Planning for the Possibility of Disability
Most older clients are far more worried about serious disability and the high cost of health care than they are about death and estate taxes. Durable Powers of Attorney, Health Care Powers of Attorney and Living Wills are basic documents people of all ages should have, because disability can strike any of us, at any time. But they are particularly important the closer we are to the end of life. South Carolina adopted the Uniform Power of Attorney statute in 2017, which clarifies the actions authorized for an "Agent." If yours predates 2017, it should be updated.
A Revocable Trust is another extremely useful estate planning tool that in essence allows a grantor to financially "pack up" before she gets ready for the last grand "trip." Probate is a non-event when an estate is properly planned using a revocable trust. But revocable trusts are also extremely useful lifetime tools, for providing management continuity in the event of a disability, for gaining experience with a particular investment advisor, for allowing a beneficiary or successor to dip a toe in the water while there is still a hand to hold, and generally making the ultimate financial transition as gentle as possible.
A Revocable Trust is another extremely useful estate planning tool that in essence allows a grantor to financially "pack up" before she gets ready for the last grand "trip." Probate is a non-event when an estate is properly planned using a revocable trust. But revocable trusts are also extremely useful lifetime tools, for providing management continuity in the event of a disability, for gaining experience with a particular investment advisor, for allowing a beneficiary or successor to dip a toe in the water while there is still a hand to hold, and generally making the ultimate financial transition as gentle as possible.
The Advantages of Revocable Trusts
There is a great deal of confusion concerning revocable living trusts. REVOCABLE TRUSTS DO NOT REDUCE ESTATE TAXES. What they do reduce are probate fees, although in South Carolina (as opposed to Florida or New York) probate fees are not as large a concern, and in some instances the costs of creating a revocable trust will be equivalent to the probate fees avoided. The confusion arises through a misunderstanding about the distinction between the probate estate and the taxable estate, which are two different concepts. The taxable estate is essentially anything the decedent owned or controlled. Probate estate + non-probate estate = taxable estate. There is also confusion about the asset protection aspects of revocable trusts. REVOCABLE TRUSTS DO NOT PROVIDE ANY PROTECTION FROM CREDITORS FOR THE PERSON CREATING THE TRUST. In South Carolina, if you can reach your assets, so can your creditors. Provisions for other beneficiaries after you death, however, can include protection against creditors for those beneficiaries. You just can't do that for yourself using a revocable trust.
What a revocable trust will do is avoid many of the problems inherent in Powers of Attorney. A great deal of financial fraud has been perpetrated using durable powers of attorney, and some financial institutions are understandably reluctant to honor them, particularly if any period of time has elapsed since they were executed. This is particularly confounding when an elderly person, who executed the durable power of attorney precisely to protect against disability is now in fact no longer competent, and no longer has the required capacity to execute an "updated" DPOA. The capacity required to execute a durable power of attorney is the same as that required to execute a contract, and is a much higher standard than the capacity required to write a Will. In certain situations, it is wiser to contact each financial institution directly and complete its specific power of attorney form, or name another individual on the account as an authorized signer.
Using a revocable trust completely avoids these problems. The trustee, in this case, the person establishing the trust, is the legal owner, with full authority to transact business for the trust. When the person creating the trust comes under a disability, the successor trustee named in the document automatically steps into the shoes of the grantor/initial trustee, with full authority, also as "owner" of the property. A certificate of trust may have to be provided to the financial institution, but the terms of the trust itself will continue to remain confidential.
Avoiding probate is also especially meaningful for a decedent who owns property in more than one county in South Carolina, or more than one state. In such instances, ancillary probate in those jurisdictions is completely avoided. Sidestepping those expenses will almost always more than compensate for the initial cost of creating the trust. Managing investments in a revocable trust also provides for continuity of investment management during the grantor's disability, as well as providing the successor trustee the ability to distribute trust property immediately after death, without waiting out the probate period. Assets held in a revocable trust do not need to be disclosed to the court at all, unless the trust pays into the decedent's estate at death by its terms. The result is privacy for the family, both as to the decedent's holdings, and also as to the terms under which the property will ultimately be distributed. A will, to the contrary, is a public record that anyone may walk into court and inspect.
A revocable trust is also superior to a Will if any challenges by family members are anticipated. There is a much smaller window for challenging a revocable trust. Once the trustee has provided a potentially disgruntled heir with a copy of the trust agreement, together with a notice informing the party any challenge to the trust instrument must be instituted within 120 days, he or she is precluded from challenging the trust terms at the grantor's death.
What a revocable trust will do is avoid many of the problems inherent in Powers of Attorney. A great deal of financial fraud has been perpetrated using durable powers of attorney, and some financial institutions are understandably reluctant to honor them, particularly if any period of time has elapsed since they were executed. This is particularly confounding when an elderly person, who executed the durable power of attorney precisely to protect against disability is now in fact no longer competent, and no longer has the required capacity to execute an "updated" DPOA. The capacity required to execute a durable power of attorney is the same as that required to execute a contract, and is a much higher standard than the capacity required to write a Will. In certain situations, it is wiser to contact each financial institution directly and complete its specific power of attorney form, or name another individual on the account as an authorized signer.
Using a revocable trust completely avoids these problems. The trustee, in this case, the person establishing the trust, is the legal owner, with full authority to transact business for the trust. When the person creating the trust comes under a disability, the successor trustee named in the document automatically steps into the shoes of the grantor/initial trustee, with full authority, also as "owner" of the property. A certificate of trust may have to be provided to the financial institution, but the terms of the trust itself will continue to remain confidential.
Avoiding probate is also especially meaningful for a decedent who owns property in more than one county in South Carolina, or more than one state. In such instances, ancillary probate in those jurisdictions is completely avoided. Sidestepping those expenses will almost always more than compensate for the initial cost of creating the trust. Managing investments in a revocable trust also provides for continuity of investment management during the grantor's disability, as well as providing the successor trustee the ability to distribute trust property immediately after death, without waiting out the probate period. Assets held in a revocable trust do not need to be disclosed to the court at all, unless the trust pays into the decedent's estate at death by its terms. The result is privacy for the family, both as to the decedent's holdings, and also as to the terms under which the property will ultimately be distributed. A will, to the contrary, is a public record that anyone may walk into court and inspect.
A revocable trust is also superior to a Will if any challenges by family members are anticipated. There is a much smaller window for challenging a revocable trust. Once the trustee has provided a potentially disgruntled heir with a copy of the trust agreement, together with a notice informing the party any challenge to the trust instrument must be instituted within 120 days, he or she is precluded from challenging the trust terms at the grantor's death.
Long Term Care Planning
There are many resources available to help plan for long term care. My favorite plan is exercise, proper diet, good sleep habits, and most important, good genes. Plan not to need it, if you can. If you do need it, count on it being expensive.
A number of companies offer long term care insurance, and many corporate entities have now added long term care insurance to their menu of employee benefits. It is worth looking at your family history and talking with your doctor about your personal situation, and if you decide coverage is wise, the earlier you purchase it, the less expensive it will be. Laura has worked with a number of different long term care insurance providers, and also with a host of home health care providers and other health professionals who strive to help seniors avoid nursing homes altogether. Laura can help you locate resources.
There are also companies that provide reverse mortgages, allowing seniors to draw money back out of their home equity to pay for care. Evaluating whether such a program makes sense for you involves the same concerns as long term care insurance - your general state of health, expected life expectancy, as well as the impact on the legacy you plan for your heirs. You should compare offers, and make sure you understand their terms. Laura can help.
A number of companies offer long term care insurance, and many corporate entities have now added long term care insurance to their menu of employee benefits. It is worth looking at your family history and talking with your doctor about your personal situation, and if you decide coverage is wise, the earlier you purchase it, the less expensive it will be. Laura has worked with a number of different long term care insurance providers, and also with a host of home health care providers and other health professionals who strive to help seniors avoid nursing homes altogether. Laura can help you locate resources.
There are also companies that provide reverse mortgages, allowing seniors to draw money back out of their home equity to pay for care. Evaluating whether such a program makes sense for you involves the same concerns as long term care insurance - your general state of health, expected life expectancy, as well as the impact on the legacy you plan for your heirs. You should compare offers, and make sure you understand their terms. Laura can help.
Medicaid and Veterans' Benefits
Laura has close relationships with numerous elder law attorneys who specialize in assisting clients in qualifying for veterans' benefits and Medicaid to pay for nursing home care. She can help you determine your options and where to go for further help, if you need it.