CURRENT ISSUES IN THE AREAS OF ESTATE, TAX AND PERSONAL AND BUSINESS PLANNING
The information that follows summarizes some of the current issues in the areas of estate, tax and personal and business planning which may be of interest to you. Although this information is accurate and authoritative, it is general in nature and not intended to constitute specific professional advice. For professional advice or more specific information, please contact my office.
Indiana Super Lawyers and Best Lawyers Announcement. I am proud to announce that I have again been selected as an Indiana Super Lawyer for 2019 in the area of Elder Law, and was selected again for inclusion in The Best Lawyers of America for 2019 in the area of Trust and Estates. I have also again been selected for inclusion in the Martindale Hubbell Bar Register of Preeminent Lawyers.
Common Insurance Mistakes – Continued. This will continue an ongoing discussion about common mistakes people make when planning with life insurance. Business owners will typically have the company pay some or all of the premiums on a policy with no plan document to explain the purpose or nature of the arrangement. For example, the arrangement might be an employee benefit transaction of one or another type, such as a split-dollar life insurance arrangement, bonus arrangement, or non-qualified deferred compensation arrangement. If there is no plan document, then the income tax consequences of the arrangement will be uncertain. The IRS may very well treat the arrangement as a bonus arrangement, and the entire premium or other payment might be treated as taxable income. If it is an employment arrangement, then a plan document will be necessary in order to meet the ERISA requirements applicable to employee welfare benefit plans and employment pension plans.
Nursing Home Pre-Admission Screening. Before being admitted to a nursing home, the State of Indiana requires that every person before admission shall be subject to a pre-admission screening (PAS) process. This applies to all applicants for nursing homes and not just those who will be applying for Medicaid. If a person chooses not to participate, the person would not be eligible for Medicaid for a full year from the date of admission. The process involves a team of individuals who will assess the applicant’s medical and other needs in order to determine whether those needs can be met by services available in the community. Placement in a nursing home will not be approved if those needs can be met without a nursing home and at less cost than the cost of a nursing home. Federal law requires all states to conduct a pre-admission screening and resident review (PASARR) if any prospective resident is suspected of having a serious mental illness other than dementia (not including intellectual disability or a related disorder) to be sure that only those actually requiring nursing home care are admitted and not those who have a need for specialized care or services.
Wills, Trusts, And Probate. A last will and testament will control the disposition of a decedent’s probate estate. A will does not control the disposition of joint assets, assets which will pass by a pay-on-death (POD) or transfer-on-death (TOD) transfer, or assets which pass by beneficiary designation, such as life insurance and retirement accounts. Many people establish non-probate transfer arrangements of different kinds as a means of avoiding probate. For example, a person who owns a bank account could add a POD designation so that the account would pass without probate to the POD designee. Be very careful about such arrangements since in most instances, in the case of a bank account, if the POD designee predeceases you, the account will not pass to his or her descendants. Consequently, adding two or more children to an account as POD designees may result in one of the children’s descendants being cut out if that child should predecease you. TOD designations of securities and other arrangements can generally be dealt with more flexibly so that a deceased child’s descendants can benefit, but those arrangements must be very specific and must be written carefully. Trusts are used for various reasons, but the most common reason for using a trust is to avoid probate. However, setting up a trust will not control the disposition of life insurance or retirement accounts which will pass by beneficiary designation, and if the designation is to the trust itself, then there could be adverse tax consequences, especially in the case of retirement accounts. Consequently, all such arrangements must be implemented very carefully. A very common occurrence that I see regularly is when a person passes away with a will or trust arrangement in place, but because of improper beneficiary designations, or the improper use of a POD or TOD designation, the person’s assets must go through the probate process anyway, even though probate was sought to be avoided. Another very common occurrence is that the actual recipients of the benefits through the POD, TOD, or beneficiary designation are not the specific beneficiaries that were intended. There is no substitute for careful legal guidance regarding all aspects of estate, trust, and asset protection planning.
Disability And Incapacity Planning. Documents pertaining to a disabled or incapacitated beneficiary may last for many years. For example, if a trust is established for a disabled child, that trust can be in existence for several generations. Since people’s needs and disability programs change, program requirements that are applicable today may not be the mandates that are in place tomorrow. The beneficiary’s needs will certainly change over time as well. Consideration must also be given to the changing needs of the parent or grandparent who established the trust in the first place, particularly if the arrangement was a part of the creator’s personal estate plan by being a part of the creator’s will or trust. It may be appropriate for the parent who is intimately familiar with the child’s needs to prepare a detailed summary of the parent’s intentions and also provide a detailed explanation of the child’s needs, likes, and dislikes. Providing detailed guidance to caregivers in the future will make the process a lot easier when decisions must be made at a later time whether particular benefits might be appropriate for the trust beneficiary. Detailed documents of that type can provide much better direction to the caregiver or care manager. It can also help the trustee make decisions regarding the appropriateness of distributions that will over time result in the dwindling of the resources that were set aside for the beneficiary. Since some needs and wants might merit a greater priority, providing direction to the trustee, as well as the caregivers and care manager, will make the decision-making process much easier.
Additional Information. Future issues of this Newsletter will address other issues of current interest. Please contact my office with any questions that you might have.