The Importance of Leaving a Will

Here is a great reminder of how important it is for everyone to make out a will, based on an actual case I've seen recently. A brother and sister came to see me today about their father's estate. The conversation went something like this--dad didn't leave a will, but always said that he wanted his property to go to us. They went on to explain to me that dad also had another child--who is disabled and on Medicaid and SSI. I had the job of explaining to them that, regrettably, the disabled daughter is also an heir of the estate under Indiana law and, what's worse, her inheriting the property could jeopardize her benefits. Also, because dad named his son as joint owner of a large bank account (with the intention that the son split it with one of the sisters) the son could be subject to Indiana inheritance tax, a problem that could have been avoided if dad had simply named both children as TOD beneficiaries.

Obviously, none of this was dad's intention. There may be solutions to some of these problems, but getting there is going to be much more expensive and complicated than if dad had simply sat down with an attorney and had his will drawn up. The amount of money his kids are going to spend now on legal fees will probably be 10 times more expensive (at least) than the cost of a simple will!

The bottom line is this: the law will not honor your wishes regarding the disposition of your estate unless you make out a will or have appropriate beneficiary designations for your assets.

Welcome to 2010!

Happy New Year! It's January once again, and if you're like me, you've already started the new diet and are wondering how long it's going to be until it finally starts to warm up. Hopefully, you are also starting to think about another important matter--getting your affairs in order, and by this, I mean updating your estate plan (or starting one, for that matter!)

If you are one of those folks I see all the time who has a 20 year old will sitting in a drawer at home, made dutifully when the children were little and life seemed a little less complicated, now is the perfect time to pull out that old document and replace it with something more up to date. If your will is up to snuff, it's still important to make sure you've covered all the bases, like having a power of attorney and living will too.

Here are some other things to do now to make sure your family is protected if a death or disability occurs--

• Check beneficiary designations. It is crucial to have appropriate beneficiary designations for assets like IRAs, life insurance policies and annuities. Otherwise, your estate can potentially owe lots of money in extra taxes. Make sure that you have up-to-date primary and contingent beneficiaries named for these types of assets.
• Organize financial records. Take it from me, trying to probate a disorderly estate is a real pain in the neck! You can help out your future executor immensely by organizing your financial records. Keep a file listing all assets and major liabilities, including account numbers and contact information for all financial advisors. Dispose of old records that no longer need to be maintained (no, you don't still need to keep that light bill from 1978--for an idea of how long to keep important records, look here.) Make sure your future executor knows how to access your records and other key documents, including any kept on your computer.
• Consider long term care insurance. This is a big topic, but if you are between ages 55-65, now is an excellent time to consider buying a long term care insurance policy. This coverage tends to be expensive, but for those who can afford it, it can be highly worthwhile in the event long term care is needed. Also, with the Indiana Partners Program, individuals who buy long term care insurance can exclude up to 100% of assets if they exhaust their benefits and have to go on Medicaid.

Having a basic estate plan doesn't need to be expensive or complicated, but it does need to be done. Resolve to make it part of your action plan for 2010!

Indiana FSSA announces new hybrid Medicaid processing system

The Indiana Family and Social Services Administration has announced a new hybrid eligibility processing system for Medicaid applications. This follows Governor Daniels' decision this fall to terminate the "modernized" eligibility processing system which had been plagued with errors and delays.

The new system will focus on delivering a more personalized approach to the processing of Medicaid applications. Previously, in counties where the modernized system had been rolled out, applicants had to file applications online, which were processed in a centralized office. Questions about applications could only be submitted to a state-wide call center, with no single caseworker assigned to an individual application. This led to widespread problems, delays, and a general lack of accountability across the system.

Now, applicants will be able to speak face-to-face with caseworkers in their own counties about questions with their applications. Problems can be resolved before a decision is made on the application, which may lessen the need to file costly appeals. If an error is made, a caseworker directly assigned to the application will be able to address it.

It remains to be seen if this new system will bring about the reforms that have been desperately needed for so long. Nevertheless, it represents a good faith effort on the part of the State to address these serious problems. For counties (including Hendricks and Marion) where the modernized system had not yet been rolled out, there will be no changes, and Medicaid applications will be filed in the local county offices just as they always have been.

Great new way to communicate with loved ones during an illness!

I just recently learned about a new website that is designed to help those experiencing an illness or health emergency keep loved ones informed of their progress . CaringBridge.org allows an individual to create a personalized web page that can be accessed by friends and relatives. The individual can use the page to post news about their health status or any other information they wish to share. In this day and age when family members are far-flung and getting out information during an emergency can be difficult, this sounds like a great way to keep everyone in the loop!

Spotlight On: Revocable Trusts

As an estate planning attorney, one of the questions I am asked most frequently is, do I need a trust? Many people are concerned that they should have a trust, but often do not understand why they might need a trust, or if it is even necessary at all.

Whenever the discussion turns to trusts, I always start by trying to understand the goal of the trust. What are we trying to accomplish by setting up this trust, and are there any alternatives to the trust? In the typical estate planning context, most people are interested in setting up revocable trusts, also known as living trusts. These are trusts that are created and funded during the creator's lifetime, as opposed to testamentary trusts, which are established after the creator's death. Some of the goals for creating a revocable trust are:

• Avoidance of probate--assets transferred to the trust during the creator's lifetime do not pass through probate after the creator's death. This is especially useful for owners of real estate in more than one state, in which case, without a trust, multiple probate proceedings may be necessary.
• Protection of beneficiaries--beneficiaries who are minors, disabled or otherwise not able to handle funds appropriately can be protected by having a trustee manage their share of the estate.
• Incapacity of the creator--if the creator of the trust becomes incapacitated during his/her lifetime, funds placed in the trust can be managed for the creator's benefit without the need for a court-appointed guardian.

While all of these goals may be achieved with a revocable trust, there are alternatives. For example, probate can often be avoided entirely by using Transfer-On-Death designations for bank accounts, investments and real estate. An incompetent beneficiary can be protected by a testamentary special needs trust. Likewise, an individual can protect him-or herself in the event of incapacity by signing a durable power of attorney which grants financial decision-making authority to an agent. Given that it can cost several hundred dollars to create and fund a revocable trust, these less-expensive alternatives should be explored first.

Need for discussion on end-of-life care

In an editorial published last week in the Indianapolis Star, Dr. Paul Helft of the I.U. School of Medicine discusses the crucial need for patients facing terminal conditions to discuss with their families and physicians their wishes for end-of-life care. This topic has gotten increased attention lately as Congress and the nation have debated health care reform legislation. Unfortunately, those opposing reform have shifted the discussion to unfounded accusations of "death panels" or forced euthanasia of the elderly and infirm.

Such talk trivializes the importance of making thoughtful end-of-life decisions. Options such as living wills, health care representative declarations and do-not-recusitate orders are important legal tools for making such decisions. A new Indiana law also allows individuals to take control of their funeral and burial arrangements, thereby avoiding family disputes, by signing an advance funeral directive.

Everyone wants to have a good life, but few ever think about having a good death. As a society, we need to take a more mature and measured approach to end-of-life care. While this topic may be scary or uncomfortable for some, taking the time to think these things over and letting one's family, physician and legal representatives know one's wishes in advance is an important step towards easing the trauma of life's passing for all concerned.

(My thanks to Dr. E.J. Last of Methodist Hospital for bringing Dr. Helft's article to my attention.)

New DRA rules in effect on November 1

Major changes to Indiana's Medicaid rules will go into effect on November 1, 2009. These changes are occurring pursuant to a Federal law called the Deficit Reduction Act (DRA), which went into effect in February of 2006. Indiana was rather late in getting around to implementing the new law, but the changes are finally almost here.

The rules as originally proposed by the State were very harsh, and even went beyond the letter of the DRA in some respects. Thanks to the hard work of the Indiana Chapter of the National Academy of Elder Law Attorneys, among other advocacy groups, the legislature softened the rules this past spring. Still, the changes brought about by the DRA will have a major impact on seniors and the disabled in Indiana.

So what's new? The penalties for making gifts of assets in order to qualify for Medicaid benefits for nursing home services are getting a lot stiffer. The look-back period is also increasing--from three years to five years. There are restrictive new rules for planning with annuities and promissory notes, too, among several other changes.

The bottom line is that individuals who want to do asset protection planning will need to get started much earlier now. Even under the DRA, there are still many options for people who have five or more years to work with. For those who wait until the last minute, the options will be fewer and less attractive. Moreover, anyone who is considering purchasing an annuity and who may need long-term care within the next five years should consult with an elder law attorney first.