Estate Planning for Your Pet (Part 1)
Everyone loves their pet. We spend millions in pet products and vet bills each year and that number seems to increase every year. A question I increasingly am asked is what happens to my pet when I pass away? What are my options in terms of providing a safe home for him or her after I’m gone? First of all, since animals aren’t people they don’t have the same rights as people do. Animals can’t own property so you can’t simply say in your will “I leave $50,000 to Casey for her to use in finding a new home for herself”. That much is pretty obvious. So what are the options? Generally there are two options. One is to leave your pet and a sum of money to someone to care for the animal. For example, I might leave Casey to my friend George and the sum of $5,000 to cover the costs of food, toys etc. If Casey has a medical condition maybe I want to leave $15,000 to cover anticipated vet bills. This is the simpler option, although there is no guarantee that George will keep Sparky. There is nothing preventing him from keeping the money and
Health Care Directives and HIPAA Releases
It’s a common mistake, confusing a health care directive and a HIPAA release. Both are necessary but they are not identical. First let’s look at a health care directive. There are actually two types of directives, an instruction directive and a proxy directive, both of which are important. An instruction directive is commonly known as a living will. It is a set of instructions of what you would or would not want done medically. It is typically used to express a desire of what you do or don’t want done in an “end of life” situation. A proxy directive, known as a health care power of attorney, is a document in writing that designates someone – your health care representative – who you wish to make medical decisions for you if you can’t make them yourself. That could be, for example, when you are in surgery under anesthesia. It could also be when you are no longer mentally capable of making decisions such as in the case of advance stages of dementia. A HIPAA authorization, on the other hand, provides consent to medical providers and others to release medical information about you to persons whom you designate. HIPAA stands
Medicaid’s Confusing Treatment of Trusts (Part 2)
Last week I wrote about trusts and how they are treated by Medicaid. Specifically, I am talking about irrevocable trusts. Most people assume that if they have placed their assets in an irrevocable trust, that by itself is enough to protect the assets from having to be spent down before achieving Medicaid eligibility. Unfortunately, it’s more complicated than that. We must look to the terms of the trust. What portion, if any, of the trust assets can be paid to the Medicaid applicant? In other words, are there any circumstances under which the Medicaid applicant, as a beneficiary of the trust, can receive payments from the trust? Whatever can be received is counted as an asset under Medicaid resource (asset) rules. This is the case regardless whether he/she actually received the asset. A trust that permits – but does not require – the trustee to distribute trust assets to a beneficiary counts as an asset under Medicaid’s rules. As I explained last week the Medicaid program consists of federal and state laws and regulations. Each state is charged with administering its own Medicaid programs. It is free to implement its own laws and regulations as long as they don’t
Medicaid’s Confusing Treatment of Trusts
Not a week goes by in which someone doesn’t call us about Medicaid eligibility as it relates to trusts. The question is usually some version of the following, “I transferred assets to an irrevocable trust. Can you confirm for me that those assets are protected and not countable by Medicaid?” Trusts are very tricky when it comes to Medicaid. It’s one of the reasons I recommend that if the need for Medicaid benefits is at all a possibility, before setting up a trust or if one has already been established, you should sit down with an elder law attorney who has experience with Medicaid laws and regulations. As readers of this blog know, Medicaid is a combination federal and state program. There is a body of federal laws and regulations that is common to all the states. Medicaid, however, is administered on the state level and so there are state laws and regulations that apply here as well. But they must be consistent with, and cannot violate, the federal laws and regulations. One final general point here. We are talking about irrevocable trusts only. Revocable trusts – in which the grantor can revoke or amend the trust terms –
What is a QLAC? (Part 2)
In last week’s post I told you about QLACs, qualified longevity annuity contracts. This week I’ll delve into the pros and cons. As I stated last week distributions under a QLAC begin at a specified starting date that you choose but no later than age 85. There are no benefits under the contract after the owner’s death. The contract must be identified as a QLAC and it cannot be a variable or indexed contract. It may, however, contain a cost of living adjustment. Many insurance companies offer such riders. A QLAC also can offer a return of premium option (ROP). The ROP guarantees that upon the contract owner’s death a designated beneficiary is entitled to receive an amount equal to the original premium paid minus the total annuity payments received by the owner before he/she died. The ROP is paid not later than the end of the calendar year following the year in which the account owner died. If the death occurred after the annuity payments have begun then the ROP payment is considered a required minimum distribution for the year in which it was paid and is not eligible for an IRA
What is a QLAC?
Chances are a QLAC is not something you’ve heard of but over time that may change. It stands for Qualified Longevity Annuity Contract and it’s a relatively new investment option. The term “qualified” may be a tip off to some that it is a type of retirement account investment. That is true. It was designed to address the increasing concern of many Americans that with Social Security estimated to run dry by 2034 unless Congress addresses the problem (and nothing going on in Washington right now gives hope that they will any time soon) they need to look to other ways to try to guarantee a lifetime stream of income. In 2014 the IRS amended the required minimum distribution (RMD) rules, providing more flexibility for owners of qualified (tax deferred) accounts to the extent they are invested in QLACs. The RMD rules are the pesky requirements that make retirement account holders take a minimum amount out of their accounts starting in the year they turn 70 and ½ so the federal and state governments can get their tax on all the interest and growth in the accounts that have built up, in many cases, for years. Let’s first review