Estate Planning For The 21st Century

Presenter’s NameEvent Date

IMPORTANT SLIDE INFORMATION NAELA Members

The following slides were graciously provided by NAELA Member Rajiv Nagaich from Washington state. NAELA members have permission to reuse these slides for their own firm’s purpose.

Use of the NAELA logo is limited to active NAELA members only.

The slides were created to provide a foundation for presenting information on Estate Planning and Long Term Care Planning and MAY NOT provide accurate or current information for your specific state

To ensure the accuracy of your presentation, you MUST review and update the contents of the slides with your state’s legal requirements

Traditional Notions of Estate Planning Who gets what when I die Who manages my checkbook and health

needs when I can no longer attend to those needs myself

Do I want to be kept alive if I am comatose and cannot communicate

ASSUMPTIONS Go to sleep and not wake up My agents will know what to do Biggest issues are:

Providing for quality of life Avoiding probate Avoiding estate taxes Making it easy for beneficiaries

Assumptions do not apply today We are living longer – but not necessarily

living healthier One out of eight Americans over 65

dependent on others for day-to-day living activities

One out of every two Americans over 85 dependent on others for day-to-day living activities

Source: Alzheimer’s Disease Facts and Figures, 2007, Alzheimer’s Association

Issues Created Financing health care costs, many of

which may not be covered by Medicare or health insurance

Managing Quality of Life

Financing Long Term Care Medicare / Health Insurance

Cover acute care needs Do not cover chronic care needs Unless . . .

Where Medicare or Health Insurance leave off: Private assets (including Long Term Care

Insurance) VA Medicaid

Limitations Long Term Care Insurance is NOT widely

embraced VA and Medicaid benefits are limited

VA Benefits Aid and Attendance – non-service

connected disability is dependent upon your qualification* up to: Veteran: $1,645 per month Spouse of Veteran: $1,057 per month Married Veteran: $1,945 per month

*http://www.canhr.org/factsheets/misc_fs/html/fs_aid_&_attendance.htm

Medicaid Benefits Food, shelter and medicine Income used as deductible towards care costs;

$55.45 / $60.78 /$90.00 per month personal needs allowance [state specific, changes annually – please update with your state’s requirements]

All clients treated the same DME Semiprivate rooms Limited personal care needs

What is missing?

ESTATE PLANNING- Eligibility is Not Automatic

VA Eligibility Service Requirements

90 days in active duty with 1 day in war time period

World War I: April 6, 1917, through November 11, 1918

World War II: December 7, 1941, through December 31, 1946

Korean War: June 27, 1950, through January 31, 1955

Vietnam War: August 5, 1964 (February 28, 1961, for veterans who served "in country" before August 5, 1964), through May 7, 1975

Persian Gulf War: August 2, 1990, through a date to be set by Presidential Proclamation or Law.

24 months if enlisted after September 7, 1980

VA Eligibility 65 years old or permanently disabled Income less unreimbursed medical

expenses less than: $1,945 for married veteran $1,645 for single veteran $1,057 for spouse of veteran

VA Eligibility Net Worth:

Unfortunately, there is no asset limit set by law, and the determination of eligibility can be made at the discretion of a VA caseworker.

All personal goods are exempt from the net worth and include:

the home in which claimant lives; a vehicle used for the care of the claimant; and household goods and personal effects such as

clothes, jewelry and furniture.

Resource Test [state specific, changed every year – please update with your state’s requirements]

Single Applicant: $2,000 House (with equity of up to

$500,000 [$750,000 in some statee])

One automobile (any value) Prepaid funeral plan

(irrevocable and of reasonable value) – burial plots for family members

$1,500 cash value in life policy

Personal property (any value)

BUT- Assets subject to state Medicaid lien

Married Applicant: $2,000

Spouse of Applicant House (any value) One automobile (any value) Between $74,820 and

$109,560 Prepaid funeral plan

(irrevocable and of reasonable value) – burial plots for family members

$1,500 cash value in life policy

Personal property (any value)

Who Should Worry? Middle class Americans

Between $50,000 and $1,500,000 in assets

Estate Planning Solutions Pre-crisis options Crisis planning options

Pre-Crisis Planning Utilize Special Needs Trusts Utilize Income Only Trusts

Decedent’s share

Survivingspouse owns

all assets

Entire estate subject to spend down to access.

Typical Estate Plan (married)

Surviving Spouse’s

share

Decedent’s share

To Testamentary Special Needs

Trust for surviving spouse

Surviving spouse owns

only half estate

Special Needs Trust protected

Way Around the ProblemSurviving

spouse’s share

Surviving spouse’s share

subject to spend down

Decedent’s estate

Assets owned by testator during life

Nearly entire estate must be spent down to access VA or Medicaid

benefits

Typical Estate Plan (unmarried)

Gift of some assets to irrevocable trust or trusted

individual

Trustee can provide funds to beneficiary, who can use funds as beneficiary sees fit.

Assets in irrevocable trust or Safe Harbor Trust protected (subject to look back

period)

Way Around the Problem

Settlor cannot be a beneficiary of the principal

Pre-Crisis Planning Update Community Property Agreements (only in community

property states) Revocable by one party

Update Powers of Attorney Gifting Powers Care Management mandate No authority to enter into arbitration agreements

Living Wills Update Living Wills after Terry Shiavo Update Health Care Proxy in states where they are

separately required

Pre-Crisis Planning Discuss your plan with named fiduciaries

Crisis Planning Financing the costs

Medicare VA Medicaid

Develop plan to address quality of life issues

Address Estate Planning issues