One of the most common concerns of our aging clients is the fear of losing their family home if they need full time nursing care. There seems to be an inclination to transfer the family home to someone else, usually a family member, as quickly as possible to keep the home from being sold. This may sound like a smart idea, but it simply doesn’t work in most circumstances.
Losing the family home is a legitimate concern but one that you should not try to address without the assistance of an experienced elder law attorney. Here are a few of the problems you can encounter if you don’t abide by Kansas law and Medicaid rules:
1. Gift Tax Consequences. Unless the appraised value of your family home is $15,000 or less (the 2019 annual gifting allowance), when you transfer your family home to someone else, you will be required to file a gift tax return and may be subject to a gift tax.
2. Medicaid Reimbursement Claim. If you require full time nursing home care and are counting on Medicaid benefits to cover the cost of your care, transferring your residence to someone else shortly before moving to a nursing home facility will likely result in a problem. Medicaid works on the theory that assets (your family home, for example) that otherwise could be used to pay for your care should not be given away within the five year period prior to requesting the government (Medicaid) pay for nursing home benefits. This period is called the five year look-back. Unless the gift recipient fits certain, clearly specified exceptions, the government will assess a penalty period before they will contribute to your nursing home care if you have made a gift within the five year look-back. During the penalty period, you will be required to private pay for the cost of any nursing home care that you receive.
You know you need to do your estate planning but you have a problem: a “problem child” more specifically, who has caused a kink in your plans. If you have an adult child with a history of mismanaging their life, it’s likely you’ve wrestled with HOW or IF to include them as a beneficiary of your estate.
Having an adult child who struggles through life can complicate an otherwise simple estate plan. When our clients are in turmoil over how to include a problem child in their estate, their adult child usually has demonstrated a weakness in one or more of the following areas:
• Gambling addiction
• Drug or alcohol addiction
• History of criminal activity
• Inability to hold steady employment
• History of financial mismanagement
• Mental health issues
• History of unhealthy relationships or marriages
• History of causing unnecessary drama with other family members
Sadly, if you fret that one of your children will be a problem during the administration of your estate, your worries probably are justified. Death does not often bring out the best in people. The stress that arises after a death can heighten behavioral problems. Here are a few things you can do to reduce the chance of your child creating problems during the administration of your estate:
1. Experience matters. If you suspect that one of your children will be difficult during your estate administration, hire the best estate planning attorney you can find. There are many things you can do yourself, but preparing your own estate plan should not be one of them. Experienced estate planning attorneys possess knowledge of sophisticated legal options that rarely are offered to you on internet sites or by attorneys with little or no estate planning experience.
2. Hire a professional fiduciary. If you cannot find anyone to serve as the executor or trustee of your estate, consider this an indicator of brewing problems. It may mean one of your kids has a well-known difficult personality or reputation. If you find this situation to be true, consider hiring a professional advisor or trust company to manage your estate. A professional fiduciary may cost more, but in the long-run it will save legal fees and stress. Professional fiduciaries are accustomed to handling disgruntled family members.
Congratulations on your child’s recent high school graduation! Your graduate deserves acknowledgement for their hard work and the achievements they earned, but let’s not overlook the tremendous role that you, as a loved one, played in their success. Without your support and guidance, they most likely would not have reached this educational milestone.
You’ve shared your wisdom and advice, helped them plan their future course. Now it’s time for your child to embark upon their next journey in life: work or continued education. Before you turn your new “adult” out into the world, there is one last thing you should help them complete when they turn 18: estate planning. While you may not think 18 year olds need estate planning, there are three basic documents which every young adult needs:
1. Durable General Power of Attorney
The first necessary component of a young adult’s plan is a durable general power of attorney. Through a durable general power of attorney, your teen designates someone to make business and financial decisions. The durable general power of attorney can be set up as either “springing” or “non-springing”. A “springing” durable general power of attorney becomes effective only if your child becomes incapacitated; at that time it “springs” into action. Should your child be involved in an accident or suffer an illness and be unable to pay their rent or other bills, their appointed agent could make those payments and communicate with financial institutions and school officials until such time as he or she recovers.
A “non-springing” durable general power of attorney is effective as soon as it is signed. This document might be necessary if you have a child going to school in another country or far out of state. That child is not unable to handle their own matters, but, nonetheless, might need you to assist with some of their affairs for them while they are so far away from home.
Acting as Trustee of a Trust can be challenging, and you should understand the responsibilities and duties involved if you are to serve in such a position. Although you may have initially been willing to assume this role, there may come a time when you know you want to resign as Trustee. Perhaps the administration of the Trust is taking more time and energy than you have available, or perhaps your health has deteriorated to the point where you no longer can properly carry out your duties; you don’t need to have a specific reason to resign. However, if you do need to resign as Trustee of a Trust there are a series of steps that should be followed to ensure that you are released, as much as possible, from any further liability.
A Trustee resignation should occur pursuant to the terms of the Trust. As long as you are Trustee, you are a fiduciary of the Trust with a duty of loyalty and a duty of care to the Trust and to the beneficiaries. Therefore, you must resign properly in order to ensure that you are not held responsible for problems that may occur due to your resignation or after your resignation. Even if the terms of the Trust seem clear and easy, you should consult with an attorney to ensure you are in compliance with the Trust and the law.
To resign as Trustee, the following steps generally must occur:
1. Check the original Trust document to see if there is a successor Trustee named. If there is no successor Trustee listed, a new Trustee will have to be appointed. The Trust may allow you to appoint a successor Trustee, but a thorough examination of the Trust will be required to determine this. If one or more of the original Grantors are still living and capable, they can name a successor trustee, if the Trust is a Revocable Trust. If the Grantor is unable to appoint a new Trustee, the current beneficiaries may be able to appoint a new Trustee. As a last resort, the Court always has the ability to appoint a successor Trustee. Whether these options are available to you depends largely on the terms of the Trust and the type of Trust.
If you’re age 65 or older, issues like retirement and long-term care planning are probably becoming more frequent topics of conversation. Even if you’re not in this population group, chances are you know and care for someone who is. Research from the U. S. Department of Health and Human Services suggests that if you are age 65 or older, you’re most likely going to need long-term care at some point in your life. Unless you are sufficiently wealthy or exceptionally poor, it is wise to do some advanced planning to cope with the increasing health care costs that will accompany long-term care stays.
Options you may want to investigate include, but are not limited to:
1. Long-term Care Insurance. The older you are and the longer you wait to obtain insurance, the more expensive it will become. Costs for long-term care insurance (LTCI) tend to be expensive and premiums will most likely rise over your lifetime. With average premiums running at $2,700 per year (according to industry research firm, LifePlans), many seniors may find LTCI too cost prohibitive to be a realistic option. Additionally, your age or current health condition may disqualify you from obtaining this type of insurance.
2. Life Insurance. Some insurance companies offer life insurance with long-term care riders. With this type of policy, your beneficiaries may still receive a death benefit even if you use long-term care rider benefits. With traditional LTCI, there is no death benefit paid to your beneficiaries after your death.
3. Family Members. Your immediate or extended family members may be able and willing to care for you or pay for your health care costs. However, with annual nursing home costs running an average of $89,000 annually, according to a 2018 Genworth study, few families can afford to cover these costs for a year, let alone for multiple years.
4. Medicare. Many people do not realize that Medicare does NOT cover long-term care expenses for patients requiring full nursing home care, except for very limited circumstances and for short periods of time.
When Bob and Laura married, they both had children and assets from previous marriages. They had new wills prepared, with each leaving their separate assets to their own children, but they did not sign a consent to one another’s wills. When Bob died ten years later, Laura’s attorney advised her that, as a surviving spouse in Kansas, she was entitled to a percentage of all of Bob’s assets—including the 300-acre farm that had been in his family for generations. Although she knew Bob had wanted the farm to go only to his children, she felt that she and her children had a right to part of it. She decided to contest Bob’s will, prompting a bitter and expensive court battle. Eventually Laura won. But, the farm had to be sold to pay the expenses, and the closeness the family had developed during Bob’s lifetime had been destroyed.
Second marriages, or even first marriages that occur later in life, can be wonderful and fulfilling but they should be entered into with caution when it comes to preserving family assets. In the above scenario, Bob’s farm had been in the family for generations. Bob and Laura had discussed that Bob wanted the farm to stay in his family after his death, but Bob’s will was not properly prepared to ensure that would happen. Because Bob and Laura had been married for ten years, Kansas law states that a surviving spouse who had been married 10 years but less than 11 years may receive 30% of the augmented estate of the deceased. Kansas Statute 59-6a202 offers a sliding scale to provide for the surviving spouse according to the number of years the couple was married. For example, if the couple had been married for 5 years, but less than 6 years, the surviving spouse would receive 15% of the augmented estate of the deceased; and if the couple had been married for 15 years or more, the surviving spouse would receive 50% of the augmented estate of the deceased.
Additionally, a surviving spouse is entitled to the homestead (residence) after the death of their spouse, unless otherwise agreed upon in their wills or in a pre- or postnuptial agreement. According to Kansas Statute 59-6a215, “a surviving spouse is entitled to the homestead, or in lieu thereof the surviving spouse may elect to receive a homestead allowance of $50,000. The homestead or homestead allowance is exempt from and has priority over all demands against the estate. The homestead or homestead allowance is in addition to any share passing to the surviving spouse by way of elective share.”
It’s finally summer. The kids are out of school and now is the time to visit the family vacation home for some rest and relaxation! If you’re like most people, your vacation home probably is located in a different state than your primary residence. As an owner of a vacation home, do you know how it will pass after your death to your heirs?
When someone dies in Kansas, any property owned in their individual name and without a Transfer on Death Deed will require a probate proceeding in order to transfer ownership to their heirs or beneficiaries. However, Kansas probate only applies to Kansas property. Real estate owned outside of the state—like a vacation home or investment property—will require a separate probate in the state where the property is located, known as an ancillary probate.
If the vacation home or investment property is put into a Trust during the owner’s lifetime, however, a probate can be avoided and the property can pass to whomever is named in the Trust. Even out of state
We frequently are asked to review old Wills for new clients. Many of those Wills are technically correct, but lack many of the “what if” scenarios that a more experienced estate planner would consider mandatory. We understand how this happens because when estate planning isn’t an attorney’s primary focus, it can be difficult to stay up-to-date on the current trends and recommendations of language that should be included in your Last Will and Testament. To ensure your Last Will and Testament provides the best protection for your estate and beneficiaries, here are some of the most common things you should be on the look-out for:
1. Does your Will name an alternate Executor or Trustee? Should your preferred Executor/Trustee be unable or unwilling to serve and you have no alternate named to serve in their place, it may be necessary for the Court to appoint a successor Executor/Trustee and the appointed Executor/Trustee may not be someone you would want handling your estate affairs.
2. Does your Will name contingent beneficiaries? It’s important to not only name someone to receive your estate assets, but also to have a contingent beneficiary in the event your first named beneficiary predeceases you. Failure to name contingent beneficiaries can result in your estate assets being distributed to individuals or organizations whom you would not have chosen yourself.
3. Would you have a taxable estate and if so does your Will include tax planning? Inclusion of specific tax planning language can save your beneficiaries thousands of dollars in unnecessary taxes, if your estate is found to be taxable. We recommend including tax planning language for anyone who is at or near the current taxable amount ($11,400,000 in the year 2019). Only an attorney familiar with tax planning should draft your estate planning documents if you believe your estate may be at or near a taxable level.
Q: My uncle recently died. I received a notice from his family attorney stating I am a beneficiary in my uncle’s estate. Am I also an heir? What exactly do these terms mean?
A: Under Kansas law, a beneficiary is a person or organization that receives money or property because someone specifically named them in their Will or Trust. In your case, because you’ve been notified that you are a beneficiary, your uncle mentioned you in his Will by name to receive something from his estate. The item(s) being given could be things like money, property, or personal items like jewelry or a family heirloom. Beneficiaries can include a person, charity, or organization.
An heir is a relative who would inherit under the laws after the death of someone. If the deceased person (also known as the decedent) did not have an estate plan in which he or she named beneficiaries then the heirs would inherit the property. What property an heir is entitled to after the death of a decedent is determined according to the laws of the State that the decedent was a resident of when he or she died. In Kansas, an heir could be a spouse, child, parent, sibling, niece or nephew. For instance, if an unmarried individual dies in Kansas and does not have children, Kansas law states that their property is to be distributed equally to their parents. One common misconception is that if a person in Kansas dies and they are married with minor children, all of their property will be distributed to their spouse. This is not true. Instead, half of the property will be distributed to their spouse and half to their minor children. Oftentimes, people want their property to go to individuals other than their heirs. This is one of the reasons why it is a good idea to have an estate plan in place and to know who your heirs are if you don’t.
An important thing to note is that a person can be both a beneficiary and an heir. In fact, most Wills and Trusts are set up by individuals leaving property to their heirs who they are naming as beneficiaries in their estate planning documents. For example, a child named in a Will set up by their parent is a beneficiary of the Will and an heir of their parent.
For more information on beneficiaries and heirs, 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.
Q: Our house is owned by our Revocable Trust. We would like to sell the house. How do we remove the house from the Trust for the sale?
A: As the Grantors of your Trust, you can sell property in your Revocable Trust the same way you would sell a property titled in your own names. The only difference is that you use a different type of deed called a Trustees’ Deed. Trustees’ Deeds typically are prepared by your attorney. You should provide a copy of your existing deed on the property to your attorney, showing when the property was deeded to the Trust, and verifying the legal description and recording information. If you are providing title insurance as part of the sale, you will need to purchase a title commitment from your title company. This title commitment will stipulate the information that in required to be included on the deed. Your attorney will use this information to prepare the Trustees’ Deed and Affidavit or a Certification of Trust. An Affidavit/Certification of Trust in Kansas should state the name(s) of the Trustee(s) of the Trust, that the Trustee(s) are legally authorized to sell the property, and that the Trust is in good standing, among other things. The Affidavit may be combined with the Trustees’ Deed, while the Certification of Trust typically is a separate document. The Trustee(s) must sign these documents before a notary public. The documents
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