​Q:        My father’s mental status has been declining this past year and now I’ve discovered he doesn’t have any planning in place. Does his diminished mental capacity mean it is too late for him to do estate planning?
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A:         Not necessarily. If your father’s attending physician has not declared him incompetent, and he still has some capacity, your father may be able to execute legally binding estate planning documents. There are different levels of capacity required for an individual to sign some legal documents versus others. For example, it takes more capacity for an individual to sign a Last Will and Testament than a General Durable Power of Attorney for financial decisions. To determine what level of capacity your Dad has and, thus what planning he is legally competent to execute, he will need to meet with an experienced estate planning attorney. Some of the questions an attorney may ask while visiting with your father include:

1. Does he understand what he is signing and what the effects of that will be?
2. Can he articulate a reason for his decisions regarding his estate plan?
3. Does he have a general idea of what property he owns?
4. Can he remember who his family members and beneficiaries are?
5. What is his degree of mental alertness, especially on the signing day? (Does he know the day, understand where he is and what he is in the office to do?)
6. Are his estate planning decisions consistent with his basic values and prior life decisions?

Part of an estate planning attorney’s role is to evaluate a client’s competency (or incompetency), as legal capacity or competency requires a subjective opinion provided by a trained attorney. Sound mind a/k/a capacity is determined on a situation-by-situation basis, as legal capacity can fluctuate, even from day-to-day. Attorneys are trained to assess a client’s legal capacity and proceed to a signing only if they believe the client meets the standards of competency necessary for the execution of a client’s legal documents.

It’s common for family members of clients who have diminished capacity to request appointments at very specific times of day because their mental clarity is best at that time. For example, they may struggle to understand certain events in the morning but exhibit a good understanding in the afternoon. Mental capacity can fluctuate due to any number of factors: medication, illness, lack of sleep, stress, time of day, etc... It is possible that a client is legally competent one day and incompetent days or even hours later. Failing to have full capacity all day, every day does not prohibit a person from executing estate planning documents. If, in an experienced attorney’s opinion, the client meets the basic threshold of legal competency at the time of signing documents, those documents are legally binding.

Because your father has some diminished capacity, it is extremely important that you choose a highly reputable estate planning attorney to assist him with his estate planning. If you have a contentious family who may dispute your father’s estate planning, make sure to let your attorney know so that they can take every precaution to determine legal capacity and to document his/her findings in the client’s file. If your family is contentious, we recommend that your father meet privately with his attorney so that there is no doubt that the contents of his planning were voluntarily and willfully made by your father, without undue influence from you or anyone else.

If you have questions about diminished capacity 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.

Q: I want to add my child’s name to the title of my home, so they can keep the house out of probate and receive my home quickly after my death. Do you see any concerns with my plan?

A: The answer to your question is a solid “maybe”. Your personal circumstances will dictate whether this estate planning strategy is the best move for you.

Adding your child’s name to your deed could speed the transfer of your home to your beneficiaries and keep it out of probate. But, before you run off and put your child’s name on the title of your house you should consider a few of these risks.

Gift Taxes. By adding your child to the title of your home, you have made a gift that is subject to gift taxes. The gift is likely far below the current federal gift tax exclusion amount, so you shouldn’t have to pay gift taxes. However, you may need to file a gift tax return if the gift is over the annual exclusion amount. 
Medicaid benefits. If you need KanCare (Medicaid) assistance to pay for nursing home care within 5 years of adding your child’s name to the deed, you could be penalized when requesting benefits. 
Child’s Death. If your child dies before you, his/her interest in your home becomes part of his/her estate. This interest in your home will be subject to his/her liabilities and would pass to his/her beneficiaries as named in your child’s estate plan. Someone you don’t know or trust could become the new co-owner of your home. 
Disagreements. If you decide to sell the house and move, your child could legally refuse to transfer ownership back to you. Also, if your child wants to sell your home, that child could force a partition action, a sale of the real estate done through the court.
Child’s creditors. If your child is involved in a serious accident, your house could have a lien placed on it to cover his/her debts not covered by insurance. Similarly, if your child is a joint owner, the value of the home could be subject to his/her creditors, should they face bankruptcy or credit issues.
Child’s divorce. If your child gets a divorce after being added to your deed, his/her interest in your house may be part of the divorce settlement. 
Capital gains tax. If you sell the home after adding your child to the deed, your child may encounter unintended capital gains tax problems.
No legal obligation. If you add one child’s name to the deed and instruct him/her to share the proceeds from the sale of the home with your other children after your death, they may not be legally obligated to do so. Your other children could be cut out of the inheritance that you intended for them to have. 
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The type of ownership that you give to your child is a very important factor in your considerations. Should you establish a joint tenancy with rights of survivorship (JTWROS), a tenancy in common (TOC), or perhaps you should do a transfer on death deed? Consulting an experienced estate planning attorney prior to adding anyone to your deed will inform you of the pros and cons of each option, as it relates to your personal circumstance. Without adequate counsel, the complications that could arise from such a move may outweigh any possible benefits. 

For more information on estate planning, probate or real estate matters, contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and Elder Law. We focus our practice on providing clients with the best legal advice on Estate Planning, Probate, Trust Administration, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Real Estate Transactions, 1031 Exchanges, and related matters.

If you want your estate plan to be as comprehensive as possible so your family is provided for after your death in the way you intend, there are some key issues you may need to include in your plan. During our 20+ years of estate planning work, we’ve seen some of the same mistakes in estate plans drafted by inexperienced attorneys or online computer-generated forms. Those mistakes generally appear as omissions of language addressing tax planning, incapacity, divorces, spendthrift beneficiaries, beneficiaries with substance abuse issues, or the possibility of a beneficiary receiving government benefits. Here are the most common issues we’ve seen overlooked and that you may need to address in your own estate plan:
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Federal Gift and Estate Taxes
Federal Gift and Estate Tax is a tax on the wealth you accumulated or transferred during your lifetime. This tax typically is paid during the probate of your estate or administration of your trust. Too often we see clients’ families pay more taxes than necessary because simple tax planning language was omitted in their estate plans. After a thorough review of your assets and consideration of your life circumstances, a good attorney will recognize if there is a need for special tax protection language in your estate plan. This language easily can be added to your estate plan and will protect your beneficiaries from potentially hefty and unnecessary taxation. 

Incapacity
Powers of Attorney for both health care and financial needs are the most basic and essential parts of a good estate plan. Yet, routinely, we meet with clients whose prior estate plan does not include either a Health Care Power of Attorney or a General Durable Power of Attorney. Anyone over the age of 18 should have a Power of Attorney for both health care and financial needs. Without these documents, the State will make decisions about your health and assets should you become incapacitated. If your attorney does not offer these as part of their estate plan package, you should be concerned. 

Divorce
No one plans on a divorce when they get married, but it happens. For individuals with an existing prenuptial agreement, your estate plan should reference this agreement and comply with its terms. This is especially important with second marriages involving children. If you have a beneficiary that may be headed for a divorce, then you may want to offer them certain protections within your estate plan to keep your family assets from being distributed to your beneficiary’s soon-to-be ex-spouse.

Beneficiaries
Everyone wants to believe their loved ones are perfect, but that’s not reality. Nearly every family we see seems to have a spendthrift, someone who simply cannot manage money for one reason or another, or a family member who struggles with alcohol, drugs or gambling. Fortunately, you can provide for beneficiaries who cannot or should not manage money. Additionally, you may have a beneficiary who is receiving governmental benefits. If such a beneficiary were to inherit your assets outright, there is a chance that they would no longer be eligible to receive their government benefits without first spending down the inheritance that you left to them. There are ways to avoid this by utilizing trust planning. Within your estate plan you can appoint a trustee to manage and distribute funds to these beneficiaries, according to your wishes. If your family members struggle with money management for one reason or another, or are receiving government benefits, you should ask your attorney if a trust might be warranted. 

To provide your beneficiaries with the smoothest transition after your death, we recommend having your estate plan reviewed every 3-5 years by an experienced estate planning attorney. This includes a review of your Will, Trust, Trust funding documents and assets, Powers of Attorney, HIPAA Authorization, Living Will, and Prenuptial Agreement. If you are a business owner, this review should also include your insurance policies, corporate formation documents, annual minutes, and Buy-Sell Agreement.

If you have questions about your existing estate plan or new estate planning options, please give us a call. At Davis & McCann, P. A. our focus is to provide the best legal advice in estate planning, farm family estate planning, Probate, Trust Administration, Medicaid and Long-term Care Planning, Family Business/Small Business Succession Planning, Real Estate Transactions, 1031 Exchanges, and related matters.

Having a will is the most basic step you can take in planning your estate. Without this document in place at your death, your State law could dictate how to divide your material possessions, who will care for your minor children (in the absence of a surviving spouse), what age those children will receive access to their inheritance, and who will be responsible for selling or distributing your items of value.

Despite these facts, nearly six in 10 adults in the U. S. still do not have a will. In our experience, most parents with children under age 18 have done little or no basic estate planning. The problem, according to Megan L. McCann, estate planning attorney and partner at Davis & McCann, P. A., likely centers around two facts: One, young adults rarely consider the possibility of their death and two, many people assume they have insufficient assets to require estate planning.

According to McCann, most Americans undervalue the assets that must be sold or distributed at their death. “Regardless of your age or the size of your bank account, it is very important to have an estate plan in place. After your death, decisions must be made about your debts, bank accounts, real estate, stocks and bonds, vehicles, jewelry, retirement accounts, insurance proceeds, securities dividends, and even pets. If you want a say on who will receive your assets and how or when they will receive them, putting a plan together is necessary.”

If you have children, McCann says having a will is critical, if for no other reason than to name guardians for your minor children. “In the absence of a will where you appoint a guardian, the State will decide who should care for your children after your death,” McCann says. “Part of our responsibility as parents is to protect our children and provide a safe future for them. By naming a guardian in a will, you can control who provides that protection and safety for your children, if you are no longer able. Equally important is the need to have financial and health care powers of attorney appointed to act on your behalf should you become incapacitated and unable to do so.”

“Tragedy isn’t part of anyone’s life plan,” says McCann, “However, young adults, rich and poor, with and without small children, die every day. The real tragedy is that most of them fail to put a plan in place stating their desires for guardianship of their children and distribution of their assets. This leaves a tremendous burden on the surviving spouse or family.”
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For more information on estate planning, contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and Elder Law. 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, 1031 Exchanges, and related matters.

When you need to put assets into your Revocable Trust, there are several ways of accomplishing this depending on the type of asset. Let’s break it down so you can easily see how to go about making these transfers.
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• For real property such as your residence, rental properties, and mineral interests, you will need to have a deed prepared to you, as Trustee of your Revocable Trust, including the date of your Revocable Trust. The type of deed that you use will depend on how the real property is currently owned. The fully executed deed must be recorded with the Register of Deeds in the county where the real property is located. You will receive the original recorded document back for your records once it has been properly recorded. 
• For assets such as bank accounts, non-retirement investments, vehicles, and other titled assets, you will want to change the ownership of the asset to you as Trustee of your Revocable Trust.
• Qualified retirement assets such as 401Ks, 403bs, IRAs, some annuities, etc., are treated differently than other titled assets. Due to the tax-deferred nature of these assets, it is not a good idea to name the Trust as the owner. Likewise, you may not want to name the Trust as the primary beneficiary if your spouse is still living and you want your spouse to inherit your qualified account upon your death. You may, however, want to instruct your financial advisor to add your Trust as the contingent beneficiary of your retirement asset. Before deciding the best way to set up your beneficiaries on your qualified account, it would be wise to visit with your estate planning attorney. Always request written confirmation that this change has been completed for your records. In general, it should take no longer than 1-2 months to receive confirmation, so if you have not received the written confirmation of this change by that time, please follow up. 
• Don’t overlook assets such as Treasury Savings Bonds and capital credit accounts with cooperative associations (utilities, grain, etc.). Savings Bonds must be submitted to the Treasury Department to be retitled. You can provide written instruction to your cooperative associations to retitle your capital credit accounts to the Trustee of your Revocable Trust.

 
You can do much of the funding work for your Trust on your own. If, however, you do not have the time, or the desire to do such, contact your estate planning attorney who can assist you with this process.
 
For more information on funding your Revocable Trust, contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and Elder Law. 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, 1031 Exchanges, and related matters.

The end of any year is a busy time with holidays, family obligations and this year specifically, the pandemic concerns. However, it also is a good the time to take stock in your personal life and finances and plan for any adjustments you need to make for 2021. The earlier you can do this, the better prepared you will be for the future.

Here are some activities we encourage you to do before the end of this year:
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• If you already have an estate plan in place, review the beneficiaries you named in your Trust or Will. Have there been any marriages, divorces, or births in the past year that require a change to your estate planning documents?
• Review the beneficiaries named on your insurance policies, retirement accounts such as your 401(k) and IRA, bank accounts, and other financial assets to assess whether changes need to be made.
• ​If you’ve purchased or inherited a new property, car, mineral rights, etc. in 2020, your estate plan should include those items, according to the type of planning you have chosen. With trust based planning or beneficiary planning, if these assets are not properly titled, you could unintentionally  create the need for a probate action upon your death. Similarly, if you have sold an asset this year, be sure your estate plan reflects this change.
• Review your Powers of Attorney, Will or Trust and confirm that the individuals you designated to be “in charge” are still able and willing to act as your agent/Executor/Trustee. Perhaps you no longer have the same relationship with the named individuals, or perhaps one of them has moved away.
• Inform at least one trusted family member as to the location of your original estate planning documents. Although it is not required, you may wish to schedule a family meeting to walk through the contents of your estate plan. This allows you the opportunity to explain your wishes and gives your family a chance to ask questions. You also can ask your attorney to explain your estate plan to your family. A family meeting with your estate planning attorney can help your children understand how your estate will be handled upon your death and may provide some measure of neutrality for families with more volatile personalities.

​For more information on end-of-year planning as it relates to your estate plan, contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and Elder Law. 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, 1031 Exchanges, and related matters.

​In a perfect world, everyone would establish a long-term care plan well in advance of needing such care, all the necessary finances to pay for any such needs would be in order and everyone in the family would be prepared to help execute that plan at any given moment. But the reality is that most people procrastinate on any type of planning that focuses on the possibility of serious illness or death.
 
When an unplanned event happens that requires immediate long-term care, and in the absence of an existing plan, long-term care ‘crisis’ planning can help you navigate the days to come. What is Long-term care ‘crisis’ planning? This term is based on the notion that an event occurred that now requires you to make decisions regarding long-term nursing home care, including addressing the cost of such care, in a short period of time. 
 
Your first step might be to seek advice from professionals who are trained in the area of long-term care planning and stay current on the best methods for addressing your situation, as the rules and regulations of Medicaid are complicated and change frequently. Below are a few of the ways a trained professional might help you manage your long-term care crisis situation:

• Education. Maybe you just want more information about long-term care and Medicaid. A trained professional can walk you through the process of what to expect and educate you, so that moving forward you feel confident making educated decisions regarding your loved one’s care.

 

• Spenddown. You are looking to apply for Medicaid. A trained professional can provide guidance on how your assets may impact your Medicaid application approval.

 

• Spousal Division of Assets. You are still living at home and are looking to apply for Medicaid on behalf of your spouse who is in the nursing home. A well-trained professional can provide you with the needed assistance with a division of assets between spouses.

 

• Medicaid Application. You need assistance with a Medicaid application. A professional highly educated in Medicaid and estate planning law can work closely with you and the nursing home while filing your loved one’s KanCare application (KanCare is the program through which the State of Kansas administers Medicaid) to try to make the process as smooth and easy as possible. 

 

• Asset Preservation. Trained professionals develop a plan to preserve your loved one’s assets while also working towards Medicaid eligibility.

 
For more information on long-term care crisis planning, contact Davis & McCann, P. A., Dodge City, KS. We are members of Wealth Counsel, a national consortium of Estate Planning Attorneys and Elder Law. 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, 1031 Exchanges, and related matters.

If you’re one of the many small business owners who thinks estate planning is for wealthy, large business owners and executives, perhaps even multi-millionaires, think again.

Regardless of the size of your bank account or the size of your business, estate planning can be beneficial for everyone, especially for the small business owner. For many small business owners, their livelihood and family’s security are largely dependent upon the success of their business. Proper estate planning for small business owners can help protect both personal and business assets from creditors. Part of that planning involves how you choose to organize your business. The business structure you choose can also have a major impact on your taxes. You would be wise to review your business organization options to ensure your current or proposed business structure provides you with the best tax and asset protection.

Here’s a quick look at some of the business organizational options that are available in the state of Kansas:
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• ​​​Sole Proprietorship. A sole proprietorship is a business with a single owner. There is no separation between your business and personal assets with this type of structure. This means that your personal assets could be at risk if your business is sued and found to be at fault. This type of business is less optimal for most, as it provides little to no tax and liability protection. One upside to this type of business is that there are no annual state filings and no required annual organizational upkeep.
• C-Corporation. Any business that is “incorporated” is automatically categorized as a C-corporation, unless the business files forms with the IRS electing to be taxed otherwise. With this type of entity, you do separate your business assets from your personal assets for liability and creditor purposes. Your business assets, owned under the name of the business, are taxed at a corporate income tax rate. Any distributions of income from the business to the owners is then taxed again as personal income. Annual filings with the Secretary of State where the business is incorporated, as well as any states that it does business in, are required. The business should also have meetings annually that it memorializes in minutes signed by the stockholders and directors of the business. A C-corporation is a good fit for those owners with high income tax rates, or who want to attract investors and foreign ownership.  

Estate planning—it is an incredibly important tool, not just for the wealthy or those thinking about retirement. On the contrary, estate planning is something every adult should do. It can help you accomplish any number of goals, including appointing guardians for minor children, choosing healthcare agents to make decisions for you should you become ill, minimizing taxes so you can pass more wealth onto your family members, and stating how and to whom you would like to pass your estate to when you die.

​While it should be at the top of everyone’s to-do list, it can be an overwhelming topic to dive into. To help you get started, below are some important terms you should know as you think about your own estate plan.

Assets:  Generally, anything a person owns, including a home and other real estate, bank accounts, life insurance, investments, furniture, jewelry, art, clothing, and collectibles.
Beneficiary:  A person or entity (such as a charity) that receives a beneficial interest in something, such as an estate, trust, account, or insurance policy.
Distribution:  A payment in cash or asset(s) to the beneficiary, individual, or entity who is entitled to receive it.
Estate:  All assets and debts left by an individual at death.
Fiduciary:  A person with a legal obligation (duty) to act primarily for another person’s benefit, e.g., a trustee or agent under a power of attorney. “Fiduciary” implies great confidence and trust, and a high degree of good faith. 

We all have reasons for procrastinating when it comes to estate planning. However, before you put this important life decision back on the shelf again, you might want to know a few of the things that can happen to your money and possessions upon your death if you haven’t planned. These Kansas probate rules may encourage you to move just a little quicker to finish or update your estate planning.

Did you know?

• Kansas probate law states that if you are married and die without a will, your spouse may not inherit all of your property? If you have children, regardless of their age, your spouse is limited to receiving only one-half (1/2) of your solely owned estate property and your children will split the remaining one-half (1/2). This is also true even if your children are minors. If this is not what you want to have happen upon your death, you need to set up beneficiary designations or have a Last Will and Testament or Trust immediately prepared for you that clearly states your wishes.
• If you and your spouse are living separately but you are not legally divorced, upon your death, your spouse may still receive the same estate share as described above. Even if you sign a Last Will and Testament attempting to completely disinherit your spouse from your estate, if your spouse has not consented to that document, then unless you have a divorce decree or other written, legally binding agreement, by law your spouse will be entitled to a certain percentage of your estate depending on the number of years you were married before your death and the value of your aggregate estate. Your spouse is also entitled to your homestead.
• If your spouse predeceased you and you had no children and you didn’t update your Last Will and Testament to name a new beneficiary of your estate after your spouse died, when you die your entire estate will pass to your parents. If your parents are still living, this inheritance could present a taxation problem for them depending on the size of their estate and what they would inherit from you. If your parents have been trying to reduce their own estate value to avoid unnecessary estate taxes, this new inheritance may create a taxable estate for them. Additionally, if you have a parent who is in the nursing home and receiving state aid, then your estate may be claimed by Medicaid. If your parents are no longer living, your estate will be divided among your living siblings. If you prefer that other beneficiaries benefit from your estate, you should put planning in place now.

​These are just a few of the Kansas probate laws that control what happens to your money and property after your death. If you have questions about probate or estate planning matters, 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.