By: George H. Lovett

            If one is making gifts as part of Medicaid/nursing home planning, then making the gifts to the trustee of a Medicaid trust is a safer alternative than making the gifts directly to someone else.

            If one faces a long term stay in a nursing home or assisted living, then usually that person would like to preserve their assets instead of spending them all on nursing home costs. With careful planning, one can make gifts, qualify for Medicaid, have Medicaid pay for the nursing home, and keep some of the assets in the family.

            One must have someone they completely trust participate in this planning. If one makes gifts, then the person has no legal power to retrieve the gifts. Thus, if the person making the gifts needs the money, then he has to hope that the recipient of the gifts is ready, willing, and able to give some of the money back.

            Even if one completely trusts someone to do this, it is wise to limit the risks that the assets will be lost. Giving money to a person is risky. They can die, divorce, file bankruptcy, or have other tragedies occur.

            Setting up a Medicaid trust, and making this special person its trustee, helps to limit these risks. If the person as trustee owns the assets, then the assets do not belong to him personally. Instead, they belong to him as the trustee. As a result, these assets are not liable for that person’s debts. The assets also do not pass through the person’s estate if he dies. If there is a divorce, then they are not available for payment to the ex-spouse. If he files bankruptcy, then the bankruptcy trustee will not take the assets.

            A Medicaid trust is not like a revocable living trust. One cannot change the Medicaid trust. It must be irrevocable. The person making the gifts cannot be the trustee or a beneficiary. If the person is the trustee or a beneficiary, then an Ohio Medicaid caseworker will claim all of the assets inside the trust are available for that person. If the trust has more than $1500, then the person will not be Medicaid eligible.

            Most Medicaid trusts have a son or daughter as the trustee. This same son or daughter, and usually one or more siblings, are beneficiaries. If the parent who made the gifts needs money, then the trustee gives funds to one of the parent’s children. These children then make the money available for the parent.

            Medicaid trusts require careful management and paperwork. The trustee must make distributions only to the beneficiaries. If the trustee makes distributions directly to the gifting parent, then he will violate the trust’s terms. The trust requires its own tax identification number. If it earns more than $100 a year, then the trustee must prepare and file a 1041 return. The parent will have to file a gift tax return for the items placed in the trust.

            For the Medicaid planning to work, the gifting parent must transfer assets to the trustee of the Medicaid trust. This requires deeds, assignments, and re-titling of other assets into the trustee’s name.

            Medicaid trusts normally hold all of the assets until the parent dies. Once the gifting parent dies, the Medicaid trust distributes the assets to the beneficiaries named in the trust. This avoids the fees, delay, and publicity of probate.

What Is A Financial Affairs Power of Attorney?

A Financial Affairs Power of Attorney lets someone endorse and deposit checks; sign a deed or mortgage; sell property; open and close accounts; change beneficiaries on insurance policies, a 401(k), and pensions; hire and fire lawyers, realtors, and accountants; prepare, sign, and file tax returns; and do other things for you.

Why Do I Need A Financial Power of Attorney?

If a person can’t act and there’s no power of attorney, then only a Guardian can legally act for him. The law does not automatically let anyone, not even a spouse, act for you. A Guardian must post a bond and account for all assets, income, and expenses each year in a detailed account that is open to public inspection. This can cost thousands of dollars in attorney fees and reduce a person’s privacy. A Power of Attorney avoids a Guardianship. This saves money, hassle, and public disclosure of your affairs.

We’re Here To Help

A power of attorney is just one part of a sound estate plan. We look at every asset and beneficiary to craft a plan that carries out your wishes. We take this thorough and careful approach in probate, guardianships, Medicaid and nursing home planning, personal injury, real estate, business and corporate, divorce and dissolution, criminal, traffic, DUI, collections, and trials in all local courts.

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There’s no charge for the first few minutes on the phone. I’m available at (937) 667-8805 from 8:30 to 5:00, Monday through Friday. There’s no reason to delay. Call us today!

If there’s no will, then Ohio gives everything to your spouse and children, or if you are not married, then your other relatives get your assets. If this is not your wish, then anyone else you want to help may not get it. The government will not minimize the taxes. Just the opposite: they want to collect the maximum tax possible. If your children have no parent, then they’ll probably go to the first relative who asks. If this works well in your case, then your family gets lucky. If it doesn’t, then they lose the benefit of your guidance. A will or trust lets you control these matters.

Joint and Survivor accounts go straight to the survivor. If a couple owns a house this way, then the survivor takes the house, even if they broke up long ago, and even if they are in the middle of a divorce. The decedent’s children, parents, brothers and sisters, and everyone else receive nothing.

Many people put another person on a bank account to help them manage their money. More often than not, the well-intentioned banker uses a joint and survivor signature card. What is the result? The survivor gets all the money. It does not matter if the decedent had other children or friends. It also doesn’t matter if the decedent had a will that provides otherwise.

Life insurance, retirement accounts, annuities, and some other assets pass directly to the named beneficiaries. Just like joint and survivor property, the money goes straight to the beneficiary. Except for some taxes, no one can force the beneficiary to pay the decedent’s debts.

If there’s no will or trust, then all of the decedent’s assets go straight to heirs 18 or older. It does not matter how irresponsible they are, how much they drink or do drugs, or how well they can invest.

For persons with a high net worth, federal and Ohio estate taxes could take up to 50% or more of their assets. Although a will, by itself, cannot tackle this burden, it can be part of an overall approach to reduce, if not eliminate, this obligation.

When you die something happens to your children and every asset you own. If you do not know what would happen when you pass away, then you need to plan now. We think through all of these issues and plan for you.

There’s no charge for the first few minutes on the phone. I’m available at (937) 667-8805 from 8:30 to 5:00, Monday through Friday. There’s no reason to delay. Call us today!

Is There A Will?

This question must be answered before the process can start. A will specifies the beneficiaries, their shares, and the person in charge of the process (Executor). If the decedent did not make a will, then Ohio chooses the beneficiaries with a prioritized list. The surviving spouse and children take to the exclusion of everyone else. If the decedent left no spouse or children, then these persons, or their descendants, inherit in the following order: parents; brothers and sisters; grandparents; step-children; and if there are no relatives, then escheat to the state of Ohio. Family members, especially the spouse, hold the first right to administer the estate with no will.

Enhanced Rights of the Spouse

Regardless of whether a will exists, the surviving spouse enjoys some special rights. If a pre-nuptial agreement does not state otherwise, then the widow or widower can receive at least 1/3 of the probate estate. This surviving partner may also take part or all of a $40,000 family allowance, select up to two cars worth no more than $40,000, purchase assets from the estate, and live in the residence rent free for a year. The surviving spouse may also hold a lifetime interest in 1/3 of the real estate a decedent owned if he sold it without the spouse’s permission. This right is known as dower. Also, a surviving spouse may utilize most, if not all, of the proceeds in joint and survivor accounts without first obtaining a tax release from the County Auditor.

Assets Subject to Probate

The probate court does not necessarily administer all of the decedent’s assets. Some written agreements may control the disposition of an item. Joint and survivor property, payable on death accounts, annuities, 401(k)s, IRAs, life insurance death benefits, and living trusts directly pass ownership to the beneficiary. Assets in the decedent’s name that do not have survivorship designations come under the probate court’s jurisdiction. A will only disposes of assets that pass through probate court. A person can have substantial worth and leave no probate estate. For example, a decedent may hold everything with a spouse or other person in a joint and survivor format or place all of his property inside of a living trust. Under both examples, the will would transfer nothing to its beneficiaries.

Appointing the Estate Fiduciary, Providing Notice, and
Identifying Assets and Debts

Someone must step forward to begin the process. Usually this happens once the funeral is over. A “Reading of the Will” is a rare event. Instead, a surviving spouse, a child selected by the siblings, or a close friend finds the instrument (if there is one) and takes it to an attorney of their choice. Whoever requests court appointment as the estate’s Executor (if there is a will) or Administrator (if there is no will) must send notice of the commencement of the process to everyone named in the will and to the surviving spouse and children. If there is no surviving spouse or children, then the relatives next in the line of priority must receive such notice. The Executor or Administrator, also referred to as an estate fiduciary, must post bond if the will does not waive this requirement. Next, the Executor or Administrator searches for all of the decedent’s assets and bills. The death expenses usually top the list of concerns. Frequently, the estate fiduciary had to personally guarantee the payment of the funeral. Once the attorney knows the names of all accounts and has the date of death balances, he then obtains a tax release from the County Auditor so that the Executor or Administrator can access the funds to pay the funeral bill and other debts. At this time or shortly thereafter, the estate fiduciary files an inventory of all of the probate assets.

Will Contests

As a general rule, a person may contest the decedent’s will up to four months after receiving the notice of commencement of probate. Only a small percentage of estates undergo this ordeal. To set aside the instrument, the protestor must show that, when making the will, the decedent surrendered to a great deal of unfair influence or did not have enough knowledge of his circumstances. Although this does not state the standard in strict legal detail, this shows how difficult it is to prove a case. Ohio allows a will to exclude a beneficiary if he contests the document. Of course, such a provision does not work if the will contest succeeds, but it can serve as a strong deterrent. Further, if all of the decedent’s property is held joint and survivor, in a living trust, or in another non-probate form, then a will contest may be pointless. If there is no probate property, then the will controls nothing.

Paying Bills, Selling Assets, and Resolving Lawsuits

An estate fiduciary must pay all of the decedent’s enforceable bills. If he does not, then he may have to pay them himself. If some of the bills are questionable, then the Executor or Administrator may provide a creditor notice to submit a claim in a short period of time or be forever barred from doing so. Normally a creditor may submit a claim against an estate up to six months after the decedent’s death. Of course, the estate fiduciary may not take this approach to avoid paying the decedent’s taxes or to escape his duty to prepare and file all the necessary returns. The Executor or Administrator must ascertain and pay the estate taxes, both federal and state. The decedent’s income tax returns and payments generally are subject to the same rules as if he were still alive. If there are not enough liquid assets to pay the taxes and debts, then the estate fiduciary must sell assets. The first assets sold are those not specifically left to a beneficiary, but these may be sold if necessary. If a will does not provide the Executor the power to sell items, then he first must get court permission. Attorney fees are also subject to court approval. If there are not enough assets to pay all of the obligations, then some creditors have preferential rights. The funeral, hospital and doctor bills, and costs of estate administration all receive high priority. If the decedent was involved in any lawsuits, then the estate fiduciary must resolve them. If the decedent died due to someone else’s fault, then the Executor or Administrator is the only person the Ohio Wrongful Death Act authorizes to pursue this litigation.

Distribution of the Assets

Once the estate fiduciary pays all of the taxes and bills, he may then distribute the remaining assets to the beneficiaries. If any beneficiary is less than twenty-one years old, then the will may direct the Executor to place a beneficiary’s share in a Uniform Transfers to Minors Act (UTMA) account. Such an arrangement allows the account custodian to distribute items for the youngster’s health, support, maintenance, and education, then release the rest to him at age twenty-one. A will may also contain a trust effective at the decedent’s death. This is known as a testamentary trust. A probate court supervises this type of instrument as long as it holds assets. If there are minor beneficiaries but no UTMA provision or testamentary trust, then the probate court will mandate the restriction of a minor’s share until the beneficiary reaches the age of eighteen. Prior to this age, they can access the funds for their health, support, maintenance, and education. Upon their eighteenth birthday, they receive their remaining inheritance.

Guardianship of Minor Children

A will can nominate a person in any state to serve as the guardian of a decedent’s children. Such a nomination, though, cannot supercede the custodial rights of a biological parent. If there is no such nomination and no surviving parent, then the probate court may appoint as guardian an Ohio resident or a non-Ohio resident when a child older than fourteen so requests.

Ancillary Administration

If a person dies owning property in a different state, then that other state may require an ancillary administration to transfer title to the beneficiaries. If the decedent owned the property in a joint and survivor format or held it in a living trust, partnership, limited liability company, or corporation, then an ancillary administration would, in all likelihood, not be necessary.

Preparing and Filing Accounts

To complete his duties, the Executor or Administrator must file a final account the probate court finds acceptable. Larger estates, or those involved in litigation, may require more than one account. The estate fiduciary must provide cancelled checks or other suitable evidence to show that he made the proper distributions. Probate courts deal harshly with unauthorized payments, even if they are unintentional. If the Executor or Administrator does not timely file the accounts, then the probate court may remove him.

Role of the Attorney

Administration of an estate is a complicated process. Attempting the process without a competent attorney would be foolhardy, if not dangerous. The Executor or Administrator may select an attorney of their choice to advise and represent them. Experienced counsel can guide the estate fiduciary through the process by preparing and filing all the necessary documents, ascertaining and collecting the assets, reviewing and paying the proper debts, transferring titles to items, resolving any court cases, providing advice to save transfer costs and taxes, and counseling the Executor or Administrator on relations with beneficiaries. If you have any questions, or need assistance in handling a decedents’ estate, then call us right away at (937) 667-8805.

What Is A Living Will and What Does It Do?

A Living Will is an instrument that directs health care providers to withhold life-sustaining treatment in the most hopeless of circumstances. Generally, this document requires the absence of life-sustaining treatment if two or more doctors agree that a person’s death is imminent or the person is permanently unconscious and the person will not regain the capacity to make an informed decision on ending the life extending care. The Living Will lists several persons to whom health care providers must give a 48-hour notice of removal of the life support. The doctors shall cease the life-sustaining treatment unless a person gains a court order that directs otherwise. Because a court will only grant such an order if someone shows, by clear and convincing evidence, that the person changed his desires, there is a great degree of certainty that the Living Will’s mandate will be followed.

Why Is A Living Will Necessary?

Doctors have a duty to keep a person alive and fear the legal consequences if they act improperly. A Living Will gives clear guidance and liability protection to those persons who rely on it. If there is no Living Will and a person’s death is close at hand, then health care providers and the family must jump through a number of hoops to remove life support. They must correctly determine which person is the legal “medical decision-maker,” insure this person investigates the patient’s desires, obtain a written consent to remove treatment, give a 48-hour notice, then implement the decision. If the patient is in a coma, then Ohio law requires a 12-month waiting period. A Living Will eliminates this process and provides a quicker, surer means to carry out the patient’s wishes.

Answers To Some Frequently Asked Questions

Although each state has laws in this area and they are not identical, it is quite likely a state will honor a Living Will made elsewhere. If you spend a lot of time in a different state, then obtaining a Living Will in the other jurisdiction would be advisable to provide some security. Doctors have a duty to provide appropriate care under all circumstances, so the presence of a Living Will should not reduce the care and attention the patient receives. Doctors must maintain a food tube and intravenous hydration if this provides comfort or alleviates pain. If any of the persons listed as contacts in the Living Will move or change telephone numbers, then this will not invalidate the instrument. Living Wills are easily obtained and inexpensive. Upon entering a hospital or nursing home, the staff will inquire as to the existence of the instrument and fill-out the forms if necessary. They usually do not charge a fee for this service.

WHAT IS A LIVING TRUST?

A Settlor (a person who establishes a trust) can set up a trust during his life or at death. A living trust is one a Settlor creates while he is alive. On the other hand, a trust effective at death is a testamentary trust. The living trust usually refers to an instrument with these four features: the Settlor can revoke or amend it; the Settlor receives all the income; the Settlor serves as the Trustee; and the Settlor continues to file a normal 1040 return.

The Trustee of the living trust owns the property inside of the trust. The beneficiaries of the living trust have the right to enjoy those assets. The terms of the instrument determine who benefits from these assets and under what conditions. Of course, the Settlor, who is usually the Trustee, is almost always the main beneficiary of the living trust.

To fully use the living trust, the Settlor transfers property to the Trustee. Thus, the Settlor must sign over to the Trustee title to his bank and brokerage accounts, real estate, life insurance policies, even cars and personal property, to have the living trust control these items. A key point is that an asset not owned by the Trustee is not controlled by the living trust.

The choice of trustee and successor trustee is of vital importance. If the Settlor can no longer handle his affairs, a Co-or successor Trustee named in the trust takes over these duties.

HOW IS A LIVING TRUST DIFFERENT FROM WHAT I HAVE?

Most people do not have a living trust. The vast majority of married couples own their property in a joint and survivor format. Under this method, the survivor of the couple at the first spouse’s death automatically owns all assets the couple held in this fashion. There are no estate taxes to pay because all items so passing qualify for the marital deduction. Further, these assets do not pass through probate. Although the probate court and estate tax authorities have some involvement in the post-death process, joint and survivor assets will avoid the heavy administration of property passing under a decedent’s Will. Likewise, other items, such as annuities, life insurance, and payable on death accounts, bypass the probate court and receive the small scrutiny enjoyed by joint and survivor assets. If a non-spouse receives these items, then such recipient usually pays estate taxes on this property.

At death, a living trust works quite similar to joint and survivor property. Assets inside the trust avoid the probate process. The Trust, not the decedent’s Will, determines where the property goes. The probate court reviews the trust and the tax authorities require some attention, but post death administration is a fairly easy process. The successor Trustee gives the property to the beneficiaries named in the instrument. No record in probate court reveals who received property or how much they got. If the surviving spouse is the beneficiary, then there’s no or little estate tax. If a non-spouse comes into the decedent’s property, then estate taxes may be due.

WHAT ARE THE ADVANTAGES OF A REVOCABLE LIVING TRUST?

Reducing or Eliminating Federal Estate Taxes

For married couples with a high net worth, living trusts can help to reduce or eliminate federal estate taxes. Avoiding these taxes is important because the rates can exceed 50%. This works by having some of the first decedent’s property remain in trust instead of passing outright to the surviving spouse. When used this way, a Trustee, who may or may not be the surviving spouse, legally owns the assets. The surviving spouse normally has income for life and whatever she needs for health, support, maintenance, and education.

Protecting Vulnerable Beneficiaries

 A trust provides much more protection to vulnerable beneficiaries than a will. If one has a will, Ohio requires the Executor to make distribution to all beneficiaries whether they can handle it or not. If a beneficiary is in a bankruptcy, divorce, or has a substance abuse or gambling problem, then he gets the money. However, if a beneficiary with one of these problems takes under a living trust, then the Trustee can withhold distribution until the danger passes. Further, if a beneficiary receives means tested Social Security income, then he cannot have more than $2000 in countable assets. But, a living trust oftentimes permits a beneficiary to have access to an inheritance and keep their SSI and Medicare card. This protection makes a living trust a valuable planning tool regardless of the level of wealth involved.

Avoiding Probate and Its Expenses

The living trust’s avoidance of probate does not eliminate the requirement of preparing and filing the decedent’s final income tax return or filing and paying estate taxes. The Trustee, or the Executor of the Will if there is no living trust, collects the decedent’s assets, pays his debts, and makes distribution to the beneficiaries. This process can be time consuming and costly. However, a living trust greatly reduces the fees and delay. For example, a living trust can save a third or more of the normal attorney fees. Months can be cut off of the normal process if one uses a trust instead of a will.  

Avoidance of Ancillary Administration

 Each state holds jurisdiction over real property inside its borders. If a person dies owning property in several states, then each state will call for ancillary administration to transfer title to the real estate. Each ancillary administration needs a local lawyer and imposes more legal and administrative expenses. Transferring real property to a living trust avoids this problem of multiple probating in different states.

Maintaining Confidentiality

When one admits a will to probate, this instrument, and the nature and extent of all assets passing under it, becomes a public record that anyone can inspect. On the other hand, the details of items distributed by a living trust stay private.

Planning for Incapacity

 If a person becomes incapacitated, then a court appoints a Guardian to oversee his assets and care for him. The individual no longer controls his care or the management of his assets. Further, each year the Guardian must post a bond and file an accounting of all income and expenditures. Every other year, the Guardian must have a doctor examine the person and declare he is still incapacitated. These rules require attorney and medical expenses that can cost thousands of dollars each year. A living trust can avoid this extra effort and expense.

The living trust protects the Settlor’s assets in the event of incapacity. The trust can make specific provision for the management of the trust assets and state who handles the Settlor’s affairs. In addition, the living trust can require the Trustee to use the trust assets to provide for the care and support of the Settlor without court intervention.

Avoidance of Family Disputes

If an individual believes his heirs may have disputes after his death, then a living trust has several advantages. When there is a Will admitted to probate, Ohio law requires the Executor to send the family members a notice of the person’s death. The Trustee of a living trust does not have to provide such notice. This provides two benefits. First, even if they learn of the trust, the Trustee may distribute the assets before the heirs realize that a trust exists. Such a distribution makes a challenge more difficult. Second, the notice of probate of the Will gives a chance to contest the Will before the Executor distributes the assets. A Will contest ties up the assets until the court resolves the challenge. Once again, living trusts avoid this problem.

Most living trusts operate for some time during the Settlor’s life. This makes the trust more difficult to challenge than a Will. It is tougher to prove incapacity, fraud, or undue influence in the establishment of a living trust if the Trustee/Settlor managed it prior to his death.

Preserving Assets for the Children and the Surviving Spouse

Ohio law gives the surviving spouse a right to take some of the assets out of the probate estate even if the decedent’s Will leaves nothing for him or her. Ohio law gives no corresponding right for the surviving children to take against the terms of the decedent’s Will. On the other hand, current Ohio law does not permit a surviving spouse or children to invade a living trust. For second or subsequent marriages, this is sometimes a concern. Also, a trust is the only way to restrict access to funds past a beneficiary’s 21^st birthday. The living trust grants flexibility to address these situations.

WHAT ARE THE DISADVANTAGES OF A REVOCABLE LIVING TRUST?

Costs to Establish and Fund

Setting up a living trust is more expensive and time consuming than estate planning with a simple Will. Living trusts and the other essential instruments may cost $2000 or more. This is because couples are not as familiar with these documents and need more of the attorney’s time to understand them. Also, a living trust works best if the Settlor puts assets in it during his lifetime. The attorney should supervise this process. This adds to the costs. Estate planning with simple wills and joint and survivor property does not require nearly as much time, effort, and money. Keep in mind, though, that a living trust normally saves far more in attorney fees for the beneficiaries than the costs to establish it.

Working with Assets in a Living Trust

Once the Settlor signs the living trust, he must coordinate all current and new assets with it. If the assets are not inside the trust, then they may pass through probate. This defeats the functions of the living trust. In our office, we prepare the deeds to transfer real estate and the assignment to transfer the household goods and furnishings into the trust. We also give detailed written instructions on how to transfer all of the person’s assets into the trust. These instructions are based on the asset information the client provides us, so it is specifically made for the client. Our fees include basic assistance to help the client get all of his assets coordinated with the trust.

WHAT SHOULD I DO?

 Each person’s situation is different. Only a competent attorney who regularly handles these types of cases can properly help you decide whether or not a living trust is right for you. A living trust can more effectively carry out an estate plan than a simple Will. Couples with high net worth benefit by having living trusts as part of an overall approach to reduce or eliminate the federal estate tax. A living trust can save attorney fees, promote privacy, and protect vulnerable beneficiaries. If you have questions about any of these matters, then call us as soon as possible at (937) 667-8805. If the time comes and your affairs are not in order, the results can be harsh for those who survive you.  

Copyright 2011 by George H. Lovett. All rights reserved. This article is not intended, and should not be construed, as legal advice. The author intends this writing to generally inform and to spur interest and discussion. The author encourages those with questions to consult an attorney of their choice for guidance. The author may be reached at (937) 667-8805 or glovett@lovettlawoffice.com.

What Is A Health Care Power of Attorney?

A Health Care Power of Attorney is an instrument in which you dictate who has authority to make health care decisions for you in the event that you are temporarily unable to do so. The document lists several persons who have this power. The first available person on the list holds this power and can overrule the desires of others if necessary. Of course, this attorney-in-fact must follow your wishes. This person may view all of your medical records; consult with all health care providers; choose whether or not to have procedures performed; hire and fire doctors; obtain second opinions; order a transfer to a different hospital; deal with insurance companies; and generally make all decisions affecting your health care.

Why Do I Need A Health Care Power of Attorney?

Doctors want to respect the patient’s wishes and provide health care appropriate for the situation in a prompt manner. If they have a Health Care Power of Attorney, then they can follow promptly the directions of this person and not delay by waiting to achieve a family consensus. If the family disagrees, then this document dictates who is in charge. Also, this instrument allows you to control who makes the decisions. This helps remove the uncertainty as to whether or not your wishes would be followed. In addition, insurers and other health care providers have a duty not to disclose the contents of medical records. Unfortunately, this can delay or stop action because of an unwillingness to fully discuss the case details. A person armed with written authority can cut through the confusion and give timely guidance.

Answers To Some Frequently Asked Questions

Even though doctors will consult with a spouse, there is no substitute for having written authority to act. If no spouse is available, then there is inevitable uncertainty as to who has the power to make decisions. Although each state has laws in this area and they are not identical, it is quite likely a state will honor a Health Care Power of Attorney made elsewhere. If you spend a lot of time in a different state, then obtaining a Health Care Power of Attorney in the other jurisdiction would be advisable to provide some security. If any of the persons listed as contacts in the Health Care Power of Attorney move or change telephone numbers, then this will not invalidate the instrument. Health Care Powers of Attorney are easily obtained and inexpensive. Upon entering a hospital or nursing home, the staff will inquire as to the existence of the instrument and fill-out the forms if necessary. They usually do not charge a fee for this service. Attorneys can also prepare a Health Care Power of Attorney. If you need a health care power of attorney, then call us right away at (937) 667-8805.

Basic Aspects Of Limited Partnerships

There are two main types of partnerships: general and limited. In a general partnership, each member is a general partner with a right to participate in the affairs of the business. Each partner has joint and several liability for all obligations of the entity once creditors deplete the partnership assets. In a limited partnership, there are two types of partners: general and limited. The general partner has sole control of the management of the business and full liability for the entity’s debts once the assets are gone. Limited partners, though, have no right to control the company’s affairs. As long as they obey this restriction, limited partners have no liability for the company’s obligations. Moreover, the limited partners have fewer rights to retrieve their investment than do owners of other businesses. In general and limited partnerships, the entity pays no tax. Instead, the income or losses pass through to the partners in proportion to their percentage of ownership.

How A Family Limited Partnership Works

Upon formation, members of the family contribute some of their assets to the FLP. They choose one or more general partners to run the company. The general partner takes responsibility for liabilities the business cannot pay. The limited partners have no vote in the operations and no liability for debts beyond their capital contributions. Each year, the partners receive a share of the entity’s profits or losses.

Passing On The Torch

A FLP can gradually pass along management and ownership of a family business. The parents who hold the general partnership shares control the company and continue to run the show. Likewise, they retain sole responsibility for its failure. As time goes by, they give limited partnership shares to the children. This divests ownership of the company to the next generation of the family and removes assets from the parents’ estate. This also sprays income to younger persons who may pay income taxes at lower rates. With enough time, and increasing confidence, the parents may give a majority of the ownership… and eventually the leadership… to the children.

Enhancing The Reduction Of The Parents’ Estate

The size of the parents’ estate goes down in two ways. First, gifting the limited partnership shares chips away at the number of assets the parents own. Second, splitting the ownership amongst more persons reduces the value of each unit. Because there is a lack of marketability and decreasing concentration of ownership, the collective value of the individual units is less than the value of the underlying assets. This process is known as “Valuation Discounting.” If the parents give away enough of the limited partnership shares so that they no longer hold a majority interest, then their shares also receive a “Minority Discount.” The IRS recognizes discounts in these cases of anywhere from 20% to 40%.

Consolidation Of Different Types Of Assets

The parents can coordinate the management of many items that have little in common by placing them in the FLP. Many types of assets, such as real estate, life insurance, stocks in publicly traded corporations, closely held shares, bonds, mutual funds, and farms can all fit into the FLP under the right circumstances. Some unique assets, like artwork, do not qualify. The common denominator is there must be a legitimate business purpose for the FLP. Centralizing the control of diverse interests and streamlining operations, as well as providing continuity of management, are valid business reasons for FLPs.

Disadvantages

The asset owners must carefully choose the items that fund the FLP. They must select suitable assets and avoid traps that cause a realization of income upon the company’s formation. Once this is done, all the assets must be retitled in the name of the FLP. Quite frequently the addresses for payments and notices need revision. All of this is time consuming. In addition, the FLP requires books and tax returns separate from its participants. The entity’s profits or losses appear on each member’s K-1, and a person needs their K-1 to prepare their own tax returns. It is commonplace for members of FLPs to ask for extensions of their tax filing deadlines. Not only is the maintenance of a FLP costly, but the fees to establish it are greater than many other types of estate planning. Fees for annual bookkeeping and accounting can exceed $1000, and the initial investment to appraise the items, draft the FLP, make the necessary state and local filings, and retitle the assets is usually more than $3000. There are also legal fees each time the parents make gifts of partnership units.

Advantages

For persons with sizeable assets and trusted family members, the FLP is a valuable tool to reduce federal estate or gift taxes. It carries out other purposes too, such as business continuation planning. However, it is a complicated and expensive device. Before committing to this approach, a person should look at simpler, less expensive alternatives with experienced counsel to make certain the FLP is an appropriate choice for their circumstances.

1. Make it a positive experience

Like all of life’s changes, entering a nursing home can be good or bad. It is up to you to make it positive. Nursing homes work hard to present activities that entertain and educate. Take advantage of them. Participate in as many things as possible. Make new friends. A stay in a nursing home is just one more station in life. Live it for all it is worth.

2. Help the staff help you

Getting to know the staff well greatly increases the odds of having a positive experience. The nurses, aides, and administrators all want the residents to get well and enjoy themselves. If you visit often and ask questions, then they can anticipate your needs and better serve you.

3. Payment methods

The patient is responsible for paying all the costs. This includes room and board, simple nursing care, and beds and linens. Most Ohio nursing homes charge over $6,000.00 per month for basic care. The patient is responsible for paying all other costs, too. Examples are doctor visits, prescriptions, medical procedures, clothing, extra laundry, hair care, toiletries, a private telephone, and a television. Medicaid, a government program, usually will not pay unless the resident has spent nearly all of their money. Long term health care insurance can pay these costs, but a resident must have it in place before entering the facility.

4. Identify all assets

The nursing home resident should inventory all of his assets. This should specify the asset type (i.e., CD, IRA, real estate, checking account, annuity, life insurance, stock, bond, etc…), current value, and beneficiary if it is jointly held or payable on death. If the resident will pay for his costs himself (often called a “private pay” resident), then this list identifies those assets most suitable for payment. If the resident applies for Medicaid, then the caseworker will require all this data. Further, this information is necessary for proper estate planning as described in item 9.

5. Medicaid

Medicaid, in proper cases, can pay for nursing home care. This is a federal program that each state administers. Approximately 50% of nursing home residents receive this aid. A nursing home cannot treat a patient differently if Medicaid pays for their care. In most cases, to be eligible one must have a limited income and less than $1,500.00 in assets. Qualifying for Medicaid is quite technical. If you have questions, it is important to consult with a professional who is knowledgeable about the rules. One can buy some articles and make some gifts and still get Medicaid assistance. However, some purchases or gifts can cause a lengthy period of ineligibility. If you do not know the difference, then consult with an expert.

6. Financial Power of Attorney

Neither a spouse, nor anyone else, can act on your behalf unless you authorize it. Almost always a nursing home resident should have a power of attorney for financial affairs. This lets a third party, known as an attorney in fact, handle all of your assets. The attorney in fact should be someone you completely trust. The instrument gives them the power to spend all of your money. If you do not have a financial power of attorney and lose the ability to act, then a Guardianship may be necessary. You want to avoid this. Guardianships are expensive and public. They are expensive because they require a lot of attorney time. This can cost thousands of dollars. They are public because all of your income, assets, debts, and expenditures are filed with the probate court. Everybody may view the information. The attorney in fact can do nearly everything the Guardian can do. The attorney in fact, though, does not need an attorney or file anything with the court. The power of attorney can also permit the person to take actions to qualify you for Medicaid. Guardians cannot do as much to make you Medicaid eligible. Thus, a financial power of attorney is an important tool that every resident should consider having. 

7. Health Care Power of Attorney

A health care power of attorney is also a must for each resident. It allows you to control who will make health care decisions if you are unable to do so. This person may view all of your medical records, consult with all health care providers, choose whether or not to have procedures performed, hire and fire doctors, obtain second opinions, deal with insurance companies, and generally make all decisions affecting your health care. The attorney in fact of a health care power of attorney can promptly give directions. A person with this authority can cut through confusion and give timely guidance.

8. Living Will

A living will is another instrument each resident should put in place. It directs health care providers to withhold life-sustaining treatment in the most hopeless of circumstances. Without it, doctors must try to save a person and fear the consequences if they do not. A living will gives clear guidance and liability protection to those persons who rely upon it. If there is no living will and death is close, then removing life support is tough. The doctors must determine which person is the legal “medical decision-maker.” Then they investigate the patient’s desires and obtain a written consent to remove treatment. Then they give a forty-eight hour notice and implement the decision. If the patient is in a coma, then Ohio law requires a twelve-month waiting period. A living will eliminates this process and provides a quicker, surer means to carry out the patient’s wishes.

9. Wills and Trusts

All adults should have a will. This determines who receives your assets and makes the process simpler and cheaper. If you do not have a will, then the state decides who gets your money. A well drafted will can also save taxes. Even if a person has few assets, a will is necessary. It allows you to name the beneficiaries who receive your most personal possessions. These could be photographs, clothing, jewelry, knick-knacks, and family heirlooms. When drafting a will, a thorough attorney also asks about the asset inventory we described in item 4. This is because a will does not control assets with beneficiary designations. Examples are IRAs, pensions, jointly held assets, annuities, life insurance, and payable on death accounts. All money in this type of asset goes to the beneficiary. The will does not control where that money goes. A proper estate plan looks at each asset and considers how each loved one will or will not inherit from a decedent. A trust is useful for more sophisticated needs. In 2008, persons with more than $2 million face a combined federal and Ohio estate tax rate of fifty percent or more. Trusts can reduce or eliminate these taxes. Also, trusts can impose conditions on receiving money. Trusts can make beneficiaries wait to receive their inheritance until they are older than twenty-one. Trusts can also require them to remain debt free or go to college.

10. Health Insurance

It is crucial to keep the health insurance in place for a nursing home resident. Nearly all medical procedures and doctor visits are not covered by the basic nursing home contract. Take all steps necessary to make sure the premiums are paid. Unlike long term health care insurance, health insurance is much more widely available. If there is no health insurance, the resident should try to get it immediately. The family should work with a competent professional to obtain coverage.

We can help

Our office has helped many nursing home residents and their families. We review all wills, powers of attorney, and trusts to make certain they remain suitable for the circumstances. While doing this, we look at every asset and beneficiary regardless of the size of the estate. We work to put in place a plan that carries out the resident’s wishes. We have helped many families to preserve assets and become eligible for Medicaid. Our attorneys take this thorough and careful approach in everything we do. If you have a legal need, then we are just a phone call away. If we do not practice in an area, then we refer to someone with a proper expertise.

Call Now

There’s no charge for the first few minutes on the phone.  An attorney is available at (937) 667-8805 from 8:30 to 5:00, Monday through Friday. We promptly answer messages. Voice mail is always available, or in emergencies, call (937) 667-0225.