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charitable contribution deductions from an estate

Distinguish between Per Stirpes vs. Per Capita

When creating an estate plan, one of the basic documents you need is a will. In estate planning, it’s important to distinguish between per stirpes vs per capita distributions. These are two terms you are likely to come across when creating your estate plan, says Yahoo Finance’s recent article entitled “Per Stirpes vs. Per Capita in Estate Planning.”

Per stirpes is Latin and means “by branch” or “by class.” When this term is used in estate planning, it refers to the equal distribution of assets among the different branches of a family and their surviving descendants. This lets the descendants of a beneficiary keep inherited assets within that branch of their family, even if the original beneficiary passes away. The assets would be equally divided between the survivors. Per stirpes distributions essentially create a “trickle-down” effect: assets can be passed on to future generations if a primary beneficiary passes away.

In contrast, “per capita” is also a Latin term that means “by head.” When you use a per capita distribution method for estate planning, any assets you have would pass equally to the beneficiaries who are still living when you pass. The share portions would adjust accordingly, if one of your children or grandchildren were to die before you.

Whether it makes sense to use a per stirpes or per capita distribution in your estate plan can depend for the most part, the way in which you want your assets to be distributed after you’re gone.

Per stirpes allows you to keep asset distributions within the same branch of the family and eliminates the need to amend or update wills and trusts when a child is born to one of your beneficiaries or a beneficiary passes away. This method can also help to minimize the potential for infighting among beneficiaries, since asset distribution takes a linear approach. However, an unwanted person could take control of your assets.

With per capita, you can state precisely who you want to name as beneficiaries and receive part of your estate. The assets are distributed equally among beneficiaries, based on the value of your estate at the time you pass away.

It’s important to distinguish between per stirpes vs per capita distributions. It can help you determine how your assets are distributed after you die.

Talk with an experienced estate planning attorney to fully understand the implications of each one for your beneficiaries, including how they may be affected from a tax perspective.

If you would like to learn more about distributing assets in your estate plan, please visit our previous posts. 

Reference: Yahoo Finance (Jan. 7, 2021) “Per Stirpes vs. Per Capita in Estate Planning”

 

charitable contribution deductions from an estate

Understanding the responsibilities of the conservator

If you have been named a conservator, or have been approached by a family member about the role, it is vital that you are understanding the responsibilities of the conservator. A conservator is appointed by a judge. This person handles the estate of an incapacitated adult, as well as their finances, their basic affairs and everyday care. Administrative matters such as Medicare, insurance, pensions, and medical coverage are all also managed by the conservator. The conservator must keep meticulous records that are subject to review by the judge.

The Advocate’s recent article entitled “Alzheimer’s Q&A: What is adult guardianship?” explains that a conservatorship typically lasts as long as the individual lives. The conservator may change because of death, relocation, or an inability to manage the conservator duties and responsibilities. A judge also has the power to replace the conservator, if he or she is repeatedly making poor decisions or neglecting required responsibilities.

A conservator can be wise in some situations because it lets family members know that someone is making the decisions. It also provides clear legal authority to deal with third parties. There is also a process in which a judge will approve any major decisions. However, appointing a conservator can be expensive. An experienced estate planning or elder law attorney must complete court paperwork and attend court hearings. A conservatorship can also be time-consuming due to the required ongoing paperwork.

A big question is when it is appropriate to seek conservatorship. If the individual has become mentally or physically incapable of making important decisions for himself or herself, then it would be smart to have a court-appointed guardian. Moreover, if the person does not already have legal documents in place, like a living will or power of attorney, then the conservatorship would benefit in covering decisions about personal and financial matters.

Even if the individual has a power of attorney for both health care and finances, he or she might need a conservator to make decisions about his or her personal life. This can include topics, such as living arrangements and who is allowed to visit. It is not always easy to determine if an individual can make decisions, but a judge understands that a conservator is viable for those with advanced Alzheimer’s or other forms of dementia.

Families that want to set up a conservatorship need to file formal legal papers and participate in a court hearing before a judge. Evidence of the physical and mental condition of the individual requiring conservatorship must be clearly presented. The person who is the subject of the conservatorship has the opportunity to contest it. Ask an experienced estate planning or elder law attorney who specializes in conservatorships to provide you a complete understanding of the responsibilities of the conservator.

If you would like to learn more about conservatorship and guardianship, please visit our previous posts.

Reference: The Advocate (Jan. 25, 2021) “Alzheimer’s Q&A: What is adult guardianship?”

 

be an effective advocate for elderly parents

Be an Effective Advocate for Elderly Parents

Family caregivers must also understand their loved one’s wishes for care and quality of life. They must also be sure those wishes are respected. Further, it means helping them manage financial and legal matters, and making sure they receive appropriate services and treatments when they need them. It is important to understand how to be an effective advocate for elderly parents.

AARP’s recent article entitled “How to Be an Effective Advocate for Aging Parents” says if the thought of being an advocate for others seems overwhelming, take it easy. You probably already have the skills you need to be effective. You may just need to develop and apply them in new ways. AARP gives us the five most important attributes.

  1. Observation. Caregivers can be too busy or tired, to see small changes, but even slightest shifts in a person’s abilities, health, moods, safety needs, or wants may be a sign of a much more serious medical or mental health issue. You should also monitor the services your family member is getting. You can take notes on your observations about your loved one to track any changes over time.
  2. Organization. It’s hard to keep track of every aspect of a caregiving plan, but as an advocate for your elderly parents, you must manage your loved one’s caregiving team. This includes creating task lists and organizing the paperwork associated with health, legal, and financial matters. You’ll need to have easy access to all legal documents, like powers of attorney for finances and health care. If needed, you might take an organizing course or work with a professional organizer. There are also many caregiving apps. You should also, make digital copies of key documents, such as medication lists, medical history, powers of attorney and living wills, so you can access them from anywhere.
  3. Communication. This may be the most important attribute. You need communication for building relationships with other caregivers, family members, attorneys and healthcare professionals. Be prepared for meetings with lawyers, medical professionals and other providers.
  4. Probing. Caregivers need to gather information, so don’t be shy about it. Educate yourself about your loved one’s health conditions, finances and legal affairs. Create a list of questions for conversations with doctors and other professionals.
  5. Tenacity. Facing a dysfunctional and frustrating health care system can be discouraging. You must be tenacious. Here are a few suggestions on how to do that:
  • Set clear goals and focus on the end result you want.
  • Keep company with positive and encouraging people.
  • Heed the advice of experienced caregivers’ stories, so you understand the triumphs and the challenges.
  • Be positive and be resilient.

It is a wise idea to work with an Elder Law attorney that can help you be an effective advocate for elderly parents.

If you would like to learn more about being a caregiver, please visit our previous posts. 

Reference: AARP (Sep. 24, 2020) “How to Be an Effective Advocate for Aging Parents”

 

Social isolation increases elder financial abuse

The Difference between Power of Attorney and Guardianship

The difference between power of attorney and guardianship is in the level of decision-making power, although there are many intricacies specific to each appointment, explains Presswire’s recent article entitled “Power of Attorney and Guardianship of an Elderly Parent.”

The interactions with adult protective services, the probate court, elder law attorneys and healthcare providers can create a huge task for an agent under a power of attorney or court-appointed guardian. Children acting as agents or guardians are surprised about the degree of interference by family members who disagree with decisions.

Doctors and healthcare providers don’t always recognize the decision-making power of an agent or guardian. Guardians or agents may find themselves fighting the healthcare system because of the difference between legal capacity and medical or clinical capacity.

A family caregiver accepts a legal appointment to provide or oversee care. An agent under power of attorney isn’t appointed to do what he or she wishes. The agent must fulfill the wishes of the principal. In addition, court-appointed guardians are required to deliver regular reports to the court detailing the activities they have completed for elderly parents. Both roles must work in the best interest of the parent.

Some popular misperceptions about power of attorney and guardianship of a parent include:

  • An agent under power of attorney can make decisions that go against the wishes of the principal
  • An agent can’t be removed or fired by the principal for abuse
  • Adult protective services assumes control of family matters and gives power to the government; and
  • Guardians have a responsibility to save money for care, so family members can receive an inheritance.

Those who have a financial interest in inheritance can be upset when an agent under a power of attorney or a court-appointed guardian is appointed. Agents and guardians must make sure of the proper care for an elderly parent. A potential inheritance may be totally spent over time on care.

In truth, the objective isn’t to conserve money for family inheritances, if saving money means that a parent’s care will be in jeopardy.

Adult protective services workers will also look into cases to make certain that vulnerable elderly persons are protected—including being protected from irresponsible family members. In addition, a family member serving as an agent or family court-appointed guardian can be removed, if actions are harmful.

Agents under a medical power of attorney and court-appointed guardians have a duty to go beyond normal efforts in caring for an elderly parent or adult. They must understand the aspects of the health conditions and daily needs of the parent, as well as learning advocacy and other skills to ensure that the care provided is appropriate.

Ask an experienced elder law attorney for help understanding the difference between power of attorney and guardianship. Explain your family’s situation and your need for power of attorney documents with a provision for guardianship. If you would like to learn more about guardianship, please visit our previous posts.

Reference: Presswire (Jan. 14, 2021) “Power of Attorney and Guardianship of an Elderly Parent”

 

Is it better to have a Living Will or a Living Trust?

A Trust Must Be Funded to Work

Thinking you have divided assets equally between children by creating a trust that names all as equal heirs, while placing only one child’s name on other assets is not an equally divided estate plan. A trust must be funded to work. Instead, as described in the article “Estate Planning: Fund the trust” from nwi.com, this arrangement is likely to lead to an estate battle.

One father did just that. He set up a trust with explicit instructions to divide everything equally among his heirs. However, only one brother was made a joint owner on his savings and checking accounts and the title of the family home.

Upon his death, ownership of the savings and checking accounts and the home would go directly to the brother. Assets in the trust, if there are any, will be divided equally between the children. That’s probably not what the father had in mind, but legally the other siblings will have no right to the non-trust assets.

This is an example of why creating a trust is only one part of an estate plan. A trust must be funded to work. If it is not funded, that is if assets are not retitled, it will not work.

Many estate plans include what is called a “pour-over will” usually executed just after the trust is executed. It is a safety net that “catches” any assets not funded into the trust and transfers them into it. However, this transfer requires probate, and since probate avoidance is a goal of having a trust, it is not the best solution.

The situation as described above is confusing. Why would one brother be a joint owner of assets, if the father means for all of the children to share equally in the inheritance? When the father passes, the brother will own the assets. If the matter went to court, the court would very likely decide that the father’s intention was for the brother to inherit them. Whatever language is in the trust will be immaterial.

If the father’s intention is for the siblings to share the estate equally, the changes need to be made while he is living. The brother’s name needs to come off the accounts and the title to the home, and they all need to be re-titled in the name of the trust. The brother will need to sign off on removing his name. If he does not wish to do so, it’s going to be a legal challenge.

The family needs to address the situation as soon as possible with an experienced estate planning attorney. Even if the brother won’t sign off on changing the names of the assets, as long as the father is living there are options. Once he has passed, the family’s options will be limited. A trust must be funded to work. Estate battles can consume a fair amount of the estate’s value and destroy the family’s relationships. If you would like to learn more about funding a trust, please visit our previous posts. 

Reference: nwi.com (Jan. 17, 2021) “Estate Planning: Fund the trust”

 

Protect Your Estate from Nursing Home Costs

Nursing home care is expensive, costing between $12,000 to $20,000 per month, so you need to protect your estate from nursing home costs. Most seniors should do all they can to prepare for this possibility. According to a recent article from the Times Herald-Record, “Elder Law Power of Attorney can save assets that would go to nursing home costs,” this is something that can be done even when entering a nursing home is imminent.

A Power of Attorney is used to name people, referred to as “agents,” to conduct legal and financial affairs, if we are incapacitated. Having this document is an important part of an estate plan, since it reduces or completely avoids the risk of your family having to go through guardianship proceedings, where a judge names a legal guardian to take over your affairs.

The guardian likely will be someone you have never met, who does not know you or your family. It’s always better to plan in advance, so you know who is going to be taking charge of your affairs.

Then there’s the Elder Law Power of Attorney, a stronger form of a Power of Attorney that includes unlimited gifting powers. Having this unlimited gifting power lets a single person who applies for Medicaid in a nursing home to protect their assets, by using a gift and loan strategy.

Here’s an example: Amy, who is single, can’t live on her own and even having home health care aides is not enough care anymore. She has $500,000 in assets and does not qualify for Medicaid to pay for her care. Medicaid will allow her to keep only $15,900.

One option is for Amy to spend down all of her money on nursing home costs, until all she has is $15,900. All of her savings will go to the nursing home, with very little left for her daughter, Ellen.

However, if Amy has an Elder Law Power of Attorney, a gift and loan strategy can protect her assets. Half of the money, $250,000, can go to Ellen as a gift under the unlimited gifting powers. The other half goes to Ellen as a loan, under a promissory note with a set rate of interest.

Any gifts made in the past five years, known as a “five year look back,” cause a penalty period. Amy will have to pay the nursing home costs for about twenty months. Every month during that period, Ellen will pay Amy a monthly payment that, with her income, is used to pay the nursing home bill. At the end of the 20 months, Amy qualifies for Medicaid to pay for her care for the rest of her life, and Amy may keep the $250,000. Saving half of her assets by using the gift and loan strategy is sometimes called the “half a loaf is better than none” strategy.

With a Standard Power of Attorney, there are no unlimited gifting powers.

A Medicaid Asset Protection Trust (MAPT) created five or more years before Amy needed a nursing home could have saved her entire nest egg for Ellen.

Preplanning is always the better way to go. An elder law estate planning attorney is the best resource for determining what the best tools are to protect a nest egg if and when a person needs the care of a nursing home.

Many people make the mistake of thinking that it “won’t happen to me.” However, injuries and illnesses often accompany aging, and it is far better to protect your estate from nursing home costs in advance than waiting and hoping for the best.

DISCLAIMER: Medicaid planning is complex and the case hypothetical above with “Amy and Ellen” is provided for purposes of illustration. Whether this strategy would work for you or your loved ones depends on the laws of your state of residence given your unique circumstances. Consult with an experienced elder law attorney admitted to practice law in your state of residence before engaging in any Medicaid planning!

If you would like to learn more about nursing home care and Medicaid, please visit our previous posts. 

Reference: Times Herald-Record (Jan. 8, 2021) “Elder Law Power of Attorney can save assets that would go to nursing home costs”

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you must plan for your spouse's Medicaid

You Must Plan for Your Spouse’s Medicaid

Medicaid eligibility is based on income. This means that there are restrictions on the resources—both income and assets—that you can have when you apply. So you must plan for your spouse’s Medicaid.

The Times Herald’s recent article entitled “Elder law planning for Medicaid” says that one of the toughest requirements for Medicaid to grasp is the financial eligibility. These rules for the cost of long-term care are tricky, especially when the Medicaid applicant is married.

To be eligible for Medicaid for long-term care, an applicant generally cannot have more than $2,400 in countable assets in their name, if their gross monthly income is $2,382 (which is the 2021 income limit) or more. An applicant may have no more than $8,000 in countable assets, if their gross monthly income is less than $2,382 (2021 income limit).

However, federal law says that certain protections are designed to prevent a spouse from becoming impoverished when their spouse goes into a nursing home and applies for Medicaid. In 2021, the spouse of a Medicaid recipient living in a nursing home—known as “the community spouse”—can keep up to $126,420 (which is the maximum Community Spouse Resource Allowance “CSRA”) and a minimum of $26,076 (the minimum CSRA) without placing the Medicaid eligibility of the spouse who is receiving long-term care in jeopardy.

The calculation to determine the amount of the CSRA, the countable assets of both the community spouse and the spouse in the nursing home are totaled on the date of the nursing home admission. That is known as the “snapshot” date. The community spouse is entitled to retain 50% of the couple’s total countable assets up to a max. The rest must be “spent-down” to qualify for the program.

In addition to the CSRA, there are also federal rules concerning income for the spouse. In many states, the community spouse can keep all of his or her own income no matter how much it is. If the community spouse’s income is less than the amount set by the state as the minimum needed to live on (“the Minimum Monthly Maintenance Needs Allowance” or “MMMNA”), then some of the applicant spouse’s income can also be allocated to the community spouse to make up the difference (called “the Spousal Allowance”). Planning for your spouse’s Medicaid is pretty complex, so speak with an experienced elder law attorney.

If you are interested in learning more about Medicaid and nursing home planning, please visit our previous posts. 

Reference: The Times Herald (Jan. 8, 2021) “Elder law planning for Medicaid”

 

how the probate process works

What to Do First when Your Spouse Dies

Forbes’ recent article entitled ‘Checklist for Handling the Death of a Spouse” tells us what to do first when your spouse dies:

Get Organized. Create a list of what you need to do. That way, you can tick off the things you have done and see what still needs to be done. Spending the time to get organized is critical.

Do an Inventory. Review your spouse’s will and estate plan, and then collect the documents you will need. Use a tax return to locate various types of financial assets.

Identify the Executor. The executor is the individual tasked with carrying out the terms of deceased’s will.

Get a Death Certificate. Request multiple copies of the death certificate, maybe at least a dozen because every entity will need that document.

Contact Your Professional Advisors. You will need to tell some professionals that your spouse has passed away. This may be your CPA, your estate planning attorney, financial advisors and perhaps bankers. These contacts will probably know nearly everything that is required to be done. You will also need to contact the Social Security Administration and report the death.

Take a Step Back. Take a breath. You should take the time to process your emotions and grieve with the other members of your family. Check on everyone and make sure the loved ones remaining are doing all right.

Avoid Making Any Major Decisions. Do not make any major financial decisions for a year. This includes things such as selling a house or making a lump sum investment. After the death of a spouse, you are emotional and looking for advice. It is easy to be pressured into making a decision that might not be in your best interests. Allow yourself permission to be emotional and not make any decision because you recognize you are grieving.

Make Certain Your Spouse’s Wishes Are Carried Out. The best way to honor your spouse is to make sure their requests and wishes are carried out. You are the only individual who can do that. So take the time to consider what to do first when your spouse dies. Your spouse expects you to take care of their last wishes the way they had intended.

If you are interested in learning more about planning after your loved one passes away, please visit our previous posts.

Reference: Forbes (Aug. 28, 2020) ‘Checklist for Handling the Death of a Spouse”

 

charitable contribution deductions from an estate

Some Fundamental Responsibilities of an Executor

If you are asked to be an executor, you should learn some of the basics of the job before agreeing to the task. An executor is the individual named to distribute a decedent’s property that passes under his or her will. The executor also arranges for the payment of debts and expenses. There are some fundamental responsibilities of an executor.

WMUR’s recent article entitled “Settling an estate” explains that if the executor is not willing or able to do the job, there’s usually an alternate executor named in the will. If there’s no alternate, the court will designate an executor for the estate.

Depending on the estate, it can be a consuming and stressful task to address all of the issues. Sometimes, a decedent will leave a letter of instruction which can make the process easier. This letter may address some of the responsibilities of an executor, like the decedent’s important documents, contact info, a list of creditors, login information for important web sites and final burial wishes.

One of the key documents is a will. The executor must get a hold of a copy and review it. You can work with an estate planning attorney to determine the type of probating (a process that begins with getting a court to approve the validity of the will) is needed.

The executor should conduct an inventory of the decedent’s assets, some of which may need to be appraised. If the decedent had a safe deposit box, the contents must be secured. Once the probate process is finished, assets then may be sold or distributed according to the will.

Asset protection is critical and may mean changing the locks on property. The executor may be required to pay mortgages, utility bills and maintenance costs on any property. He or she must change the name of the insurance on home and auto policies. Any brokerage accounts will need to be re-titled. The final expenses also need to be paid.

The funeral home or coroner will provide death certificates that will be needed in the probate process, and for filing life insurance claims.

If the decedent was collecting benefits, such as Social Security, the agency will need to know of the decedent’s death to stop benefits. Checks received after death must be returned. The executor will file a final federal and state tax return for the decedent, if necessary. There also may be an estate and gift tax return to be filed.

These are just some of the fundamental responsibilities of an executor. An executor’s task can be made easier with the help an estate planning attorney.

If you would like to learn more about being an executor, please visit our previous posts. 

Reference: WMUR (Dec. 23, 2020) “Settling an estate”

 

steps to take when diagnosed with Alzheimer's?

Steps to Take when Diagnosed with Alzheimer’s

A diagnosis of Alzheimer’s or any serious progressive disease takes some time to absorb. What are the steps to take when diagnosed with Alzheimer’s? During the days and weeks after the diagnosis, it is important to take quick steps to protect the person’s health as well as their legal and financial lives, advises the recent article “What to do after an Alzheimer’s disease diagnosis?” from The Indiana Lawyer.

Here are the legal steps that need to be taken when diagnosed with Alzheimer’s, before the person is too incapacitated to legally conduct their own affairs:

General Durable Power of Attorney—A person needs to be appointed to perform legal and financial duties when the time comes. This can be a family member, trusted friend or a professional.

Health Care Power of Attorney—A person must be entrusted with making health care decisions, when the patient is no longer able to communicate their wishes.

HIPAA Authorization—Without this document, medical care providers will not be able to discuss the person’s illness or share reports and test results. An authorized person will be able to speak with doctors, pick up prescriptions and obtain medical reports. It is not a decision-making authorization, however.

Living Will—The living will explains wishes for end-of-life medical care, including whether to prolong life using artificial means.

Funeral Plans—Some states permit the creation of a legally enforceable document stating wishes for funerals, burials or cremation and memorial services. If a legal document is not permitted, then it is a kindness to survivors to state wishes, and be as specific as possible, to alleviate the family’s stress about what their loved one would have wanted.

Medicaid Planning—Care for Alzheimer’s and other dementias becomes extremely costly in the late stages. A meeting with an elder law attorney is important to see if the family’s assets can be protected, while obtaining benefits to pay for long-term and dementia care.

After the patient dies, there may be a claim against it from the state to recover Medicaid costs. By law, states must recover assets for long-term care and related drug and hospital benefits. All assets in the recipient’s probate estate are subject to recovery, except if surviving spouse, minor children, blind or disabled child is living or where recovery would cause hardship.

These are just a few steps to take when diagnosed with Alzheimer’s. With good planning and the help of an experienced elder law attorney, the family may be able to mitigate claims by the government against the estate.

If you would like to learn more about Alzheimer’s disease, and other forms of dementia, please visit our previous posts.

Reference: The Indiana Lawyer (Jan. 6, 2020) “What to do after an Alzheimer’s disease diagnosis?”