Planning in the Event of Disability
It’s an unwelcome thought, but most people experience a period of disability prior to death. During this short or long-term period, important decisions must be made. Who will make important financial and medical decisions on your behalf? What will be his or her scope of authority in making these decisions? What are the risks and benefits of authorizing certain powers and persons to act for you?
Most people gloss over the importance of planning in the event of disability because they do not foresee the risks associated with incapacity. The emotional and financial toll of paying for long-term care often produces discord within the family as finances are depleted and the level of care that is needed rises. What happens when families disagree? Just as importantly, what happens when families agree but third parties, such as medical providers and financial institutions refuse to act? Disability planning helps to ensure continuity of care and financial management.
Our estate planning attorneys can help you consider and address your needs in the event of disability or incapacity. We regularly assist our clients in preparing and administering the following:
Durable Power of Attorney
A durable power of attorney for property management is a written instrument which authorizes one or more joint or successive agents (or “attorneys-in-fact”) to act on behalf of the principal with such powers as are specifically granted in the instrument. The power of attorney is said to be “durable” when the authority of the agent continues even if the principal becomes incapacitated.
Texas Estates Code § 752.051 provides the statutory form of a durable power of attorney. This “statutory durable power of attorney” is widely used by estate planning attorneys. Elder law attorneys typically enlarge the powers granted under a statutory durable power of attorney to allow the agent to engage in such acts as may be necessary to protect the principal’s estate against nursing home spend-down and Medicaid estate recovery.
Medical Power of Attorney
Texas Health and Safety Code §§ 166.163 and 166.164 provide state promulgated forms for designating an agent to make medical decisions for you in the event you are unable to make medical treatment decisions. The agent’s authority under a Medical Power of Attorney does not go into effect until the principal’s attending physician certifies in writing and files in the principal’s medical records the physician’s medically reasonable belief that the principal is incompetent. Importantly, the principal always maintains the power to override the agent’s decision, even if the principal is incapacitated.
Directive to Physicians and Family or Surrogates (Living Will)
Texas Health and Safety Code § 166.033 sets forth a statutory form for instructing your healthcare providers to administer or withhold life-sustaining treatment in the event you are diagnosed with a terminal or irreversible condition. It is important that your desires are clearly known and understood to avoid disputes between your family members and medical team.
Declaration of Guardian in the Event of Later Incapacity or Need of Guardian
Texas Estates Code § 1104.204 provides the statutory form for the appointment of a guardian of your estate and/or person in the event of your future incapacity. This document is used to supersede the statutory priority given to certain family members whom you may not want to serve as guardian and to request the appointment of another.
Revocable Living Trusts
Elderly individuals and couples planning for possible future incapacity may find a Revocable Living Trust beneficial. Such trusts permit the trustmaker (or “grantor” or “settlor”) to serve as the initial trustee of the trust with a successor trustee named in the event of the initial trustee’s incapacity or death. The Revocable Living Trust, if properly funded, allows the grantor to avoid probate and, in the event of a guardianship, the necessity of obtaining court approval to conduct trust business for the grantor-beneficiary.
Disability planning requires expertise in government benefit programs such as Medicare, Medicaid, Social Security (SSI and SSDI) and Veterans’ Benefits. At The Hale Law Firm, our estate planners are accomplished elder law attorneys. When you work with one of our attorneys, you can rest assured that due consideration has been given to potential long-term care needs.
Planning for an Orderly Transfer of Wealth
Death affects people in a number of ways. As families cope with the loss of a loved one, relationships, values and judgment are tested. A valid Last Will or Trust prepared by an experienced estate planning attorney can help to ensure an orderly and intended transfer of your estate.
At The Hale Law Firm, we are committed to helping our clients preserve their legacy. Wills and Trusts are not just for the rich. They are for people who care about their family. We can help you determine whether a Will or Trust is right for you.
Last Will and Testament
Everyone, even those without a Will, has an estate plan. If you die intestate – meaning without a valid Will – your probate estate will be distributed according to state law. In Texas, this is somewhat complicated as property is distributed differently depending on its classification as either community or separate, real or personal, and whether or not the deceased individual was married or had children from a prior relationship.
Dying intestate is a recipe for disaster for blended families, minor children, and disabled heirs. In addition, intestate estates are often difficult and hence, more expensive, to settle. For those who want simplicity and an orderly disposition of their property upon their death, The Hale Law Firm can help.
Our estate planning attorneys prepare all types of Wills, including:
- Simple Wills
- Wills with Contingent Trusts and guardianship appointments for minor children
- Wills with Testamentary Trusts for adult children to accomplish asset protection objectives
- Wills with Special Needs Trusts (Supplement Needs Trusts) for disabled beneficiaries to preserve public benefit eligibility
- Wills with Bypass Trusts to minimize federal estate taxes
Using Trusts to Transfer of Wealth
For most people the easiest part of estate planning is deciding who should inherit property. Oftentimes, however, it is difficult to determine whether the property should be distributed outright or in trust, and who should be responsible for overseeing the administration of the estate. In cases where trusts are needed to achieve a particular result, due consideration must be given to the type of trust to be used, its duration, tax implications, and trustee powers.
At The Hale Law Firm, our attorneys are experienced trust attorneys. For many clients, trusts are an essential component of their estate plan, offering protection for their beneficiaries in the event of divorce, lawsuit, or disability. A common concern for many clients is the education of children and grandchildren and creating incentives for beneficiaries to complete their secondary studies. For other clients, trusts are prepared to protect beneficiaries against mismanagement of trust assets. The common denominator of all trusts is maintaining sufficient control to accomplish a legal purpose. If you are outcome-oriented, then it is worth considering the benefits and disadvantages of a trust.
With respect to our trust services, we prepare and assist in the administration of the following types of trusts:
Revocable Living Trusts
A common theme among clients is the desire to avoid probate. A properly funded and managed Living Trust can eliminate the need for probate, providing the privacy and continuity of management sought by many families.
A Living Trust is a revocable trust that can be changed by the grantor during his or her lifetime. The grantor is also the lifetime beneficiary and, in most cases, is the initial trustee. Upon the grantor’s incapacity, death, or resignation, a successor trustee, often a child or corporate fiduciary, assumes responsibility for the trust’s administration. After the grantor dies, the trust property is distributed outright to the beneficiaries or held in trust to be invested and distributed according to its terms. At this point in time, the trust becomes irrevocable and can provide asset protection to the beneficiaries.
Importantly, the trust agreement only controls the investment and distribution of trust property. Therefore, it is important when using a Living Trust to make sure that the trust is properly funded and to check all account beneficiary designations to make sure they are correct. This involves deeding property into the trust, updating financial accounts, and assigning personal property.
Domestic Asset Protection Trusts
A Domestic Asset Protection Trust (“DAPT”) is an irrevocable spendthrift trust with discretionary distribution provisions designed to avoid or mitigate the effects of taxation, divorce and bankruptcy. Such trusts are commonly used by business owners, professionals and high net-worth individuals to grow wealth in a safe environment.
Special Needs Trusts (Supplemental Needs Trusts)
A Special Needs Trust (“SNT”), also known as a Supplemental Needs Trust, is an irrevocable trust created for the sole benefit of a disabled beneficiary. A properly designed and administered SNT provides for the disabled beneficiary’s supplemental needs without effecting the beneficiary’s eligibility for means-tested government benefits, such as Medicaid, Supplemental Security Income (SSI), subsidized housing and vocational rehabilitation.
Qualified Income Trusts (Miller Trusts)
A Qualified Income Trust (“QIT”), also known as a Miller Trust, is an irrevocable trust specially designed to legally divert an individual or married couple’s income into a trust resulting in the income being excluded for purposes of determining eligibility for nursing home (“institutional”) Medicaid and §1915(c) home and community-based waiver services. [read more…What is a Qualified Income Trust under Q&A].
Bypass Trusts (Credit Shelter Trusts)
A Bypass Trust, also known as a Credit Shelter Trust, Family Trust, and as a B Trust), is an irrevocable trust used by a married couple to preserve the estate tax and generation skipping tax (“GST”) exemption of the first spouse to die in an effort to minimize estate and generation skipping taxes. With the passage of the American Taxpayer Relief Act of 2012 (“ATRA”), increasing the gift, estate and GST exemption from $1,000,000 to $5,000,000 (indexed for inflation) and by allowing couples to stack their gift and estate tax exclusion to over $10,000,000 with a timely portability election, Bypass Trusts are used less frequently. [read more…]
Stretch IRA Trusts (Inherited IRA Trusts)
A Stretch IRA Trust, also known as an Inherited IRA Trust, is a special type of trust designed to satisfy the strict rules permitting a non-spouse beneficiary of an IRA or business retirement plan (e.g. 401(k), 403(a), 403(b), 457, profit-sharing plan, pension, etc.) to “stretchout” the taxable required minimum distributions over his or her actuarial lifetime. By deferring taxable distributions from qualified retirement plans, beneficiaries are able to compound their inherited retirement investments.
The IRS permits individual beneficiaries to stretch their retirement distributions. However, naming an individual as beneficiary, (instead of an Stretch IRA Trust), could have unintended consequences: (1) the individual beneficiary may simply choose to take more than his or her required minimum distribution (“RMD”) due to ignorance of the rules, bad advice, poor money management, or the influence of others; (2) if the beneficiary is disabled, he or she could lose important public benefits such as SSI or Medicaid; (3) if the beneficiary is sued in a lawsuit or divorce, the retirement account could be at risk; and (4) the original account owner has no control over who will ultimately inherit the retirement funds. The Stretch IRA Trust offers control over the management and distribution of retirement assets while preserving the tax-deferred benefits of a qualified retirement plan.
You have spent a lifetime accumulating and protecting your assets, a free hour or two with one of our estate planning attorneys will help to insure that the fruits of your labor are preserved for years to come. Call for your free initial consultation.
