The Social Security Administration just announced the Cost-of-Living (COLA) adjustment for 2020. Recipients of Social Security and Supplemental Security Income (SSI) benefits  will receive an increase of 1.6 percent in their benefit amount for 2020. Below is a list of the top highlights of the automatic COLA increase and information about when you can anticipate the benefit increase to start.

 

  • Social Security beneficiaries will begin seeing their increase beginning in January 2020.
  • Social Security Income (SSI) beneficiaries will begin seeing the increase on December 31, 2019.

Earlier this month the Center for Medicare Advocacy and the Long Term Care Community Coalition made a joint announcement regarding changes to the Nursing Home Compare website. Nursing Home Compare is a service provided by Medicare.gov to help prospective nursing home residents or nursing home residents and their families obtain information about every Medicare and Medicaid certified nursing home in the country.

 
A nursing home is a place for people who can’t be cared for at home and need 24-hour nursing care. Over 15,000 nursing home facilities around the country will be affected by this change. Nursing home residents and their families will be able to easily identify if the nursing home they are considering has a history of resident abuse, neglect, and exploitation of its residents.

 
What’s happening?

Many of you may recall when President John F. Kennedy founded the Peace Corps in 1961 and may have even signed up as a volunteer to help provide social and economic development assistance abroad. Borrowing on this model, an initiative is underway to establish an internal national volunteer care corps to help older adults age in place by relying on the assistance of volunteers to help people manage their day-to-day living needs.

 
Introducing the National Volunteer Care Corps

The National Volunteer Care Corps is a government initiative run by the Administration for Community Living, a division of the U.S. Department of Health and Human Services. The National Volunteer Care Corps seeks to build an army of domestic volunteers to help older people live better and longer in their homes, especially if they can still take care of their primary needs. From teens, to college students, or civic minded adults, volunteers would perform the following tasks:

A common question asked of us is what happens when a will’s language is inconsistent with the titling of an account held with survivorship benefits? The immediate answer to the question is that the titling of an account will control over a will’s language. The practical effect on the survivor or beneficiary of the account, if there is a discrepancy with the name or a name has been changed, is to challenge the titling of the account in probate proceedings.

 
When an account is held with survivorship benefits to another account holder, how that account is titled may mean one of two things. Ideally, the named beneficiary, by operation of law, should automatically receive the contents of the account. If the titling is wrong or incorrect, legal intervention will be necessary to correct the account titling. In almost all cases, the account title will supersede any instructions to the contrary in the deceased person’s or maker’s will.

 
Why do people set up accounts with survivorship rights?

More seniors than ever are carrying high debt into retirement. Managing high debt simultaneously with managing the cost of daily living and medical care on a fixed income is a recurring problem in many households. The amount of debt burden has skyrocketed over the past decade.  

 
The National Council on Aging commissioned the Survey of Consumer Finances to study debt and how it impacts seniors economic security. The key findings are listed below:

  • Percentage of households headed by an adult 65 or older with any debt increased from 41.5% in 1992 to 51.9% in 2010 and then to 60% in 2016.

Settling an estate, after the loss of a loved one while grieving, is a difficult process. For the weeks and months that follow the funeral, handling the estate of a deceased individual may quickly overwhelm survivors. The steps outlined below provide a guide to survivors through this tumultuous time.

 
Immediately upon the death of a loved one

After notifying family members and close friends, contact a funeral director. The funeral director is able to assist with funeral and burial arrangements, publish an obituary, order the death certificate, and transport your loved one’s remains to the funeral home.

The advantage of including a trust in your estate plan is that trusts usually avoid probate. The beneficial effect of that advantage is that your beneficiaries may gain access to the assets held in trust faster than those assets transferred via will. When used optimally a trust may minimize estate taxes. Trust can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. What follows are a brief description of the types of trust instruments that may be included in your estate plan.

 

Basic types of trusts

 

 

Marital or “A” trust

Provides immediate benefits to your surviving spouse. However, the assets in the trust are included in the taxable estate of the surviving spouse. The surviving spouse does not pay estate taxes on his or her spouse’s assets, until he or she passes.
 

Bypass or “B” trust

Bypasses the surviving spouse’s estate, providing federal estate tax exemption for each spouse, popularly referred to as a credit shelter trust.
 

Testamentary trust

Assets from the will are transferred into a testamentary trust upon death. The assets are subject to probate and transfer taxes and often continue to be subject to supervision by the Surrogate’s Court.
 

Irrevocable life insurance trust (ILIT)

Designed to exclude life insurance proceeds from the deceased person’s taxable estate while providing liquidity to the estate and/or the trusts’ beneficiaries. This type of trust is irrevocable.
 

Charitable lead trust

Estate assets pass to a charitable or religious organization and the remainder is given to your beneficiaries.
Charitable remainder trust For a period of time the trust provides an income stream to the beneficiary and then any remainder goes to a charity.
 

Generation-skipping trust

Using the generation-skipping tax exemption, a generation-skipping trust permits trust assets to be distributed to grandchildren or later generations without incurring either a generation-skipping tax or estate taxes on the subsequent death of your children.
 

Qualified Terminable Interest Property (QTIP) trust

Used to provide income to a surviving spouse. Upon the spouse’s death, the assets then go to additional beneficiaries named by the deceased. Often used in second marriage situations, as well as to maximize estate and generation-skipping tax or estate tax planning flexibility.
Grantor Retained Annuity Trust (GRAT) Irrevocable trust funded by gifts you make (grantor). It is designed to shift future appreciation on quickly appreciating assets to the next generation during your (grantor’s) lifetime.

 

Consult with a New York trusts and estates lawyer to include a trust as part of your estate plan. Be sure to read our next post, Understanding the Differences Between Revocable and Irrevocable Trusts, to learn about the types of trust instruments that may be included in your estate plan.  

Adding trust instruments to your estate plan can help a surviving spouse and other beneficiaries have access to assets while the rest of the estate is wound up. Especially if there are young children or children with special needs ensuring continuity of financial security to survivors is at the forefront of individuals making end of life decisions. There are many types of trust instruments, such as a marital “A” trust or a bypass “B” trust. These trusts can also be revocable and irrevocable.

 
Revocable or living trusts

A revocable trust permits the passing of assets outside of probate, the legal proceeding that winds up and settles the estate of the deceased person. Also known as a living trust, you (the grantor) are able to retain control of the assets during your (the grantor’s) lifetime. A living trust is flexible. They can be dissolved at any time should you wish to change the beneficiary or you yourself need access to the trust assets for any reason. Once you (the grantor) dies, the living trust becomes irrevocable. A living or revocable trust is subject to estate taxes, unlike an irrevocable trust. Lastly, you are able to name yourself the trustee or co-trustee and retain complete ownership and control over all of the trust assets during your lifetime.

This is the last post in our in-depth series of trusts and why and how to include them in your estate plan. For prior topics, click here. We were last discussing common mistakes we see in the establishment of trust instruments. Our last post examined failing to fund the trust. The next topics surround beneficiary designations and policy titling.

No. 3 – Unintended beneficiaries of retirement accounts and life insurance policies

Trust funds include life insurance proceeds and other accounts and policies payable to beneficiaries. If those accounts and policies do not properly designate your trust as a primary or contingent beneficiary, then those funds will pass to the beneficiary directly, disregarding any of your instructions from the trust document. The result of the distribution may be that your beneficiary receives more or less than you attended or sooner than necessary, defeating the purpose of the establishment of the trust.

We’ve been examining adding a revocable (a/k/a living or inter vivos) trust or irrevocable trust to your estate plan. Trust instruments are an important part of your estate plan, particularly if you have a spouse and young children you wish to provide for upon your death. When mistakes are made, in establishing or setting-up a trust, the errors are borne by your survivors.

 
When problems arise in trusts they tend to involve issues with trust funding, policy titling, and beneficiary designations. When neglected these issues have their way of creeping into the lives of your loved one and will require significant amounts of money and time being spent that could have otherwise been avoided. What follows is a primer on the top 4 scenarios your survivors will need to get through to correct any problems associated with trust funding, policy titling, and beneficiary designation.

 
No. 1 – Avoiding probate

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