Articles Posted in Financial Planning

When determining how you want your estate and assets administered upon your death, it is also important to consider how you want decisions made in the event that you cannot make them for yourself. Naming a power of attorney has a number of benefits that will avoid any drawn out court proceedings to name an agent in the event of your incapacitation. Power of attorney documents name an individual, also known as an agent, to perform specific tasks when you cannot. These powers can vary, as there is medical/health care power of attorney and also property or financial power of attorney powers.

Medical power of attorney gives an individual the ability to make your health care decisions, such as where you should receive care, if you should receive a specific treatment in the event your wishes are not listed, as well as dealing with your insurance and medical premiums. Financial powers of attorney allow an individual, upon a specific event, to handle a variety of your financial matters on your behalf. While many people will name someone as power of attorney in the event of incapacitation, some will name a power of attorney to take effect immediately, thus, delegating decision making power.

These situations are predisposed to undue influence, something the court is very suspect of and will closely monitor in the event they believe an individual is abusing their power of attorney role over an elderly individual. In the event that you are competent and have named someone as a power of attorney, but due to a number of circumstances, including the end to a relationship or a possibility of undue influence, you wish to revoke the power of attorney, you can do so by delivering a notice to the power of attorney, your estate attorney, as well as other interested parties notified of the document.

When determining how you want your estate and assets administered upon your death, it is also important to consider how you want decisions made in the event that you cannot make them for yourself. Naming a power of attorney has a number of benefits that will avoid any drawn out court proceedings to name an agent in the event of your incapacitation. Power of attorney documents name an individual, also known as an agent, to perform specific tasks when you cannot. These powers can vary, as there is medical/health care power of attorney and also property or financial power of attorney powers.

Medical power of attorney gives an individual the ability to make your health care decisions, such as where you should receive care, if you should receive a specific treatment in the event your wishes are not listed, as well as dealing with your insurance and medical premiums. Financial powers of attorney allow an individual, upon a specific event, to handle a variety of your financial matters on your behalf. While many people will name someone as power of attorney in the event of incapacitation, some will name a power of attorney to take effect immediately, thus, delegating decision making power.

These situations are predisposed to undue influence, something the court is very suspect of and will closely monitor in the event they believe an individual is abusing their power of attorney role over an elderly individual. In the event that you are competent and have named someone as a power of attorney, but due to a number of circumstances, including the end to a relationship or a possibility of undue influence, you wish to revoke the power of attorney, you can do so by delivering a notice to the power of attorney, your estate attorney, as well as other interested parties notified of the document.

Blind Trusts

Blind trusts are another type of trust that is established in order to set assets aside and preserve them for a specific period of time, however the person establishing the trust has no control over the  funds and thus does not receive access to them. Additionally, the individual also does not receive periodic reporting of the assets held in trust and their investments.

Blind trusts are a type of irrevocable trust, meaning that the beneficiary does not have any control over the administration or distribution of the trust or its terms. The person establishing the trust relinquishes his or her rights to make decisions and gives the trustees, those people who are now in charge of managing and handling the assets, full power to make decisions. The maker of the trust only has the power to establish the trust and to terminate it.

The New Rule

When consulting a financial advisor, we all assume that they would have our best interest in mind when determining where our portfolio should be invested and what investments best suit our interests, however, this has not always been the case. This year, the Labor Department issued new regulations that require industry professionals dealing with individual retirement accounts and 401k accounts to act on the best behalf of their clients.

Before this new standard was issued, financial advisors only needed to meet a suitability standard, meaning that the financial advisor only has to choose what is suitable for the portfolio, which is not always what is in the client’s best interest. A financial advisor under this standard could invest in a fund he found suitable, but may be more risky or expensive, although a similar option is available with a different fund. This suitability standard led to many advisors investing in funds they were personally interested in, sparking a need for change.

Spendthrift trusts are a type of irrevocable trust in which the grantor seeks to leave property or assets to a beneficiary, under the terms they outline, by which the beneficiary cannot alter, because they have no legal claim to the trust property. An irrevocable trust is a type of trust by which the beneficiary cannot modify the terms of the trust without the first obtaining the permission of the grantor.

Irrevocable trusts allow the grantor to create this trust document in which they transfer their rights to the property into the trust and the trustee, a third party manager of the trust, now technically holds legal title, until the trust allows for vestment in the beneficiaries. Beneficiaries are not the only ones who lack control in these trust situations; in an irrevocable trust, once it is created, the grantor cannot undo the trust to obtain title to the property without first getting the consent of the trustee and beneficiaries.

When To Use a Spendthrift Trust

According to the 2010 Census, over 7.5 million unmarried couples or 15 million people, live together, a sharp increase from the 3.2 million unmarried couples living together in 1990. This increase in cohabitation has been attributed to a number of different factors, including increased living costs, decisions to marry later or not at all, and until recently, due to legal barriers for same sex couples.

There are many legal benefits to marriage, including rights to social security, immigration rights if one party is not a citizen, surviving spouse benefits, estate benefits, as well as joint bankruptcy filings and the right to refuse to testify against a spouse in a legal proceeding. However, these reasons alone are not justification to get married, which many couples are finding is not for them.

In order to ensure that your partner gets inheritance in the event of your passing, it is critical that the couple executes estate planning documents such as a will or trust. Naming your partner in your will ensures that they will be the beneficiary of the assets and property executed in the document. Additionally, name your partner as your beneficiary on all pensions, retirement accounts, and insurance policies and check those policies to determine if naming a non-family member is allowed or subject to specific rules.

Depending on the purpose of a trust, a trust may be able to further sustain its’ life and generate additional income by investing the funds originally set aside by the grantor in a variety of investment tools. In order to generate additional income, a professional investor will seek to have a diverse portfolio established in order to mitigate any potentially large losses and keep your funds safe.

While the idea of hitting it big with one major investment is the dream of many, the reality is highly unlikely, thus, investing money in a wider range of areas is beneficial. While the investment team and trustee will be able to best assess the proper investments for your trust funds, each situation will differ and will be influenced by the risk the trust is willing to take as well as the timeline for distribution of funds needed.

Types of Investments

SPECIAL NEEDS LAWS HELP PROTECT THOSE WHO PROTECT US

For those of us who come from families with many military members, we know the sacrifices and hard work that service members incur for their principles and belief that there are certain obligations in life that precede all else.  Unfortunately, until recently, for a select few of those dedicated service members faced a choice between two equally important obligations, their obligations to their country and their obligations to their family.  More specifically, service members with special needs children who received benefits publicly funded programs such as Medicaid or Supplemental Security Income knew that if something happened to them and their family received monies through the Military Survivor Benefits pension, their children would lose those vital benefits.  

It should be noted that the protections contemplated by the law are even allowed for if a service member retires and collects a pension for retirement but also diverts some of that money for the benefit of their special needs child.  This was a choice that was too high for some service members and helped them decide to not reenlist.  The military spends a tremendous amount of money on training and maintaining our military.  Any lost member is a lost investment to put it in economic terms.  To help combat the lose of these soldiers, sailors and airmen Congress created the Disabled Military Child Protection Act (DMPA).  The DMPA allows a service member to choose a special needs trusts as the beneficiary of any money given through a Military Survivor Benefits pension.  This allows the service member to have peace of mind knowing that if they do pay the ultimate sacrifice, their children and loved ones will not suffer further.

SIMPLE GUIDELINES, EASY TO UNDERSTAND AND FOLLOW

The Center for Disease Control (CDC) released guidelines to help prevent and mitigate falls among senior citizens in 2012. The CDC program is called STEADI, an acronym coming from the full title Stopping Elderly Accidents, Deaths and Injuries. Research shows that falls are the leading cause of injuries, death and emergency room visits for trauma. If a senior citizen falls it can literally be a traumatic, life altering event or even a deadly one. The silver lining is that many falls are preventable. Last year the Obama Administration announced that that the White House Conference on Aging, the Administration on Aging awarded $4 million in various grants to help expand STEADI. It is estimated that the increased funding will help reach an additional 18,000 at risk senior citizens. It is further hoped that the funding will increase participation in evidence based community programs and improve the overall programs long term viability. The CDC developed these guidelines in conjunction with British and American Geriatric Societies.

The American and British Geriatric Societies already had clinical practice guidelines in place to better define the various risk factors in falls by senior citizens. The CDC guidelines contain basic information about falls, methods to begin conversations with seniors, balance assessment tests, gait assessment tests along with instructional videos for the gait and balance tests and even case studies of the the fall risks for different senior citizens. The program and recommendations are all inclusive in that the STEADI program at the CDC website has a testing protocol for professional medical care providers, to information about webinars and other instructional videos, material for senior citizens themselves, important facts about falls, referral forms, posters for professional establishments, with posters also available in Spanish and Chinese and most importantly, it has a toolkit for medical professionals.

LEGAL DISTINCTIONS THAT MATTER

When a person applies for Medicaid eligibility there are many pitfalls that an unsuspecting or unsophisticated applicant can run afoul of. To help them retain the benefit of certain monies that they would normally have access to third parties or the applicant themselves can create a special needs trust to help keep the public benefits and still benefit from the money in the trust. The various different trusts have different legal requirements that must be met to qualify as that type of trusts.

Moreover, different trusts accomplish different goals and yet other types of trusts exist that have nothing to do with Medicaid or other public entitlement program eligibility but help to reduce tax liability. Some trusts accomplish two tasks, such as a third party special needs trusts, which allow seniors to live a relatively modest and respectable life and qualify for Medicaid at the same time. While other types of trusts only satisfy just one legal goal, such as a grantor retained annuity trust, which allows a person to make a gift of an asset that will likely appreciate rather quickly, but incur no gift tax liability. Finally, there are other types of trusts that outlive their utility, such as pooled trusts.

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