 It is not uncommon for clients to inquire about giving assets away to their loved ones, either as a one-time gift or as part of a long-term gifting plan. What many people do not realize is that there are tax consequences associated with making a gift. As Benjamin Franklin once said “…in this world nothing can be said to be certain, except death and taxes.” Before you decide to make gifts to your family, here are some tax considerations you should be aware of: Annual Gift Tax Exclusion – The annual gift tax exclusion is an amount put in place by the federal government that an individual is allowed to gift in any given year without tax consequences. It often changes from year to year, although it has now been the same since 2018. The annual gift tax exclusion amount for the year 2021 is $15,000. Therefore, an individual can gift up to $15,000 per person this year and not pay any taxes on it. There are also no required tax filings for making this gift. For example, I could gift $15,000 to each of my three children (for a total of $45,000 gifted) and I would not have any taxes to pay on those gifts, nor would I file anything with the Internal Revenue Service (IRS). My spouse could also gift the same amount. Lifetime Gift Tax Exemption – The lifetime gift tax exemption is the total amount that I am allowed to gift during my lifetime without suffering a tax penalty. It typically changes from year to year. The lifetime gift tax exemption amount for 2021 is $11,700,000. Therefore, I can gift $11,700,000 in assets this year and I will not have to pay any taxes. However, I will have to file a Form 709 Gift Tax Return to show that I have used my lifetime exemption. Any exemption that I use by making gifts during my lifetime, is taken off of what I am able to leave tax free at my death via the estate tax exemption. For example, if I make a gift this year that uses $1,000,000 of my lifetime exemption, then two years later I die and the estate tax exemption amount is $12,000,000 at the time of my death (estate tax exemption amount is what an individual is allowed to leave tax free at their death), then I will only be able to leave $11,000,000 estate tax free ($12,000,000 less the $1,000,000 of my exemption that I already used by making gifts during my lifetime). This is why, even though no tax is due, a gift tax return is required if I use any of my lifetime exemption amount. It allows the IRS to keep track of how much exemption an individual has. Please be aware, that this is a simplified discussion of the potential tax consequences associated with making gifts. There are also other considerations to be made before beginning a gifting program for your loved ones. Prior to doing any gifting, you should consult a tax professional and your estate planning attorney. For more information on gifting, please contact Davis & McCann, P.A. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, and related matters.  If you have a loved one who is physically, mentally or developmentally disabled he or she may be entitled to receive government benefits, such as Supplemental Security Income (SSI) or Medicaid. Most of these benefits are needs and income-based and are thus, available only to those with very limited resources.
If you leave a disabled dependent a substantial inheritance, you may accidentally disqualify that individual from receiving benefits which might be essential to his or her care. However, we find that clients are often uncomfortable with the idea of completely disinheriting a loved one. A third-party special needs trust may help address this problem. This type of trust is created for the specific purpose of supplementing the government benefits to which the beneficiary is entitled - -- providing only for items above and beyond the benefits the disabled beneficiary receives from governmental agencies or programs. It allows a client to leave assets to their loved one without disqualifying that loved one from the benefits that they have come to rely on. One of the requirements of a third-party special needs trust is that the beneficiary not have any control or ownership of the trust assets. In order to accomplish this, the trustee must be given complete authority regarding the distribution of the trust assets and income. The beneficiary cannot have the power to demand payment of either income or principal from the trust. This makes the choice of trustee extremely important. This brief article is no substitute for careful consideration of all of the advantages and disadvantages of a special needs trust, especially as applied to your unique situation. Before implementing any significant estate planning strategy or selecting a Trustee for a Special Needs Trust, you should consult with your estate planning advisor. For more information on planning for those with special needs, please contact Davis & McCann, P.A. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, and related matters.  One of the goals of a good estate plan is to ease the burden of estate administration for those we leave behind. Failing to communicate with your heirs, executor or trustee about the structure of your estate plan and your assets can cause considerable difficulty and result in added administrative expenses. The “nuts & bolts” of your estate administration will often depend on your recordkeeping during your lifetime. Your records should include:
Keep these records in one secure place and make sure that a trusted family member or friend knows the exact location of the files. You should also provide financial information to make certain that your assets are easily discoverable. Check to be sure all the following information is in one convenient place:
Having all this information organized will greatly assist those who will be administering your estate and help keep costs down. For more information on how to ease the burden of your passing on your loved ones, please contact Davis & McCann, P.A. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, and related matters.  People of all shapes and sizes are establishing trusts. Credit shelter trust, marital trusts, generation skipping trusts, life insurance trusts, Medicaid asset protection trusts, charitable remainder trusts and revocable living trusts are just a few examples of the types of trusts that are in use today. All of these trusts have at least one thing in common—you need a trustee to manage them. Your trustee plays a critical role in whether your trust will be successful. The question is, who should be your trustee?
A trust is a written agreement between the grantor (sometime call a settler or trustor) and the trustee. Under a trust agreement, the grantor transfers cash and/or assets to the trustee and gives the trustee instructions regarding the distribution of the income and principal of the trust to the beneficiaries. The trustee is a fiduciary who must follow the instructions of the grantor with respect to the investment of trust assets and all distributions. There are three types of trustees; professional, semi-professional, and amateur. Professional trustees are usually corporations who are engaged in the business of acting as a trustee for hire. Bank trust departments and independent trust companies are the most common examples of professional trustees. Semi-professional trustees are typically professional advisers like attorneys and accountants. These individuals have some, but perhaps not all, of the technical knowledge of a full-time professional trustee. However, they often have a long-standing relationship with the grantor and his/her family. Amateur trustees include any individual who acts as a trustee on a part-time, infrequent basis. Appointing yourself, your spouse, your child, your brother-in-law-the-doctor or most other family and non-family members typically means that you have appointed an amateur trustee. No one type of trustee is right for every situation. Like any other aspect of estate planning, choosing a trustee involves weighing relative advantages and disadvantages and it should be done with the help of a trusted advisor. Professional trustees do offer expertise in trust law, taxation, investments and a variety of other topics that relate to trusts. They also have staff that can provide grantors and beneficiaries with various reporting services. There is very little risk of fraud when dealing with a corporate trustee and a corporate trustee won’t die or become incapacitated. However, professional trustees may be more expensive than semi-professional or amateur trustees. Semi-professional and amateur trustees share many of the same advantages and disadvantages, although perhaps to a different degree. On the plus side, they may be more “in tune” with the grantor’s wishes and the personal needs of beneficiaries, as they often have a longer standing personal relationship with the grantor. They may waive some, or all, of the fee to which they are entitled. There are, of course, negatives as well. Semi-professionals and amateurs are part-time trustees. They may lack the time and skills necessary to manage the trust assets. They are also subject to the human frailties of injury, sickness, death and dishonesty. There is not one right answer for all situations and thus, it pays to review your options carefully. For more information on who you should consider as your trustee, please contact Davis & McCann, P. A. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, and related matters.  Twenty years ago or more, when you needed an attorney in rural Kansas, most firms would try to accommodate any legal concern you might bring to them. Today, times have changed. Just as we have seen with the specialization of medical professions, the practice of law has followed a similar path. Many, if not most, law firms now focus their scope of practice to a limited number of areas so they can offer top of the line legal advice. For matters in which they are not well-versed, firms rely on a referral network of other local and regional law firms. In this way, rural residents receive legal advice and services comparable to what they might expect from a large metropolitan firm.
Davis & McCann, P. A. is no exception. We focus our practice around estate planning, long-term care planning, Medicaid planning, probate and trust administration, corporate, business succession planning, and real estate. Specifically, we regularly work with clients on the following: · Wills · Powers of Attorney · HIPAA authorization forms · Living Wills · Planning for distributions to children, both minors and adults · Asset protection for professionals or successive generations · Guardianships and Conservatorships · Beneficiary designations · Prenuptial and Postnuptial Agreement preparation and review · Entities to hold and control family assets and family business interests · Farm, ranch, and business succession planning · Living Trusts and ancillary documents (Certification of Trust, Declaration of Trust) · Trust funding · Special Needs Trusts · Charitable Remainder Trusts · Charitable Lead Trusts · Other types of Irrevocable Trusts  If you’re healthy, you’ve probably never really thought about long-term care or Medicaid planning. However, statistically, the vast majority of individuals will end up needing nursing home care at some point during their lives. Some people are able to apply and qualify for Medicaid benefits without hiring an attorney to assist them. However, there are many individuals who could greatly benefit from having an elder law attorney guide them in creating and implementing a long-term care or Medicaid plan. Below are a few situations where you might want to consider hiring an elder law attorney: 1. If you are in immediate need of full-time nursing home care, have more than $15,000 in countable assets, and need Medicaid benefits to help pay for your care, it might be worthwhile to hire an experienced elder law attorney to assist you. Your attorney can complete your Medicaid application and serve as a liaison with the state Medicaid office and nursing home facility. This move can improve your chances of preserving as many assets as possible as well as increasing your chances of receiving all Medicaid benefits for which you might be eligible. 2. If you are living at home and your spouse requires full-time nursing care in a facility, an attorney can help expedite the Medicaid application process to reduce costs. Additionally, an attorney can show you ways to protect your financial interests so that you can live more comfortably at home and not feel the need to spend all of your assets down on your spouse’s care. 3. If you and your spouse both require care, hiring an experienced attorney to help with the Medicaid application process and spenddown rules can save your adult children time, money and stress. 4. If you and your spouse are healthy and not in need of immediate care, an elder law attorney can provide you with long-term care planning advice that can help you avoid missing time-sensitive asset protection opportunities. How much will an elder law attorney cost? In most situations, attorney’s fees rarely exceed the cost of one to two months of long-term nursing home care. For more information on long-term care planning and Medicaid issues, please contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, and related matters.  Are you considering purchasing a life insurance policy to benefit your family members after your death? Death benefits from a life insurance policy can be substantial. Benefits can be paid to one or more beneficiaries or to a Trust administered for their benefit. Did you know life insurance can be a key part of your estate plan? While it’s not a necessary component for everyone, it certainly can be useful in many situations. The tricky part comes with knowing whom to name as the beneficiary of your policy. If your estate is very simple and you have few beneficiaries for whom you wish to provide, doing beneficiary planning for your life insurance benefits works well. However, if you have a more complicated family situation or you want to provide your beneficiary with asset protection, you may want to consider naming a Trust as the beneficiary of your life insurance policy. Here are a few examples of why you might want to name a Trust as the beneficiary of your life insurance policy: 1. Asset Equalization. Not all assets are created equal. If you’ve decided to give one child farmland and the other child pastureland, there is likely to be a discrepancy in property valuation. If your goal is to provide an equal inheritance to each child, life insurance proceeds are an easy way to equalize the value of overall estate distributions. If you name a Trust as the beneficiary, you can stipulate how the life insurance proceeds should be used to equalize any inequities among your beneficiaries. 2. Debt payment. If you are concerned that your estate will not have enough cash to pay your estate debts, you should consider using a life insurance policy to provide the necessary cash to cover expenses after your death. If done properly, this will prevent your assets from being sold to pay for outstanding debts. By naming a Trust as the death beneficiary, your Trustee will be able to pay the necessary debts, preserve your other assets for your heirs, and distribute any remaining cash pursuant to your wishes. 3. Beneficiary/Asset protection. Many people can benefit from being a beneficiary of a life insurance policy but not all beneficiaries are responsible enough to receive cash proceeds outright. If your intended beneficiary has a poor track record with money management, handing them a large sum of money outright from the life insurance proceeds probably isn’t in their best interest. However, if you name the Trust as the beneficiary and give specific instructions within the Trust to provide for the welfare of that same beneficiary, your Trustee can more safely provide for the benefit of that beneficiary, without directly allowing them access to the funds. Additionally, Trust planning can provide asset protection for a beneficiary in a difficult marriage who might be heading towards divorce or is facing a lawsuit or bankruptcy. Having your life insurance proceeds pay to a Trust for that beneficiary means those funds should not be available to that beneficiaries’ creditors. Finally, naming a Trust as the beneficiary of your insurance allows for more control and flexibility in planning should your beneficiary die before you or if your beneficiary is a minor child. If you think using a Trust to administer life insurance death benefits may be an estate planning strategy you want to explore, please contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate Transactions, and related matters.  When a person needs help paying for skilled nursing care, they can apply for government Medicaid assistance. In Kansas, the state agency administering Medicaid benefits is known as KanCare. To qualify for KanCare benefits, you may not have more than $2,000.00 in total countable resources. What are “countable resources”? Sometimes referred to as liquid assets, countable resources are assets that the government has determined an individual can easily convert to cash to pay expenses such as skilled nursing care. Examples of countable resources include: cash, stocks, bonds, investments, savings and checking accounts, certificates of deposit (CDs), retirement funds (excluding pensions) and real estate (excluding your personal residence and business income producing assets, like farmland). Some assets not typically considered “countable” by KanCare when determining your eligibility for benefits include: personal keepsakes and belongings, household goods and furnishings, one vehicle (under some situations, like if a spouse is still living at home), life insurance policies without a cash value, burial plots, irrevocable funeral plans with cash of less than $7,000.00, and your personal residence. If you have gifted away any assets within the five years prior to your nursing home admission date, KanCare will use the value of those assets to calculate a penalty period. A penalty period is a time that an individual is not eligible to receive Medicaid benefits. It’s important to note that assets that have been gifted, either outright or into a trust like a Medicaid Asset Protection Trust, more than five years before an individual applies for Medicaid benefits are not countable for Medicaid eligibility purposes under current law. If a person has more than $2,000.00 in countable resources, they will not be considered Medicaid eligible until they have done what is commonly referred to as a “spenddown”. However, it is important to note that not all of the assets that must be spent down have to be toward the nursing home care. Instead, an individual can use some of their countable resources for their own benefit, so long as the expenditure abides by Medicaid rules. Depending on your unique situation, these expenditures might include: prepaying for funeral and burial expenses up to a specified amount, paying some debts, doing certain home improvements, particularly if a spouse is still living at home, paying medical bills (doctor, dentist, vision), purchasing clothing for the individual being admitted, or even purchasing a vehicle in some instances. To ensure your expenditures will meet with Medicaid approval, you might want to run your spenddown plan by an elder law attorney prior to moving forward and please keep receipts and records. If KanCare challenges the validity of your purchases, you must be able to prove that the expenses met their guidelines. If you have questions about Medicaid planning or long-term care planning, contact Davis & McCann, P.A., Dodge City, Kansas at 620-225-1674. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Special Needs Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate, 1031 Exchanges, and related matters.  What can long-term care planning or Medicaid planning do for you? For starters, it can save you thousands of dollars on current or future long-term care. According to a 2020 Genworth study on nursing home costs, the average semi-private, full-time nursing home room in Kansas costs approximately $6,691.00 monthly ($80,292.00 annually). With this type of price tag, people are starting to realize the importance of planning for their end-of-life expenses. If you are healthy and in no need of immediate care, you might want to seek advice on long-term care planning from an experienced elder law attorney. Upon examining a comprehensive list of your assets and their values and listening to your objectives, your attorney may suggest any number of legal strategies to help you accomplish your goals. A few of these suggestions might include purchasing a long-term care insurance policy, creating and funding an irrevocable Medicaid Asset Protection Trust, establishing a gifting plan to family members, transferring assets by beneficiary designations and transfer-on-death designations, or forming some type of business entity. The type of legal strategies recommended for you will depend on your unique situation. Medicaid planning is the term commonly used to preserve assets for individuals already residing in or having an impending need for full-time, skilled nursing home care. Planning at this stage is often referred to as crisis planning. Once again, an elder law attorney will need a comprehensive list of your assets and their values, as well as information on any income streams that you have. Depending on your goals, assets, income, life expectancy, and other issues unique to your situation, your attorney might recommend purchasing a Medicaid annuity, initiating an asset gifting program, purchasing a prepaid funeral plan, having home improvement repairs done on your residence, or any other number of planning choices. All of these are viable options that many people are unaware they can utilize, particularly once someone has already been placed in a long-term care facility. However, be cautious when moving forward with a Medicaid spenddown, because if not done correctly, it can result in a refusal of benefits. Hiring an experienced elder law attorney is a good way to ensure that mistakes are avoided so that you can qualify more easily for Medicaid while preserving the greatest amount of assets allowed by law for your family. If you have questions about Medicaid planning or long-term care planning, contact Davis & McCann, P.A., Dodge City, Kansas at 620-225-1674. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Special Needs Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate, 1031 Exchanges, and related matters.  If you have minor children, one of most important things you can do is choose a guardian and formally appoint them in your Last Will and Testament. A guardian is the person you legally authorize to raise your children in the event of your death. Naming a guardian is one of the top reasons young parents create an estate plan. To help you decide on a guardian, here’s a list of topics you may want to consider while choosing a potential candidate: Religion, Political, Moral Beliefs. These topics often are the most important considerations for young parents. Are you comfortable with the proposed guardian’s religious, political, and moral beliefs? Are you confident that your children will be raised in a way that honors your current religious, political and moral framework? Location. Does the person you’d like to name as guardian live a significant distance from you? Are you comfortable having your children raised in the community where the guardian resides? Is the guardian’s home large enough to accommodate your children? Would your children need to relocate to a new school and leave their existing friends? Existing Family. If the person is married, is the marriage stable? Would the spouse welcome and respect your children in his/her home? Does the person have children? If so, are the guardian’s views on education and social activities similar to your views? If the person does not have children, would they be comfortable raising your children? Is the guardian’s method of discipline similar to your own? Age. If you prefer an older guardian, they might be in a better financial position and may have more time to spend with your children, but he or she might be less equipped to help your children face the social pressures of the future. Younger guardians may be more in tune with current issues but due to career demands, they may have less time for the day-to-day duties associated with child rearing. Health. Raising young children is mentally and physically demanding. A guardian with ongoing health issues may not have the energy or strength necessary to provide a stable environment for your children. Is this person in a position to devote the necessary time and energy to help your children fulfill their potential? Finances. Will acting as a guardian for your children cause a financial burden for this person? Do you have provisions in place to provide finances for your children’s care after your death? Is this guardian capable of managing the children’s finances or should you consider naming a separate person as conservator of their funds? Willingness. An honest conversation with the proposed guardian is an absolute necessity. Be sure to discuss the anticipated responsibilities and your desires for your children’s future. He or she needs to understand the role of a guardian and be willing to assume the responsibility. It is important that you always choose an alternate person to name as guardian just in case your first choice is unable or unwilling to serve. Remember, without formally naming a guardian for your children, you will allow the State to make that choice for you. If you have questions about naming a guardian for your minor children or any Kansas estate planning topic, contact Davis & McCann, P.A., Dodge City, Kansas at 620-225-1674. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and the National Academy of Elder Law Attorneys (NAELA). We focus our practice on providing clients with the best legal advice on Estate Planning, Medicaid and Long-term Care Planning, Special Needs Planning, Family Business/Small Business Succession Planning, Probate, Trust Administration, Real Estate, 1031 Exchanges, and related matters. |
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