A Last Will and Testament is an important document, but it’s usually the last resort rather than the final word. A Will is set of instructions to the probate court judge. It has no authority outside of the courtroom. Thus, in order for a will to control who inherits an asset, that asset must first fall under the authority of the judge.

A probate court only has authority over assets that do not already have a designated owner. This fundamental misunderstanding can lead to bitterness amongst descendants. A few years ago a man passed away and his five sons brought his Will to my office. I did not know either the decedent or his sons but I was happy to peek at the bequest. The will was as straightforward as it gets, “I leave everything to my five sons in equal shares.”   I then asked what assets the man had left behind; the sons replied that the only asset remaining was a single bank account containing one million dollars. The next question changed the game. “Who are the owners on the account?” I asked; “Dad and Dorkins (not his real name) came the reply. I then correctly responded that because the bank account was a joint account the will didn’t matter at all and therefore Dorkins was the sole owner of the million dollar account. I then started to say that Dorkins was welcome to share the money with his siblings if he so chose, but Dorkins did not leave me enough time. Dorkins was peeling out in, what I assumed was a soon to be replaced, Geo Metro in 5 seconds flat; impressive because if memory serves he was a kind of a hefty fella. The other four brothers lurched after the newly minted millionaire in a surly mix of stupor and anger, leaving the useless will behind on my desk.

Although somewhat altered to protect client privilege, this story illustrates the truth that a will only covers assets without an automatic successor. Thus, joint ownership of home, a bank account or a beneficiary designation on life insurance, retirement assets, or stock accounts all trump the will in a head to head contest. This is just another reason it is useful to talk things through with a competent lawyer before Dorkins speeds off with the money.

Takeaway: A will is important, but it is generally just a part of a balanced estate plan.

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There are several steps parents with minors can take to ensure their children are legally protected in the event of a parent’s incapacity or death. The first and most basic is a will. A will is set of instructions to a probate court judge. It does not skip court it, in fact a will is written to be read in court. In the case of younger families, a will directs the judge on who is serve as guardian for minor children if the parents are deceased.

For some families, a will is all that gets done; however, I recommend going a step further and at least considering a living trust.  In a trust, an individual puts all of their assets into the care of a trustee who follows the directions left in the trust to pay for expenses. I like this scenario because it allows parents to plan how their money will be spent on their children if they pass prematurely.

For example, I may direct that my money be spent on my son’s education, health and maintenance instead of a new truck. A trust allows me to decide instead of a court. I may also direct that my son must reach an age older than 18 before he can receive direct access to his money.

Another key advantage of using a trust to help plan for younger children is that it ensures that the person managing the money for the kids will be a different individual from the one serving as guardian. The court is supposed to police guardians to make sure that money is not wasted but they do not always have the resources to check in as they should. This scenario means multiple eyes are watching the estate making harder for anyone to justify using your money for anything other than the care of your children.

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First, trusts avoid probate. Probate is the court process wherein a judge orders a deceased person’s property to be distributed to living individuals or creditors according to the terms of a will. If there is no will, this process is the same except the judge orders property to living folks according to the default laws of intestacy. This process can be expensive, and overly long. In Utah a deceased person’s estate must go through probate if they owned a home, had too many vehicles or more than $100,000 in the bank. For most people home ownership is the triggering event. A trust skips the probate process because it holds title to everything an individual owns so that when they die, there is nothing for the judge to issue orders about. This allows a person to flexibly leave their property behind with very low costs of administration and no court.

The second major benefit of a trust for everyday folks is protection during incapacity. Some of the saddest cases I come across are of kids or other trusted persons caught stealing an elderly person’s money. Often there is really no way to recover stolen funds. A trust can be a protection against financial abuse because it appoints specific people to be in charge of funds during incapacity while also putting in place a system of reviews on the actions of those designated individuals. A solid trust plan can also remove the need for relatives to ever need to go to court for a guardianship over an incapacitated adult; this results in more freedom and independence at a time in life when both of those can feel fleeting. Takeaway: trusts can be very helpful to just about anybody.

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A common refrain I hear too often goes something like, “mom does not need the money, because the state will pay for the nursing home anyway.” This is a deeply flawed line of Financial abuse of a parent is generally perpetrated with lots of justifications. This justification is not different and sadly it is patently false. When someone requires nursing home care there are two options to cover the costs, self-pay or use state assistance. Regular medical insurance does not cover long term care. The state will only cover nursing home costs if 1. The person has less than 2,000 in assets (this DOES NOT include the home and several other exempt items); and 2. Has not given away money in the past five years.

Number two is particularly applicable for our discussion because when mom gives money, any money to children for ANY reason, the state will apply a penalty if that gift or theft was made in the last five years. The penalty is assessed by taking the amount of money given or taken and dividing it by the average cost a month in a nursing home, somewhere around 5,0000. So if mom pays for daughter’s breast enhancement at a cost of 20,000, the state will refuse to cover nursing home costs for four months. The state will not waive the penalty unless the individual applying for care sues the child for stolen funds or proves to the state in an official hearing that the penalty will cause them death or serious injury, not an easy bar to meet.

Sometimes children are actually trying to help their parents by moving money around. If you want to help or before moving any money, please speak to a knowledgeable attorney. The five year look-back period also applies when adding a child to the title of a home and many other seemingly simple transactions. Takeaway: Mommy is spelled M-O-M-M-Y not M-O-N-E-Y.

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For many children with special needs, gainful employment simply is not a reality, luckily Federal and State Government assistance programs fill part of the gap with low or no cost medical insurance through Medicaid and sometimes a monthly living stipend through Supplemental Security Income (SSI). These programs are available to those individuals who have less than $2,000 in assets (not including parent’s assets) and meet income eligibility requirements.

Potential problems arise when parents or grandparents pass and leave these children inheritances that push the net worth over $2,000. Without proper estate planning a transfer of this kind can cause the loss of government benefits until the inheritance is spent down. Luckily, there are several tools available to prevent this scenario.

First, a special needs trust can receive an individual’s inheritance and supplement rather than replace government benefits. These trusts must be established by an expert in the field because of the strict law surrounding them. Another tool is the ABLE account. ABLE accounts are special tax-free accounts that allow individuals with special needs to keep their own funds in excess of the benefit asset limits. The money in these accounts may be used for a variety of purposes related to a person’s disability such as rent, travel, etc. ABLE accounts are very inexpensive to set up and maintain. The account can hold up to $100,000 total and receive a maximum contribution of $14,000 per year. This is a major development for those hampered by the $2,000 asset limit.

Parents and grandparents of children with special needs have to think a lot harder about how to care for their loved ones when they pass. Fortunately, there are flexible tools available to help them meet these challenges.

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One of the concerns many of the folks I talk to everyday share is how to protect their assets, especially their home as they start getting older. Many people are under the impression that by making their children or other family members co-owners on their home, bank accounts, cars and other assets they are adequately insulating themselves from legal issues. This is generally not true.

Making someone a co-owner on anything such as an account or real estate means exactly that, they become co-owner. So while the transferring individual might be insulating themselves from some liability from their own creditors, they are also opening themselves up to liability from the new co-owner’s creditors. I have witnessed more than one sad case where a child, after being added to the title of a parent’s home, created liability resulting in liens on the property.

The triggering event that leads many people to add their children to a title is a fear of the State coming after property after they have passed on. This scenario most commonly applies to those who use state assistance to cover the cost of nursing care. I cannot emphasize enough the importance of speaking to an attorney who understands these complex laws before making any transfer for these purposes. The state has very specific rules about the timing and effect of these kinds of transfers that can lead to a lot of heartache if left ignored.

Finally, I want to discuss care-giver agreements. It is a fact that most people will require some kind of care in their old age. Much of this care falls on family members. I know many family members who serve their elders selflessly and sometimes thanklessly. Rather than turning over assets to individuals who will provide care, it is better to go through the minor hassle of creating caregiver agreements through an experienced lawyer and getting the proper powers of attorney in place.

Takeaway: talk to a lawyer before transferring away anything for less than its worth.

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Imagine my mother’s embarrassment when I pointed out that she had accidently pinned a festive reminder for my father’s colonoscopy the door along with the other cards. In the same spirit of unwanted New Year’s reminders, I wish to discuss one simple step everyone should put into place this year that can greatly help during periods of incapacity

The Utah Advance Healthcare Directive is an incredibly useful part of an incapacity plan. It is available for free online at http://aging.utah.edu/_documents/utah-coa/directives/fillin-2009.pdf. I have them available for free at my office as well. This directive combines two documents, the Healthcare Power of Attorney and the Living Will. The healthcare power of attorney appoints an agent, usually a spouse or other family member, to make healthcare decisions for a person who has lost the ability to do so on their own. This can include a range of important treatment options including admission to a long term nursing facility. In many cases having this document in place obviates the need for more drastic options such as a court ordered guardianship for an incapacitated person. There is also a space for a person to name a potential guardian should the need ever arise.

The living will is where a person specifies their wishes regarding care or termination of care if they are on external life support without the ability to communicate their wishes. Having directions either to be left on, or taken of life support is an enormous relief for family members who would otherwise be forced to make the decision on their own. In my work I witness these painful deliberations regularly. I can unequivocally state that the rationale, “my kids know what I want” is not generally a enough unless a person has taken the time to fill out a directive and discussed it with their family.

So like my father’s unwanted (but certainly needed) colonoscopy reminder, I wish you all a Happy New Year and implore you to get your Utah Advance Healthcare Directive completed promptly.

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Consider, according to government statistics that a whopping 70 percent of us will need long term care eventually. Long term care can be anything from home based care, home visits, or care in an assisted living facility or nursing home. According to longtermcare.gov, 37 percent of the U.S. population will eventually need to spend some time in a nursing home.

Nursing home costs add up quickly, the average in Utah seems to be around $5,000 per month. Assisted living centers are less usually coming in between $3,000 and $4,000. These costs are not covered by Medicare. Expenses may be met out of pocket, by a long term care insurance policy, or by the State through Medicaid. Medicaid is the state program for covering medical costs of the impoverished. Knowing the options that exist for covering long term care expenses is crucial to forming a solid plan for the future.

The first step to planning for incapacity, regardless of age, is education. Asking questions and getting answers is often the hardest part because it represents the nod towards that big old elephant in the corner. Next, talk to family and professionals to create a plan. Even if you believe that this conversation does not apply to you, create the plan as a back up just in case. Finally, do not be discouraged; there are solutions to these problems and the earlier they are addressed the better.

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Save your kids some serious grief and make a will. When a person dies, the law provides a way to dispense of their leftover stuff. The legal process of dividing up and closing a deceased person’s estate is called probate. Just like there is family law court for divorces and a criminal court to handle criminal matters, there is a separate probate court assigned to administer all probate matters in a given jurisdiction.
A will is basically a set of instructions to the probate judge on how your estate is to be handled. The will should contain several important elements including 1. A person named as your personal representative. This person is responsible for handling your estate following the death of the testator (the person making the will). 2. Instructions on who is to receive the residue of the estate. The residue of the estate is what is leftover after creditors and costs of administration have been paid. The people listed here are considered your “heirs.” 3. A designation of guardian for minors. I cannot emphasize enough that young families need wills more than more mature families with no kids at home because a young couple choosing who will care for their minor children is more important than an elderly person choosing who gets a prized nativity set. 4. Any specific distributions. Specific distributions are those gifts going to specific people. Those getting specific gifts actually get their distributions before the heirs split the residue.
If there is no will the process is much more complicated. Anyone who could inherit under the law must be notified and agree to the court’s approval of a personal representative. With no instructions from a testator, a person’s belongings are collected and sold and the proceeds divided up among whoever the default law determines are the heirs. Intestacy (when a person dies without a will) opens a big door to conflict. You may say to yourself, “I don’t have anything to fight over.” Yes you do. While I have been on cases with parties fighting over millions, I have also sat through court ordered mediation where the major sticking point came down to cheap household furniture. Common sense takeaway: Don’t let sentimental value to your kids turn into actual value to lawyers; enjoy Heaven with no regrets, make a will.

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