A lot of people that are unprepared from an estate planning perspective know that it is important. Many of them state that they are frozen with inaction because they simply do not know where to begin.
This is understandable, and in this post, we will provide some basic facts to consider when you are thinking about the estate planning process.
Nursing Home Asset Protection
We are going to start with an area that can be easily overlooked. Your estate plan is going to have limited value if you don’t have anything left to pass along to your loved ones. With this in mind, there is a looming threat to your legacy in the form of long-term care costs.
It can cost somewhere in the vicinity of $200,000 to spend a year in a quality nursing home in the Hartford area. The average length of stay is in fact 12 months, but more than half of people that receive custodial care need the assistance for more than a year. A survey has found that 13 percent require paid long-term care for more than five years.
Medicare does not cover long-term care costs. If you ultimately need nursing home care without making any preparations in advance, the financial impact can be devastating. This potential is compounded for a married couple.
Medicaid will cover these costs if you can gain eligibility. The creation and funding of a Medicaid trust can be the solution, but you have to act in advance because there is a five-year look-back period. You have to fund the trust at least 60 months before you apply for coverage.
Taxation
There are those that put estate planning on the back burner because they don’t want to think about complicated tax issues. In reality, the vast majority of people do not have to be concerned about taxes on inheritances.
Generally speaking, inheritors are not required to pay taxes on the income. This is because the decedent is passing along after-tax assets. If there are assets in the estate that have not been taxed, taxation would become a factor. An example of this would be distributions of a trust’s earnings.
We have a federal estate tax in the United States, but it is only applicable on the portion of an estate that exceeds $12.92 million in value. This figure is called the credit or exclusion.
Here in Connecticut, we have a state-level estate tax. Traditionally, the exclusion has been somewhat lower than the federal exclusion. However, this year it is equal to the federal estate tax exclusion for the first time.
Asset Transfers
Obviously, when you plan your estate, you have to facilitate asset transfers. There are different types of trusts that can be utilized to address specific circumstances. We can gain an understanding of your situation and help you make the right choices.
Incapacity Planning
When you take care of this responsibility, you have to confront some unpleasant possibilities. Unfortunately, a significant percentage of elders become unable to make sound decisions at some point in time. Cognitive impairment is relatively common, and serious physical ailments can make communication impossible.
To account for this eventuality, your plan should include an incapacity component. From a medical perspective, you should have a living will. This is an advance directive that is used to state your preferences with regard to life-support utilization.
You should add a durable power of attorney for health care to name someone to make medical decisions on your behalf if it becomes necessary. A HIPAA release should be included to give the health care representative the legal right to access your medical records.
For financial matters, you can name a representative in a durable power of attorney for property. And if you have a living trust, you can designate a disability trustee to assume the role if it becomes necessary.
Take Action Today!
We would be glad to help you put a plan in place if you are currently unprepared. Plus, if you have an outdated plan, we can review it with you and make the appropriate adjustments.
You can set up a consultation at our Glastonbury or Westport, CT estate planning offices if you call us at 860-548-1000, and you can use our contact form to send us a message.
Mr. Karpe is licensed to practice law before the courts of the States of Connecticut and Colorado, the U.S. District Court for Connecticut, the U.S.District Court for Colorado, the United States Supreme Court, and the U.S. Tax Court. He is a member of the Connecticut and Hartford County Bar Associations as well as the Estate and Probate Section of the Connecticut Bar Association. In addition, he is a member of the American Academy of Estate Planning Attorneys, the National Academy of Elder Law Attorneys and Planned Lifetime Assistance Network of Connecticut.