), in the eventuality that you are no longer able to make these decisions yourself.
It might be in your best interested to have both a Living Will and a Power of Attorney which will set forth comprehensive guidance when it comes to your medical care in the end stages of life.
Things to consider when completing these documents:
Having a Living Will is only one part to a comprehensive estate plan. For information regarding living wills, trusts, power of attorney, or a pour-over will, contact Dan Baron of Baron Law to make an appointment at 216-573-3723.
Cleveland, Ohio Estate Planning Dan A. Baron Explains the Difference Between an Executor and Trustee:
Estate planning can be complicated and sometimes difficult to bear when charged with the responsibility as executor or trustee of an estate. If you have minor children, then you probably have set up some form of testamentary trust coupled with your will and power of attorney. Within these estate planning documents, there are designated executors and trustees that have been carefully selected to administer your estate after you pass. It’s important to talk with your executor and trustee and let them know their responsibilities after your’re gone. Below is a quick summary of the difference between executor and trustee of a testamentary trust.
The Executor’s responsibility is to liquidate or otherwise gather all estate assets, pay any outstanding bills and then transfer assets from the name of the decedent to the beneficiaries named in the Will (most often the decedent’s children). They also make any necessary filings with the court and attend any court hearings. Most Executor’s elect to use an attorney to help them with this so the process runs smoothly. Once all assets are in the name of the beneficiary, the Executor’s job is done. The complexity of the estate will determine how long the Executor is needed.
In comparison, a Trustee receives the assets from the Executor and then, with court approval, invests the trust assets in savings account, investment accounts, or whatever they deem appropriate. Most importantly, the Trustee manages the funds and makes distributions to the trust beneficiary (usually children) when needed (i.e. to pay school tuition, living expenses, doctor bills, etc.). Most clients set a maturity age of 25. When the children reach the age of 25, the trustee distributes the balance of the trust funds and that particular child’s trust is terminated. The Trustee will be required every two years to make reports to the court as to the value of the trust. As you can imagine, the length of time the Trustee will be needed will depend upon the age of the children.
If you would like to learn more about the responsibilities and an executor and trustee, or have questions, contact our office at 216-276-4282. You will speak directly with an Cleveland, Ohio estate planning attorney who can help you set up a trust, will, power of attorney, medicaid planning, and more. If you would like to attend one of our FREE seminars, please visit this link.
Annuity-Based Long-Term Care and the Pension Protection Act of 2006
Medicaid and long-term care are unquestionably a hot topic. Estate planning and Medicaid planning attorneys have long been waiting for an opportunity that would allow those wishing to enroll in Medicaid to shelter all or a portion of their savings – legally! Cleveland, Ohio estate planning attorney Dan Baron offers the following information on long-term care and how the Pension Protection Act of 2006 has created one of these sought after opportunities.
In 2006, the President signed into law The Pension Protection Act of 2006 (the “Act”). The act changed certain tax laws and allows for those owning annuity contracts to take advantage of certain tax savings. In sum, the Act allows the cash value of annuity contracts to be used to pay premiums on long-term care contracts. The payment of premiums in this way will reduce the cost basis of the annuity contract. In addition, the Act allow annuity contracts without long-term care riders to be exchanged for contracts with such a rider in a tax-free transfer under Section 1035 of the Internal Revenue Code of 1986, as amended (IRC).
Here’s an example of how the Act’s changes might benefit someone considering long-term care insurance. Let’s say that Kathy, age 70, lives in Cleveland. Her children live out of state but are concerned with a recent diagnosis of diabetes, along with a history of heart disease. Because of these illnesses, she was not a good candidate for traditional long-term care insurance. However, by taking advantage of an annuity based long-term care strategy that takes advantage of the Pension Protection Act, Kathy could likely be insured.
Look at the illustration below. Kathy can take her $140,000 fixed annuity with a cost basis of only $40,000 (i.e. the amount she actually deposited) and using the tax-free exchange from his existing fixed annuity to a new annuity that complied with the Act’s rules, Kathy’s $140,000 fixed annuity could continue to earn interest. However, if she needed long-term care to pay for home care, assisted living, or skilled care, she now had a long-term care pool of money equal to $420,000.
There are many annuity based long-term care packages available. It’s best to consult with an attorney or Medicaid specialist who can help you choose the right plan. For more information, or to speak with Cleveland estate planning and Medicaid planning attorney Dan Baron, contact our office at Baron Law LLC. Baron Law LLC is a Cleveland, Ohio law firm dedicated to helping those in need of elder care, estate planning, and Medicaid planning. Contact attorney Dan Baron today at 216-276-4282.
Medicaid Planning – Important Considerations When Choosing a Long-Term Care Plan
It’s no surprise that Medicaid planning has been a widely discussed topic considering the overwhelming cost of nursing home care. For example, the average daily cost of care in the Midwest is approximately $135 per-day. In Ohio, this same care is around $203.00 per-day. Put another way, your long term care plan must account for $6090.00 per-month.
As an estate planning attorney, I’m often asked whether it’s worth purchasing long-term care insurance. Unfortunately, the answer is specific to each individual’s goals, needs, assets, and more. However, there are several important considerations everyone should know. Medicaid planning and elder law are key to estate planning. At a minimum, those planning for their financial and physical health, should consider the following when choosing a long-term care plan.
Ratings
The financial ratings of a long-term care plan are important when considering purchasing the insurance. Every company is different and each have different ratings. The recommendation is to choose a company with an AM BEST rating of A+ or better. In addition, the assets of the insurance company should be in the billions. In essence, you want the insurance company to have a high rating and be financially sound. For more information on ratings, visit:http://www.ambest.com/home/default.aspx
Discounts
There are a number of discounts available when considering your insurance plan. Some long-term care insurers will allow for group discounts through employers. Senior clubs and other organizations can also offer discounts from 5%-10% on long-term care. In addition, some companies will actually allow for a 30%-50% discount when both spouses purchase long-term care. Good health discounts may also be given when the applicant is in excellent health which range from 10%-15%. It’s important to realize that not all companies permit these types of discounts and its best to consult with an estate planning or Medicaid planning attorney. Moreover, each company has its own underwriting guidelines which may change the above mentioned averages.
Tax Considerations
There are several tax considerations when thinking about long-term care insurance. At the federal level, premiums for long-term care insurance fall into the ‘medical expense’ category. So, if the premium (or the premium plus other medical expense) is over 7.5% of the adjusted gross income, part of that premium is tax deductible. Additionally, business owners can deduct the full cost of long-term care insurance protection for themselves and designate individuals, including spouses.
From a national perspective, 26 states offer some form of deduction or tax credit for long-term care insurance premiums. In Ohio, there is a deduction for polity premiums. However, it is absolutely paramount to consult with a Medicaid planning attorney, tax advisor, or financial planner when making these tax considerations. The tax laws change constantly and the it’s important to understand your options fully.
Tax Qualified Plans vs. Non-Tax Qualified Plans
There are two types of long-term care insurance plans: (1) Tax qualified plans and (2) Non-tax qualified plans. Tax qualified plans follow the federal HIPAA law (Health Insurance Portability and Accountability Act). Under this plan, the insured must need assistance with two of the six daily activities necessary for daily living. These activities include:
In order to be eligible, the individual must need assistance for a period of 90 days or greater. These criteria help protect consumers by designating long-term care for those who truly need it. However, the benefits received are not considered taxable income. Tax qualified plans are guaranteed renewable. This means that your coverage can never be cancelled, as long as you pay your premiums.
Non-tax qualified plans allow the consumer to access benefits more quickly. Here, the insured only needs to fall under one of the above mentioned activities of daily living. If you speak with a Medicaid planning attorney, you’ll find that these plans are a bit more expensive than tax qualified plans. (Side note: Cleveland, Ohio Medicaid planning attorneys have been in great debate on the pros and cons of each plan but sticking with a tax-qualified plan is currently my recommendation).
There are numerous other considerations to discuss with your estate planning or Medicaid Planning attorney when thinking about long-term care insurance. For more information, or to speak with a Cleveland, Ohio Medicaid planning attorney, contact Dan Baron at Baron Law LLC. Contact Dan at 216-573-3723 today to set up a free consultation. Dan is a Cleveland, Ohio attorney practicing in the areas of estate planning, Medicaid planning, and business law.