Table of Contents
What is estate planning?
Estate planning is thinking about how you want your personal and financial affairs handled if you die or can no longer do it yourself, then putting in place the documents to carry out those desires. Estate planning is not financial planning. Estate planning deals with having people you trust to make the proper decisions for your money and healthcare. Financial planning is working with a professional to properly invest your money.
What is an estate and why do I need estate planning?
Everybody has an estate, not just wealthy people. An estate is simply everything you own or control. It is your house, furniture, lawnmower, clothes, jewelry, pension plan, IRA, life insurance, stocks, bonds, mutual funds, cars, RV’s, dog, cat…you get the picture. An estate is EVERYTHING that you own or control. Estate planning is putting in place, in advance of a crisis, the documents necessary to make your assets do what you want them to do when you die or if you can no longer manage your affairs yourself.
When we do estate planning, it is also wise to put in place documents to deal with medical emergencies. This way, if you can no longer make your own medical decisions, someone you trust will be making those decisions for you.
Why do I need a will?
A will determines who gets your assets when you die and who is in charge of distributing them. If you do not have a will, then Ohio law determines who gets your assets and who is in charge of managing them. That plan may not do what you want. Therefore, to make your wishes control the situation it is important you put in place a will. Even if you do not own very much now, you may own something in the future. Your death could create assets you did not have while you were alive. If you die as the result of someone else’s wrongdoing, this could create a right to wrongful death proceeds that may be worth a lot of money. This is why every adult, regardless of age, should have a will.
I just want a simple will. Why are you recommending I have an estate planning consult?
Everybody wants to keep things simple and to spend the least amount possible on their estate planning. There is nothing wrong with this. We always strive to put our clients in the simplest plan at the least cost that does what they need it to do. The problem is that simplicity will not always match a person’s needs. If a person has a child that suffers from some sort of impairment, then a simple will does not protect that child. An impairment could be spina bifida or mental retardation. It could also be bankruptcy, divorce, mental illness, being sued, drinking, gambling, pill popping, or worse. If a person suffers from any of these problems, then a simple will cannot protect them. You would need a trust. Further, if you are entering a nursing home, then planning to pay for that is vital; a simple will becomes much less important. We need to talk with a person to learn more about them and their family. Only by having an extended conversation can we learn more about a person’s personal and financial situation and make the right recommendations for them. This is why we always wish to have a consultation even if a person just wants a simple will.
What Documents Should I Have?
Every adult needs a will, financial power of attorney, healthcare power of attorney, and living will. A will gives away assets you own as an individual at your death. A financial power of attorney gives someone the power to handle your money in case you cannot do that. A healthcare power of attorney gives someone else the power to make your healthcare decisions if you cannot do so. A living will controls how long you receive life support in the event you become permanently unconscious or your death is imminent. These are the four basic documents that every adult needs to have. If you do not have any of these four documents, then your family may have to ask a probate court judge for help. This adds delay and expense that easily could be avoided by having your estate planning in place.
I got divorced. Do I need to change my will?
Yes, you should. In Ohio, a divorce will automatically disinherit your spouse from items controlled by your will. However, it will not necessarily keep your former spouse from inheriting benefits controlled by federal law, like a pension at work. Moreover, your will may have your ex-spouse as your executor and name no one else as an alternate. If so, then your plan has a serious defect. Further, if you have not named an alternate guardian for your minor children in the event your spouse is gone, then this is also a defect that needs to be fixed. In addition, you may have listed your ex-spouse as the first person to be contacted in the event you have a healthcare emergency. If this is the case, then you ought to put in place a new health care power of attorney and living will. Finally, if you listed your ex-spouse as your agent to act on your behalf in your financial power of attorney, then you need to upgrade that document to name a different person.
I am getting married. How does that change my estate planning?
Getting married has huge ramifications for your estate planning in Ohio. If you own assets in your name as an individual, upon your death if those assets go through probate then your surviving spouse has significant claims against them. If you have children from another relationship, then those rights of your surviving spouse may conflict with or even trump the rights of your children to inherit from you. In addition, estate planning with a living trust (and an antenuptial agreement) can protect your assets in the event of a divorce.
My Mom may need to enter a nursing home. What should we do?
Making certain your mom gets the best care possible for the rest of her life is the number one concern. Preserving wealth helps make that happen. The more money there is the more options that are available to provide her with the best care. Medicaid planning preserves wealth. Very few Americans have the type of insurance that will pay the costs if someone enters a facility. Over half of Americans in facilities receive Medicaid benefits. Good planning obtains the Medicaid benefits as soon as possible and preserves wealth while doing that. The main goal of preserving wealth is to make those funds available to provide the best care possible and, if married, to give the spouse at home as much money as possible so they have a secure retirement. If a parent needs to enter a nursing home, then the sooner we get started on their planning, the better. Although it is never too late to try to preserve wealth, the sooner we start the better the odds we will be able to save more.
My dad is in the hospital and may not live much longer. What should we do?
We should immediately review your dad’s personal and financial situation, look at his current estate plan, and see if it carries out his desires and the needs of the family. Sometimes the person’s competency is an issue. We need to assess the person’s awareness of his family and assets to determine if they have the competency to sign legal documents. If they do not have this competency, then we are limited in what we can do. The terms of their existing documents would largely control that situation. However, if the person is competent, then we may be able to change the documents. When a person is deteriorated, though, they can become incompetent and make it impossible to act. When time is short, meeting with the person as soon as possible is crucial.
I don’t want to be on life support. What do I need to do to stop it?
No one wants to be in a permanent vegetative state like Karen Quinlan or Terri Schiavo. However, we always want medical professionals to save our life if there’s a reasonable chance to recover. One can strike a reasonable balance by having a healthcare power of attorney and a living will. A healthcare power of attorney designates those persons with authority to make the healthcare decisions if you can no longer do that. It also states who is in charge of making those decisions and the order in which they serve. This gives the healthcare professionals one person to work with who has the authority to decide what needs to be done. It also gives cell phone numbers at which those persons can be reached at a moment’s notice. In your living will you demand that you be removed from life support if you become permanently unconscious or your death is imminent. A living will makes clear your desire to not prolong your life if there is no reasonable hope of saving you. These documents are different from a do not resuscitate order. A do not resuscitate order is a document that requires the healthcare professionals to step aside and make no efforts to save you if you have stopped breathing or your heart has quit beating. That is a radical measure. It should only be taken if a person has been suffering a long time and there is no reasonable hope of recovery. This is why, in our view, it is most appropriate to put in place a healthcare power of attorney and living will and let the people you love and trust make that decision if it becomes the right one.
My parents’ attorney told them they need to spend all of their money before they can get on Medicaid to pay for the nursing home. Is that true?
No, it is not true. There is a lot we can do to preserve wealth if a person faces a nursing home stay. Medicaid is the government program that will pay when a person no longer has the assets to do so. Medicaid planning is repositioning assets to preserve wealth so that we have more options to provide the best level of care for the person who needs it. Medicaid planning also makes it more likely that there will be funds for the spouse at home so that they will not be impoverished by spending everything on the care costs. Medicaid planning is very technical. Many attorneys are not well versed in it. Some attorneys feel that preserving wealth by doing Medicaid planning is unethical, so they may not feel they should help people get the planning done. It is important to talk to an attorney who does a lot of Medicaid planning so that you get the proper advice. Therefore, it is always a good idea to ask an attorney about their experience in doing Medicaid planning if one is seeking their advice about it. Our office does a lot of this work.
I’ve heard Medicaid planning only works if you have five years to wait after making gifts. Is that true?
No, it is not true. Since 2006, Medicaid laws penalize all transfers made for less than a fair market value within five years of applying for Medicaid. However, this does not mean that a person is disqualified if they have made any gifts within five years of submitting a Medicaid application. The more gifts one has made, the longer the period of ineligibility. In Ohio, the ineligibility is determined by adding up all the gifts made during the five years immediately prior to filing for Medicaid. Then we divide that grand gift total by the average monthly pay rate of an Ohio nursing home. The result of that equation is the number of months of ineligibility. However, there are steps we can take to reduce that ineligibility, avoid it, or pay for the care during an ineligibility. During the consultation, our attorneys can learn more about the gifts that have been made, family composition, and the competency and desires of the person who needs long-term care. Once we learn more about these things, determine the person’s personal and financial affairs, and review their legal documents we can then make recommendations on the appropriate steps. Many times we can obtain Medicaid benefits for someone who has made significant gifts within five years of the application. Sometimes we recommend those gifts ourselves! However, this planning is highly technical. It is easy to make a wrong move. And a wrong move can cause a disaster. With careful planning, though, gifting can preserve a lot of wealth and do a lot of good. Therefore, it is important to have the right professional to help you in this process. Our office does a lot of this work.
I heard probate is something to avoid. How do I do that?
Probate is undesirable because of its fees, delay, publicity, and lack of protection. Probate requires a lot of steps to protect creditors and pay the beneficiaries whatever is left. Probate could be avoided with proper planning. Probate also requires a lengthy process. The average case in this country takes 18 months to resolve. In Ohio, probate is an arm of government subject to the Ohio open records law. One cannot legally seal a decedent’s probate court file in Ohio and protect the family’s privacy. Many probate courts put all this information on the internet, thereby giving it even greater exposure. Additionally, if a beneficiary is not in a good position to receive an inheritance, probate could leave that beneficiary vulnerable. If that person receives government benefits or is drinking, gambling, abusing drugs, facing bankruptcy or divorce, or in some other tenuous situation, then probate will not help them. A will cannot legally empower the executor to keep a distribution for a troubled beneficiary. One must use a trust to protect that vulnerable beneficiary. A trust can also avoid probate entirely, thereby making the process quicker, easier, and much cheaper due to reducing a lot of work. Transfer on death accounts can also avoid probate, but they have their limitations. Transfer on death accounts risk disinheriting grandchildren if a child dies prematurely. Transfer on death accounts also do not protect a vulnerable beneficiary. If a child is the beneficiary and receives an inheritance, they could lose it entirely if they are being sued, in bankruptcy, or facing a divorce. However, a trust can provide protection from these risks. Therefore, it is important to consult with a knowledgeable professional about the planning that is right for you. A qualified estate planning attorney or elder law lawyer is in the best position to do this because of their experience and training. Our attorneys have these qualifications.
Why is using an attorney better than getting forms on the internet and doing my own estate planning?
The problem with plucking forms off the internet is you do not know if they are the right forms. For example, forms that work well in Ohio may not work well elsewhere and vise versa. Further, the forms a person chooses may not be right for their situation. If a person owns all of their bank and brokerage accounts in a transfer on death format, then their will controls none of those assets. Using a will form and filling it out would have no effect on the person’s planning. Further, if a person has a beneficiary who is in a vulnerable situation, then you need a trust to protect them. A trust is a very complex instrument that does not lend itself well to simple fill in the blank forms. Moreover, a person may need a financial power of attorney that empowers someone else to do estate planning and Medicaid planning to preserve wealth from long-term care costs. If that financial power of attorney does not have gifting and estate planning authority in it, though, then it could be useless. You need to have an attorney knowledgeable in these matters guide you through the process. Selecting forms off the internet to do your own estate planning is similar to getting on Web MD and trying to diagnose your own condition. The average person does not have the expertise necessary to do that for their medical affairs. The same thing holds true for legal matters and especially for estate planning.
I don’t trust lawyers. Why should I trust you? How can I tell you are honest?
The internet can help you verify that we have the honesty and integrity you need. Go to our website and look at our reviews. This is www.lovettlawoffice.com. Go to Google and look at our reviews. We have an extremely high satisfaction rating. Further, go to the Ohio Supreme Court attorney registration site. That is here: http://www.supremecourt.ohio.gov/AttySvcs/AttyReg/. Look and see if the attorney has any disciplinary history. You will see that all of our attorneys have a discipline-free history.
My broker said all I need to do on my accounts is list my wife and kids as beneficiaries. What is wrong with that?
The problem is bad things can happen to good people. Transfer on death accounts can have a lot of things go wrong. If everyone dies in the right order and no one is a vulnerable beneficiary, then transfer on death accounts can work great. The problem is we cannot tell who is going to die in what order. The other problem is that people can be in a bad situation in the future even though they are perfectly fine today. Long-term marriages can end. Folks can lose their job, lose their health insurance, need expensive medical care, face unexpected large bills, and have to seek bankruptcy relief. A person can have legitimate pain issues, get hooked on pain pills, and now lack a good judgment necessary to handle an inheritance. A person can have a bad accident, face injury, and no longer have the capability of exercising sound judgment. A transfer on death account cannot help these persons. A transfer on death account entitles the beneficiary to immediate and full possession of the asset. If the person is not in a stable situation, then this immediate entitlement to the money could be a recipe for disaster. Usage of a trust is a far better planning tool. A trust can empower a trustee to hang on to the distribution for a troubled beneficiary, wait until the danger passes, then give it to them. This is a much safer arrangement than using a transfer on death account.