Fong Law Group

Should you omit your children’s names in your trust if you don’t want to leave anything to them?

 

如何利用信託避免灣區渣男重演?

識法有方-信託Q&A (廣東)

信託 Q & A (國語)

Medicaid's Asset Transfer Rules

In order to be eligible for Medicaid, you cannot have recently transferred assets. Congress does not want you to move into a nursing home on Monday, give all your money to your children (or whomever) on Tuesday, and qualify for Medicaid on Wednesday. So it has imposed a penalty on people who transfer assets without receiving fair value in return.

This penalty is a period of time during which the person transferring the assets will be ineligible for Medicaid. The penalty period is determined by dividing the amount transferred by what Medicaid determines to be the average private pay cost of a nursing home in your state.

Example: If you live in a state where the average monthly cost of care has been determined to be $5,000, and you give away property worth $100,000, you will be ineligible for benefits for 20 months ($100,000 / $5,000 = 20).

Another way to look at the above example is that for every $5,000 transferred, an applicant would be ineligible for Medicaid nursing home benefits for one month. In theory, there is no limit on the number of months a person can be ineligible.

Example: The period of ineligibility for the transfer of property worth $400,000 would be 80 months ($400,000 / $5,000 = 80).

A person applying for Medicaid must disclose all financial transactions he or she was involved in during a set period of time -- frequently called the "look-back period." The state Medicaid agency then determines whether the Medicaid applicant transferred any assets for less than fair market value during this period.  The look-back period for all transfers is 60 months (except in California, where it is 30 months).  Also, keep in mind that because the Medicaid program is administered by the states, your state's transfer rules may diverge from the national norm.  To take just one important example, New York State does not apply the transfer rules to recipients of home care(also called community care).

The penalty period created by a transfer within the look-back period does not begin until (1) the person making the transfer has moved to a nursing home, (2) he has spent down to the asset limit for Medicaid eligibility, (3) has applied for Medicaid coverage, and (4) has been approved for coverage but for the transfer. 

For instance, if an individual transfers $100,000 on April 1, 2017, moves to a nursing home on April 1, 2018, and spends down to Medicaid eligibility on April 1, 2019, that is when the 20-month penalty period will begin, and it will not end until December 1, 2020.

In other words, the penalty period would not begin until the nursing home resident was out of funds, meaning there would be no money to pay the nursing home for however long the penalty period lasts.  In states that have so-called "filial responsibility laws," nursing homes may seek reimbursement from the residents' children. These rarely-enforced laws, which are on the books in 29 states, hold adult children responsible for financial support of indigent parents and, in some cases, medical and nursing home costs.  In 2012, a Pennsylvania appeals court found a son liable for his mother's $93,000 nursing home bill under the state's filial responsibility law.

Exceptions

Transferring assets to certain recipients will not trigger a period of Medicaid ineligibility. These exempt recipients include the following:

• A spouse (or a transfer to anyone else as long as it is for the spouse's benefit)
• A blind or disabled child
• A trust for the benefit of a blind or disabled child
• A trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances).

In addition, special exceptions apply to the transfer of a home. The Medicaid applicant may freely transfer his or her home to the following individuals without incurring a transfer penalty:

• The applicant's spouse
• A child who is under age 21 or who is blind or disabled
• Into a trust for the sole benefit of a disabled individual under age 65 (even if the trust is for the benefit of the Medicaid applicant, under certain circumstances)
• A sibling who has lived in the home during the year preceding the applicant's institutionalization and who already holds an equity interest in the home
• A "caretaker child," who is defined as a child of the applicant who lived in the house for at least two years prior to the applicant's institutionalization and who during that period provided care that allowed the applicant to avoid a nursing home stay.

Congress has created a very important escape hatch from the transfer penalty: the penalty will be "cured" if the transferred asset is returned in its entirety, or it will be reduced if the transferred asset is partially returned. However, some states are not permitting partial returns. Check with your elder law attorney.

More Reasons Why You Need a Will

“Truly, nearly every legal question depends on a host of facts and circumstances that make it impossible to guarantee a particular outcome … except in the case of my favorite question: ‘Do I need a will?’”

It doesn’t take very long for any newly-minted attorneys in the trusts and estates practice area to see what happens when there is no will, says the Daily Memphian in a to-the-point article titled “Five reasons you need a will (and one reason you don’t).” The stress on families, unnecessary expenses and assets going to the wrong people, can easily be prevented with an estate plan and a will. However, in case you still aren’t convinced, here are the top five reasons:

You have a family. For those who are married with children, the laws of intestacy take over, if you don’t have a will. Assets are divided between the surviving spouse and the children in most states (check with a local estate planning attorney for your state’s laws). In theory, that sounds fine. But there are three situations where not having a will can make a mess of things:

• Minors and developmentally delayed heirs. Minors and individuals with special needs may not legally contract or represent themselves in court. Therefore, they cannot agree to the disposition of assets. When a minor or individual with special needs inherits assets directly, the court must appoint a neutral person, often an attorney, to oversee that person’s best interests. It may also require the appointment of a guardian, so the court can monitor the use of the assets in the child’s best interest, until they are of age.
• Bad relationships between surviving spouse and children. Under intestate law, the spouse inheriting reduces the amount the children inherit. If the spouse is a second wife, this can make a bad situation worse. A will can plan out the distribution of assets to care for the spouse and ensure that the children receive the assets, as determined by their parent.
• Extramarital children. Children who are not born to legally wed parents have the right to inherit, regardless of whether their parents were married. What if an unknown offspring shows up and demands his share? This does happen.

You hate your next-of-kin. Not every family is as happy as their Facebook photos. If you don’t want your lawful next of kin inheriting your assets, you need a will. Remember that as time passes and people enter and exit the family, through birth, death, marriage and divorce, the person who is your next-of-kin will likely change over time.

Do you want to give specific gifts? Under the intestacy laws, your relatives (next-of-kin) inherit your property in percentages that are based on their degree of relationship to you and the number of other relatives at that same degree. Outside of designating a beneficiary or joint owner of an assets, having a will that is properly prepared under the laws of your state, is the only way to ensure that you can determine who gets what.

You know how you want things to work after you die. If you want to have any control over what happens to your assets, how you want your funeral to be paid for, what you want to happen to personal property, etc., a will may be the best way to do this. The person named to be your executor is legally responsible to carrying out your wishes, unless it’s impossible, impractical or illegal for them to do so.

You have a living trust. If you took the trouble to have a living trust, then you should also have a will. You need, specifically, a “pour-over” will. This ensures that any assets not titled in the name of the trust at the time of your death, are transferred into the trust. Otherwise, your non-trust assets are subject to intestacy law.

The ONLY reason you may not need a will? If every single asset you own has either joint ownership or beneficiary designations. That’s very unusual, in part because it takes a lot of detail to make sure that every asset is titled correctly. You can leave real property to another person through a joint ownership deed, which establishes that person as the co-owner of the property. Accounts can be left to a person of choice, by naming a person as beneficiary.

Joint ownership and beneficiary designations do supersede the intestacy laws. However, what happens if a beneficiary dies before you do and you neglect to change the name on the asset? There are also gift and tax implications.

A will can be as complex or as simple as you want. Speak with an experienced estate planning attorney, who can make sure that your will and any other documents are prepared to achieve your wishes for your estate, protect your family, and don’t leave anything to chance.

Reference: Daily Memphian (March 8, 2019) “Five reasons you need a will (and one reason you don’t)”

Do I Need a Living Trust or a Will? Or Both? 我需要信託還是遺囑？還是兩者都需要？ (中英對照)

“In some states, clients are charged court costs and attorney’s fees, based on the worth of their probate assets. Thus, the cost of the administration of the estate increases, as the value of the probate estate increases.”

This is just one of the reasons people think they want a trust: to ensure that the value of their overall estate will not decrease, because of the cost of probate. The most common way to do that is with a trust, says The Houston Chronicle in the article “Elder Law: Which should I have—A Living trust or a will?”

In some states, probate is not an expensive or overly time-consuming issue. Texas, for example, has what is called an independent administration. Executors handle the tasks involved in settling an estate and distributing assets to beneficiaries. As a result, there’s very little court involvement. However, that’s not the case everywhere.  In California,   the Probate Court closely supervises the entire probate process and no assets can be distributed without the Court’s approval.  Further, in California, probate costs are 5% to 7% of the gross value of the estate.  For instance, if your estate is $1 million, the probate costs can be as high as $50,000.  If you want to avoid probate costs, you should hire an estate planning attorney.  An experienced estate planning attorney can tell you whether a trust is right for your estate.  He or she can also explain the difference between different types of trusts.

The trust most frequently used to avoid probate, is known as a revocable management trust, living trust or an “inter vivos” trust.

Selecting the best type of trust for each situation is different. Here are some advantages of living trusts:

Avoiding probate. The cost of probate alone is not reason enough to use a trust. However, if your assets are in trusts, you may not need to file an inventory listing your assets with the court. That’s not always required in every jurisdiction, but if it is required where you live, a trust can help keep your asset list private, by ensuring that it is only seen by beneficiaries.

Asset management for incapacity. A living trust goes into effect, while you are alive. If you become incapacitated, an alternate trustee can step in to manage assets, pay bills and ensure that finances are taken care of.

Avoiding probate in another state. If you own out-of-state property, your estate may need to be probated in your home state and in the other state. If you have a living trust, out-of-state parcels of land can be deeded into the trust during your lifetime, thus avoiding the need for probate in another state. After your passing, your trustee can handle the out-of-state property in the living trust.

Administrative ease. There are, unfortunately, instances when Power of Attorney can be challenged by financial institutions. The authority of a trustee is more likely to be recognized, by banks, investment companies, etc.

There are some questions about whether it’s better to have a living trust or a will. The most complex part of having a living trust, is the process of funding the trust. It is imperative for the trust to work, that every asset you own is either transferred into the trust or retitled into the name of the trust. If assets are left out or incorrectly funded, then probate will probably be necessary. This can occur, even if only one single asset is left out.

If an asset is controlled by beneficiary designation, then the trust may not need to be named a beneficiary, should you want it to pass directly to one or more beneficiaries.

Funding the trust becomes complicated, when retirement accounts are involved. Consult with an experienced estate planning attorney, if you want to make the trust a designated beneficiary of a retirement account. This is because very specific and complex rules may limit the ability to “stretch” the distributions form the account.

Using a trust instead of a will-based plan is growing in popularity, but it should never be an automatic decision. An estate planning attorney will be able to explain the pros and cons of each strategy and help you and your family decide which is better for you.

Reference: The Houston Chronicle (Feb. 15, 2019) “Elder Law: Which should I have—A Living trust or a will?”

“在某些州，客戶需要按資產的價值去支付法庭費用和律師費。因此，隨著資產增值, 遺囑認證費用亦隨著增加。”

這是人們認為他們需要信託的其中一個原因：確保他們的財產總值不會因為遺囑認證的費用而減少。The Houston Chronicle在“Elder Law: Which should I have—A Living trust or a will?”

一文中說，最常見的方法就是建立信託。

在某些州，遺囑認證並不花費及耗時。例如，德州擁有所謂的獨立的遺產程序。執行人員處理解決遺產和向受益人分配資產。因此，法院很少參與。但不是到處都是這樣。在加州，遺囑認證法院密切監督整個遺囑認證過程，未經法院批准，不得分配任何資產。此外，在加州，遺囑認證費用佔遺產總值的5%至7%。例如，如果您的遺產是100萬美元，那麼遺囑認證費用可高達50,000美元。如果您想避免遺囑認證費用，您應聘請資產規劃律師。經驗豐富的資產規劃律師可以告訴您信託是否適合您。也可以跟您解釋不同類型的信託之間的差異。

最常用於避免遺囑認證的信託稱為生前信託。

因著不同的情況選擇最合適的信託。以下是生前信託的一些好處：

避免遺囑認證。遺囑認證的費用不是使用信託的唯一原因。另一個原來是，如果您把資產放到信託中，您便可能無需向法院提交資產清單。並非每個司法管轄區都要求這樣做，但如果您所在的地方需要，可以通過信託確保只有受益人才看到您的資產清單。

失去能力管理資產。當你還在世的時候，生前信託便生效。如果您失去能力，替代受託人可以介入管理您的資產，支付賬單並確保財務得到妥善處理。

在另一個州避免遺囑認證。如果您在外州擁有財產，您的遺產可能需要在您所居地和其他州認證。如果你有一個生前信託，那麼可以把在外州的地放到信託中，這樣便可避免在另一個州進行遺囑認證。在您去世後，您的受託人可以處理在信託中的於外州的物業。

容易管理。不幸的是，有很多情況下，財務授權書可被一些金融機構質疑。而受託人的權力更有可能被銀行，投資公司等承認。

關於擁有生前信託還是擁有遺囑好一些這問題。擁有生前信託最複雜的部分是把資產注入信託的過程。如果要令信託有效，您擁有的所有資產都要轉移到信託中或是重新命名為信託名下。如果忘了轉移資產或不正確地轉移，則可能需要進行遺囑認證。即使只剩下一個資產，也可能發生這種情況。

如果資產有指定受益人，而您希望把資產直接留給指定受益人，那麼, 信託就不需要成為指定受益人。

當涉及退休賬戶時，為信託注入資金會變得複雜。如果您想將信託作為退休賬戶的指定受益人，請諮詢經驗豐富的資產規劃律師。因為當中涉及複雜的規則。

以信託來取代遺囑的做法越來越受歡迎，但這並不是理所當然的。資產規劃律師將能夠解釋每種策略的利弊，並幫助您和您的家人決定哪種方案更適合您們。

參考: The Houston Chronicle (Feb. 15, 2019) “Elder Law: Which should I have—A Living trust or a will?”

When Estate Planning Takes Place in a Crisis 當資產規劃陷入危機時 (中英對照)

“Many of us have experienced the unexpected "telephone call" from a hospital or loved one that a sudden negative medical event has occurred, involving a member of your family.”

It’s never a good thing, when you get a call and the person on the other end asks if you are sitting down.

A sudden death or medical crisis can turn your world upside down, especially if the person was not prepared with the right documents says The Union in the article “Estate planning in a time of crisis.” Your heart sinks and questions start flooding your mind. Will they survive? How far is the hospital and how fast can you get there? Will they end up in nursing care? Who will be able to help you care for them?

The questions go on, long after the initial panic subsides.

There are three documents you’ll wish you had when dealing with a medical crisis for a loved one: a health care directive, a durable power of attorney and a living trust.

When a loved one needs help in making decisions and discussing their situation with doctors and other care providers, a health care directive grants you the authority to speak on their behalf. The law requires health care professionals to have legal permission to speak with a representative about highly personal and confidential information. The law requires medical professionals to perform life-saving procedures, which are sometimes painful and unwanted. If the wishes of the person are not correctly documented, it is not possible to stop these procedures from being initiated.

The most common need for this document, is what kind of on-going care is needed and wanted for the loved one, who can no longer express their wishes or care for themselves without help.

Any asset owned by an incapacitated person that is not titled in the name of their trust, cannot be overseen by the successor trustee. The person who is named a durable power of attorney is permitted to control and direct these assets, including transferring them into the trust.

Retirement accounts, 401(k)s, IRAs, Deferred Compensation Benefit Plans, SEPs and all other assets or benefit plans not titled in the trust name can be administered only by the person named the durable power of attorney.

If there is no power of attorney at the time a loved one becomes incapacitated, the only way they can access funds outside a trust is to have a guardian appointed for their loved one. The court must be involved in every part of their life, as long as their loved one lives.

A living trust is a legal document that provides for the smooth transition of management, administration and distribution of assets by the grantor, the person who is putting their assets into their trust during their lifetime. When that person is no longer legally competent, the successor trustee takes over with all the legal powers outlined in the living trust document.

This document gives clear legal authority so that assets can be managed, income can be distributed and bill paying and distribution of the estate at death can take place.

Speak with a qualified estate planning attorney to put these important documents into place, along with creating a will, so you are protected before an emergency occurs.

Reference: The Union (Sep. 9, 2018) “Estate planning in a time of crisis”

“我們當中許多人都接過從醫院或是所愛的人發生了突然的醫療事故的”來電”，涉及您的家庭成員。”

當你接到電話並且另一端的人詢問你是否坐下時，這絕不是一件好事。

突如其來的死亡或醫療危機可能會讓你的世界顛倒過來，特別是當這人沒有準備好正確的文件，就如The Union 在文章“Estate planning in a time of crisis”中說。你的心沈澱，而各種問題開始湧入你腦海。他們會活過來嗎？醫院有多遠，你能多快到達那裡？他們最終需要接受護理嗎？有誰能幫你來照顧他們？

很久之後, 最初的恐慌會消退, 但這些問題仍繼續存在。

在為親人處理醫療危機時，您會希望有這三份文件：醫療授權書，財務授權書和生前信託。

當親人需要幫助做出決定並與醫生和其他護理人員討論他們的情況時，醫療授權書可授予您代表他們發言的權力。法律要求醫療專業人員獲得法律許可方可與代表就高度私人機密資料對話。法律要求醫療專業人員執行挽救生命程序，這些程序有時是痛苦和不必要的。如果未有文件正確記錄此人的意願，則無法阻止這些程序。

需要這文件最常見的情況是，親人需要或要求什麼樣的照顧, 因他們不能在沒有幫助的情況下表達自己的意願或照顧自己。

無行為能力人所擁有的任何資產如果不在信託名下，不能由繼任受託人監管。財務授權書允許授權人控制這些資產，包括將資產轉移到信託中。

退休賬戶，401（k）s，IRA，推遲領取補償金計劃，SEP以及所有其他未以信託命名的資產或福利計劃只能由財務授權書授權人來管理。

如果親人在失去能力時沒有財務授權書，他們如要獲得信託以外的資產唯一方法就是為他們親人指定一名監護人。只要親人還在世，法庭必介入他們生活的每一個部分。

生前信託是合法文件，可讓該人於在生時把資產管理權順利轉移信託裡及由成立人作資產分配。當該人在法律上沒有行為能力時，繼任受託人將接管生前信託中概述的所有法律權力。

該文件明確規定了法律權限，以便管理資產，分配收入，支付賬單及分配遺產。

與合資格的資產規劃律師交談，將這些重要文件放在適當的位置，同時建立遺囑，以便在緊急情況發生之前得到保障。

參考:  The Union (Sep. 9, 2018) “Estate planning in a time of crisis”