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Hooper Law Office,LLC Estate Planning Blog

Monday, April 6, 2015

Is a prenuptial agreement really a good idea?

Most estate planning attorneys counsel their clients who are about to remarry to consider putting a prenuptial agreement in place.  Essentially, the prenuptial says, "what's mine is mine and what's yours is yours, and should we ever divorce, or if any one of us dies, I keep my stuff and you keep yours."  This is only fair because if a divorce should occur when the marriage is still young, your surviving spouse will leave the new marriage with the same assets he or she brought into it, as well as an equitable share of any assets acquired together during the marriage.

Monday, March 30, 2015

What about protection from predators?

An "Asset Protected Trust" also provides protection from predators.  A knowledgeable estate planning attorney will insert special provisions into the trust to keep predators away from your spouse's door.  Special trust provisions may include:

  • Directions that the trust assets can be used only by your spouse and no one else;
  • Appointment of a co-trustee to help protect your spouse from potential predators; and
  • A requirement that prior to remarriage the new spouse must sign a prenuptial agreement relinquishing all claims against your spouse's assets.

Monday, March 23, 2015

Does every trust protect my spouse from creditors?

No!  Not all trusts provide creditor protection.  If creditor protection is desired, the trust must be carefully planned and drafted to achieve this valuable benefit.  Lawyers with expertise in estate planning will know what provisions are needed to protect your spouse from creditors.

Monday, March 16, 2015

How do I protect my spouse from creditors?

When a spouse dies, the estate is usually left outright to the surviving spouse.  This is a big mistake!  Anything owned by your surviving spouse can be taken away.  The first rule of protecting your spouse from creditors after your death, is "Do not let your spouse own your assets after you die."

This strategy is not as bad as it sounds.  In fact, most spouses actually appreciate the strategy when they learn they can maintain the benefits of ownership without the risk of having it exposed to any creditor claims.

To implement this strategy requires that you first create  a revocable living trust and transfer your assets into it.  When you die, the instructions of the revocable trust state that your assets will be moved to a special trust inside your revocable trust that can be used for your surviving spouse's health, education, maintenance, and support.  These instructions mean that all of the trust's assets are available to maintain your spouse's lifestyle.  The beauty of this plan is that although your spouse will receive all the benefits of being a trust beneficiary, your spouse will not face any of the risks faced by thos4e who receive their inheritances outright, including the risk of losing it to creditors.

As a trust beneficiary, your spouse is entitled to what the law calls the "beneficial enjoyment" of the trust property.  This gives your spouse all of the benefits of enjoying the use of the trust property without fear of losing it to creditors.

This arrangement gives your spouse "control without ownership."  Even though the trust owns that assets, your spouse will continue to manage and control them.  The benefit is that if a creditor makes a claim against your spouse, assets in the trust are protected because they are not legally owned by your spouse - they are your assets left in trust under your spouse's control and for your spouse's benefit.  Because a creditor is not your spouse, the creditor has no right to claim the trust's assets.


Monday, March 9, 2015

What is a predator?

A predator is anyone who preys upon your surviving spouse for money, including a new suitor.  A predator can also be the person who marries your surviving spouse with good intentions, but when the marriage goes bad, initiates a divorce to take as much as he or she can from your spouse.  Either way your spouse can be financially wiped out.  The good news is that careful planning with the right attorney can protect your surviving spouse from these disastrous situations.

Monday, March 2, 2015

What is a creditor?

A creditor can be anyone who demands payment from your spouse for debts or who files a lawsuit against your surviving spouse claiming your spouse is legally liable to them.  Litigants might be seeking compensation for slip and fall accidents, automobile crashes, or any of the many other reasons that people are being sued these days.  The cost of defending against such litigation and a possible judgment that awards huge damages can financially ruin a surviving spouse which will also impact negatively on your children.

Monday, February 23, 2015

Should I plan with a trust?

To determine if a trust is right for you, simply ask yourself the following questions:

  • Do you want your family to pay the expenses of probate, which are often between 3% and 8% of the gross value of an estate (up to $8,000 for a $100,000 estate)?
  • Do you want the publicity involved in a probate where anyone can see what your beneficiaries inherit?
  • Do you want your family to suffer the delays of the probate process?
  • Do you want a judge to be in charge of settling your estate instead of the Trustee you choose?
  • Do you want your money frozen by the court following your death?
  • Do you want your family to go through a probate in each state where you own real estate?
  • Do you want intrusive guardianship court proceedings if you become incapacitated?
  • Do you want a will contest to take place when you can't defend your actions?

If you answered "No" to any of these questions, then planning with a trust is right for you.

We believe the advantages of a revocable living trust far outweigh the disadvantages.

A well-drafted trust is clearly one of the most beneficial estate planning opportunities available today.  By maintaining control over your estate plan, you can decide for yourself the best use of your property and how to benefit and protect yourself and your family.


Monday, February 16, 2015

What instructions should I include in my trust?

Whatever you want!  You can tailor your trust instructions to meet your unique needs, as well as those of your loved ones.  The more clear, detailed, and specific your instructions, the better your Trustee will be able to understand your desires and fulfill your objectives.

For example, if you want to be cared for in your home if you become disabled, your trust should say so.  Your trust should also authorize your Trustee to pay for this type of care.  Money will be needed to maintain your home and possibly remodel your home for wheelchair accessibility.  You should grant authority to pay for visiting nurses, 24-hour care, hospice, or other needed caregivers to make staying at home possible.  If you wish to continue your daily routine to the maximum extent possible, you can include direction for your recreational activities, travel (including travel companions), and religious or spiritual involvement.

Business owners will want to give special instructions for the continued operation, transfer, or liquidation of their business.  The instructions need to specify whether the Trustee or someone else will be responsible for implementing these decisions.

Other detailed instructions will allow you to leave what you want, to whom you want, when you want, and in the way you want, just as if you were there personally giving direction.  For instance, you can instruct your Trustee to use your estate to care for your children, provide them with quality education, and offer incentives to encourage them to excel in life.

With careful thought, you can creatively plan to benefit friends, relatives, grandchildren, and charities.  Your planning can even be designed to benefit them immediately or over a period of many years.


Monday, February 9, 2015

What are the differences between revocable and irrevocable trusts?

A trust may be either revocable or irrevocable.  The primary difference between revocable or irrevocable trusts is that revocable trusts can be amended whenever the Trustmaker desires without needing court permission.  Revocable trusts are popular because they provide the Trustmaker with maximum flexibility for controlling all the property in the trust plus the ability to change the plan at any time without anyone else's permission.  With an irrevocable trust, the Trustmaker may not independently amend the trust without court permission.  A trust that does not expressly reserve the power to revoke is considered an irrevocable trust.

Irrevocable trusts are used for special planning goals and are appropriate when the benefits to be achieved outweigh the ability to amend without court permission.  Irrevocable trusts may be used in special circumstances to achieve estate and income tax planning goals; protect the estate from nursing home costs; obtain asset protection for beneficiaries; or to plan for persons with special needs.

During the Trustmaker's lifetime, revocable trusts pose no income tax issues because the income and expenses "pass through" to the Trustmaker and are reported on the Trustmaker's personal income tax return.  Following the death of the Trustmaker, the trust becomes irrevocable and therefore a separate taxable entity with its own taxpayer identification number.

 


Monday, February 2, 2015

What are the differences between living and testamentary trusts?

The principal difference between living and testamentary trusts is when they go into effect.  Living trusts go into legal effect immediately upon signing.  They are known as inter vivos trusts, which means "during lifetime" in Latin.  This distinguishes them from trusts created in wills (testamentary trusts) that do not take legal effect until the maker's death.  Like wills, testamentary trusts go through the probate process and are supervised by the court system, while living trusts escape court supervision.  Living trusts can technically be either revocable or irrevocable, but the term "living trust" commonly refers only to revocable trusts.

Monday, January 26, 2015

How is the actual pension amount calculated?

The first step is to calculate your income for VA pension purposes (IVAP).  The IVAP is your gross income minus certain deductions.  Almost all of these deductions are for un-reimbursed medical costs.  This is a long list, but the most important ones are your Medicaid supplement premium, long term care expenses and any deductibles and co-pays you actually aid.  These deductions reduce your gross income to IVAP.  The IVAP is now compared to the maximum pension amount you qualify for.  Thus, if the IVAP is more than the pension you get nothing.  If it is less you get the difference, and if the IVAP is zero or negative you qualify for the  maximum pension.  In most cases you will get little or no pension benefit unless you have high un-reimbursed medical expenses.  However, your pension qualification rating may allow access to other benefits.  If you need home health care, or need to be in an assisted living facility, all of these costs are considered medical expenses.  Therefore, the major impact of a VA pension is that it may allow the veteran or surviving spouse to avoid going into a nursing home (which is the only long term care option paid by Medicaid) by providing extra income for care at home or in assisted living.


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