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A Trust Just for Your Retirement Account. Is it right for you?

Unlike most of your assets, individual retirement accounts (IRAs) do not pass to your family through a will. Instead, upon your death, your IRA will pass directly to the people you named via your IRA beneficiary designation form.

Unless you take extra steps, the named beneficiary can do whatever he or she wants with the account’s funds once you’re gone. The beneficiary could cash out some or all of the IRA and spend it, invest the funds in other securities, or leave the money in the IRA for as long as possible.

So that’s why you might not want your heirs to receive your retirement savings all at once. One way to prevent this is to designate your IRA into a trust.

But you can’t just use any trust to hold an IRA. You’ll need to set up a special type of revocable trust specifically designed to act as the beneficiary of your IRA upon your death. Such a trust is referred to by different names—Standalone Retirement Trust, IRA Living Trust, IRA Inheritor’s Trust, IRA Stretch Trust—but for this article, we’re simply going to call it an IRA Trust.

IRA Trusts offer a number of valuable benefits to both you and your beneficiaries. If you have significant assets invested through one or more IRA accounts, you might want to consider the following advantages of adding an IRA Trust to your estate plan.

Protection from creditors, lawsuits, & divorce

While IRAs are typically protected from creditors while you’re alive, once you die and the funds pass to your beneficiaries, the IRA can lose its protected status when your beneficiary distributes the funds to him or herself. One way to counteract this is to leave your retirement assets through an IRA Trust, in which case your IRA funds will be shielded from creditors as long as they remain in the trust.

IRA Trusts are also useful if you’re in a second (or more) marriage and want your IRA assets to be used for the benefit of your surviving spouse while he or she is living, and then to distributed or be held for the benefit of your children from a prior marriage after your surviving spouse passes. This would ensure that your surviving spouse cannot divert retirement assets to a new spouse, to his or her children from a prior marriage, or lose them to a creditor before the funds ultimately get to your children.

Protection from the beneficiary’s own bad decisions

An IRA Trust can also help protect the beneficiary from his or her own poor money-management skills and spending habits. If the IRA passes to your beneficiary directly, there’s nothing stopping him or her from quickly blowing through the wealth you’ve worked your whole life to build.

When you create an IRA Trust, however, you can add restrictions to the trust’s terms that control when the money is distributed as well as how it is to be spent. For example, you might stipulate that the beneficiary can only access the funds at a certain age or upon the completion of college. Or you might stipulate that the assets can only be used for healthcare needs or a home purchase. With our support,  you can get as creative as you want with the trust’s terms.

Tax savings

One of the primary benefits of traditional IRAs is that they offer a period of tax-deferred growth, or tax-free growth in the case of a Roth IRA. Yet if the IRA passes directly to your beneficiary at your death and is immediately cashed out, the beneficiary can lose out on potentially massive tax savings.

Not only will the beneficiary have to pay taxes on the total amount of the IRA in the year it was withdrawn, but he or she will also lose the ability to “stretch out” the required minimum distributions (RMDs) over their life expectancy.

A properly drafted IRA Trust can ensure the IRA funds are not all withdrawn at once and the RMDs are stretched out over the beneficiary’s lifetime. Depending on the age of the beneficiary, this gives the IRA years—potentially even decades—of additional tax-deferred or tax-free growth.

Minors

If you want to name a minor child as the beneficiary of your IRA, they can’t inherit the account until they reach the age of majority. So without a trust, you’ll have to name a guardian or conservator to manage the IRA until the child comes of age.

When the beneficiary reaches the age of majority, he or she can withdraw all of the IRA funds at once—and as we’ve seen, this can have serious disadvantages. With an IRA Trust, however, you name a trustee to handle the IRA management until the child comes of age. At that point, the IRA Trust’s terms can stipulate how and when the funds are distributed. Or the terms can even ensure the funds are held for the lifetime of your beneficiary, to be invested by your beneficiary through the trust.

See if an IRA Trust is right for you.

While IRA Trusts can have major benefits, they’re not the best option for everyone. Laws regarding IRA Trusts vary widely from state to state, so in some places, they’ll be more effective than others. Plus, the value of IRA Trusts also varies greatly depending on your specific family situation, so not everyone will want to put these trusts in place.

Consult with us to find out if an IRA Trust is the most suitable option for passing on your retirement savings to benefit your family. But of course, if what you need is your foundational estate planning documents (like your Will, Power of Attorney, Health Care Directives), we can help you with that first!

Attorney Myrna Serrano Setty doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why our firm offers a Planning Session. The Planning Session helps you get more financially organized than ever and helps you make the best choices for the people you love.  Start by calling us today to schedule a Planning Session and mention this article to learn how to get this $500 session for free.

Contact us at (813) 514-2946 or info@serranosetty.com.

 

Can An Adult Child Be Liable for a Parent’s Nursing Home Bill?

Although a nursing home cannot require a child to be personally liable for their parent’s nursing home bill, there are circumstances in which children can end up having to pay.

This is a major reason why it is important to read any admission agreements carefully before signing.

Federal regulations prevent a nursing home from requiring a third party to be personally liable as a condition of admission. However, children of nursing home residents often sign the nursing home admission agreement as the “responsible party.” This is a confusing term and it isn’t always clear from the contract what it means.

Typically, the responsible party is agreeing to do everything in his or her power to make sure that the resident pays the nursing home from the resident’s funds.

If the resident runs out of funds, the responsible party may be required to apply for Medicaid on the resident’s behalf. If the responsible party doesn’t follow through on applying for Medicaid or provide the state with all the information needed to determine Medicaid eligibility, the nursing home may sue the responsible party for breach of contract. In addition, if a responsible party misuses a resident’s funds instead of paying the resident’s bill, the nursing home may also sue the responsible party. In both these circumstances, the responsible party may end up having to pay the nursing home out of his or her own funds.

In a case in New York, a son signed an admission agreement for his mother as the responsible party. After the mother died, the nursing home sued the son for breach of contract, arguing that he failed to apply for Medicaid or use his mother’s money to pay the nursing home and that he fraudulently transferred her money to himself. The court ruled that the son could be liable for breach of contract even though the admission agreement did not require the son to use his own funds to pay the nursing home. (Jewish Home Lifecare v. Ast, N.Y. Sup. Ct., New York Cty., No. 161001/14, July 17,2015).

Although it is against the law to require a child to sign an admission agreement as the person who guarantees payment, it is important to read the contract carefully because some nursing homes still have language in their contracts that violates the regulations. If possible, consult with your attorney before signing an admission agreement.

Another way children may be liable for a nursing home bill is through filial responsibility laws.

These laws obligate adult children to provide necessities like food, clothing, housing, and medical attention for their indigent parents. Filial responsibility laws have been rarely enforced, but as it has become more difficult to qualify for Medicaid, states are more likely to use them. Pennsylvania is one state that has used filial responsibility laws aggressively.

We recommend that your Health Care Directives explicitly lay down a financial liability shield for your agents.

This one provision can save great grief and money.

Attorney Myrna Serrano Setty doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why our firm offers a Planning Session. The Planning Session helps you get more financially organized than ever and helps you make the best choices for the people you love.  Start by calling us today to schedule a Planning Session. Mention this article to learn how to get this $500 session for free.

Call us at (813) 514-2946 or email us at info@serranosetty.com.

Getting Paid to Take Care of a Sick Family Member

Caring for a sick family member is difficult work, but it doesn’t necessarily have to be unpaid work. There are programs available that allow Medicaid recipients to hire family members as caregivers.

All 50 states have programs that provide pay to family caregivers. The programs vary by state, but are generally available to Medicaid recipients, although there are also some non-Medicaid-related programs.

Medicaid’s program began as “cash and counseling,” but is now often called “self-directed,” “consumer-directed,” or “participant-directed” care. The first step is to apply for Medicaid through a home-based Medicaid program. Medicaid is available only to low-income seniors, and each state has different eligibility requirements. Medicaid application approval can take months, and there also may be a waiting list to receive benefits under the program.

The state Medicaid agency usually conducts an assessment to determine the recipient’s care needs—e.g., how much help the Medicaid recipient needs with activities of daily living such as bathing, dressing, eating, and moving. Once the assessment is complete, the state draws up a budget, and the recipient can use the allotted funds to pay for goods or services related to care, including paying a caregiver. Each state offers different benefits coverage.

Recipients can choose to pay a family member as a caregiver, but states vary on which family members are allowed.

For example, most states prevent caregivers from hiring a spouse, and some states do not allow recipients to hire a caregiver who lives with them. Most programs allow ex-spouses, in-laws, children, and grandchildren to serve as paid caregivers, but states typically require that family caregivers be paid less than the market rate in order to prevent fraud.

In addition to Medicaid programs, some states have non-Medicaid programs that also allow for self-directed care. These programs may have different eligibility requirements than Medicaid and are different in each state. Family caregivers can also be paid using a “caregiver contract,” increasingly used as part of Medicaid planning.

In some states, veterans who need long-term care also have the option to pay family caregivers. In 37 states, veterans who receive the standard medical benefits package from the Veterans Administration and require nursing home-level care may apply for Veteran-Directed Care. The program provides veterans with a flexible budget for at-home services that can be managed by the veteran or the family caregiver. In addition, if a veteran or surviving spouse of a veteran qualifies for Aid & Attendance benefits, they can receive a supplement to their pension to help pay for a caregiver, who can be a family member. All of these programs vary by state.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents. She helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session, which will help you get more financially organized than ever before and help you make the best choices for the people you love. Call us today to schedule a Planning Session. Mention this article and learn how to get this valuable session for free.

Report Ranks States on Nursing Home Quality and Shows Families’ Conflicted Views

A new report that combines nursing home quality data with a survey of family members ranks the best and worst states for care and paints a picture of how Americans view nursing homes.

The website Care.com analyzed Medicare’s nursing home ratings to identify the states with the best and worst overall nursing home quality ratings. Using Medicare’s five-star nursing home rating system, Care.com found that Hawaii nursing homes had the highest overall average ratings (3.93), followed by the District of Columbia (3.89), Florida (3.75), and New Jersey (3.75).  The state with the lowest average rating was Texas (2.68), followed by Oklahoma (2.76), Louisiana (2.80), and Kentucky (2.98).

Care.com also surveyed 978 people who have family members in a nursing home to determine their impressions about nursing homes. The surveyors found that the family members visited their loved ones in a nursing home an average six times a month, and more than half of those surveyed felt that they did not visit enough. Those who thought they visited enough visited an average of nine times a month. In addition, a little over half felt somewhat to extremely guilty about their loved one being in a nursing home, while slightly less than one-quarter (23 percent) did not feel guilty at all.

If the tables were turned, nearly half of the respondents said they would not want their families to send them to a nursing home.

While the survey indicates that the decision to admit a loved one to a nursing home was difficult, a majority (71.3 percent) of respondents felt satisfied with the care their loved ones were receiving. Only 18.1 percent said they were dissatisfied and about 10 percent were neutral. A little over half said that they would like to provide care at home if they could. The most common special request made on behalf of a loved one in a nursing home is for special food. Other common requests include extra attention and environmental accommodations (e.g., room temperature). Read the entire report here.

Are you worried about being able to afford quality long-term care? We can help you incorporate a variety of planning strategies to maximize your quality of life and help protect what you’ve worked so hard for.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents. She helps you make informed and empowered decisions about your life and death, for yourself and the people you love. That’s why we offer a Planning Session, to help you get more financially organized than ever and help you make the best choices for the people you love. Call us today to schedule a Planning Session. Mention this article to learn how to get this $500 session for free!

Overlooking This Basic Part of Your Estate Plan Can Be Tragic

The recent death of the CEO of QuadrigaCX, a major cryptocurrency exchange in Canada, demonstrates a basic, yet often-overlooked, principal of effective estate planning:

If you become incapacitated or die, if your heirs don’t know how to find or access your assets, those assets are as good as gone. Indeed, it’s as if those assets never existed at all.

In the case of QuadrigaCX’s owner Gerald Cotten, the lost assets were purportedly worth $145 million. That represented the vast majority of the company’s crypto holdings.

The hefty sum effectively vanished after Cotten died without leaving instructions for how to access the digital currency’s security passcodes. The crypto holdings were owned by some 115,000 clients, who used the exchange to buy and store their digital coins.

An untimely death and a cold wallet

Cotten, age 30, died suddenly while traveling in India during December 2018. In January 2019, QuardigaCX filed for bankruptcy to protect itself from creditors, including all of the customers with crypto stored in the company’s electronic vault.

Ironically, the digital assets were lost in part because Cotten followed a security practice designed for protection. Most of the company’s cryptocurrency holdings were stored in a “cold wallet,” or one that isn’t connected to the Internet. The use of a cold wallet is a common practice, since “hot wallets,” or those connected to the internet, are a frequent target of hackers.

This typically would’ve been a smart move, but Cotten reportedly stored the cold wallet on an encrypted laptop that only he knew how to get into.

According to Cotten’s widow, Jennifer Roberston, following multiple searches, she has been unable to find the passwords that will open the laptop and provide access to the company’s cold wallet. QuadrigaCX even brought in IT experts to get into Cotten’s laptop, but so far, all attempts have been unsuccessful.

Canadian financial authorities and independent auditors are currently investigating the case. Some have even speculated that Cotten’s death was faked as part of a nefarious scheme connected to QuadrigaCX. Whether it ultimately turns out to be a simple case of carelessness or something more malicious, the lesson remains the same:

From cryptocurrency to safety deposit boxes and everything in between, your family must know how to find and access every asset you own, otherwise it could be lost forever.

In fact, there’s a total of more than $58 billion of unclaimed assets from across the country held by the State Department of Unclaimed Property. Much of that massive sum got there because someone died and their family didn’t know they owned the asset.

Incomplete estate planning

Another puzzling fact is that upon first glance, Cotten was diligent in his estate planning. Indeed, Cotten named Roberston as his estate’s executor and left her instructions for the complete distribution of his assets, including a private jet and multiple properties in Canada.

He even left behind $100,000 for the care of his dogs. But he forgot to forget to include the passcodes that would unlock his company’s vast crypto assets. Most people holding crypto assets haven’t taken the proper steps to ensure their heirs will know how to access these assets upon their incapacity or death.

Given this, if you own any digital currency like Bitcoin, be sure to call us to make certain these assets have been correctly included in your estate plan. Indeed, if you have any assets that might potentially be overlooked in the event of your incapacity or death, contact us now.

Easily avoidable

What makes this loss so tragic is that it could have been so easily avoided. Whether you own a lot (or very little), your plan must include a comprehensive inventory all of your assets. And as Cotten’s case shows, this inventory must also include a detailed instructions for how your heirs can find and access every asset.

At our firm, a comprehensive asset inventory like this is a standard part of every estate plan we create. And whether it’s cryptocurrency, social media accounts, or online payment platforms like PayPal, this inventory will include detailed instructions for accessing all of your digital assets and their passcodes. Contact us today to get started with a Planning Session.

Attorney Myrna Serrano Setty doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why our firm offers a Planning Session. The Planning Session helps you get more financially organized than ever and helps you make the best choices for the people you love.  Start by calling us today to schedule a Planning Session and mention this article to learn how to get this $500 session for free.

Part 2: Estate Planning Must-Haves for Unmarried Couples

In Part 1 of this series, we discussed the estate planning tools all unmarried couples should have in place. Here, we’ll look at the final two must-have planning tools.

Most people see estate planning as something only married couples need to worry about. But estate planning can be even more critical for for unmarried couples in committed relationships.

Because your relationship with one another is usually not legally recognized, if one of you becomes incapacitated or when one of you dies, not having any planning can be devastating. Your age, income level, and marital status makes no difference. Every adult needs to have some fundamental planning strategies in place to keep loved ones out of court and conflict.

Health Care Directives

In addition to naming someone to manage your finances in the event of your incapacity, you also need to name someone who can make health-care decisions for you. If you want your partner to have any say in how your health care is handled during your incapacity, you should get Health Care Directives in place.

This gives your partner the ability to make health-care decisions for you if you’re incapacitated and unable to do so yourself. This is particularly important if you’re unmarried, seeing that your family could leave your partner totally out of the medical decision-making process, and even deny your him or her the right to visit you in the hospital.

Don’t forget to provide your partner with HIPAA authorization within the health care directives,  so he or she will have access to your medical records to make educated decisions about your care.

Living will

While your Health Care Directives names who can make health-care decisions in the event of  your incapacity, a living will explains how your care should be handled, particularly at the end of life. If you want your partner to have control over how your end-of-life care is managed, you should name them as your agent in a living will.

A living will explains how you’d like important medical decisions made, including if and when you want life support removed, whether you would want hydration and nutrition, and even what kind of food you want and who can visit you.

Without a valid living will, doctors will most likely rely entirely on the decisions of your family or the named medical power of attorney holder when determining what course of treatment to pursue. Without a living will, those choices may not be the choices you—or your partner—would want.


We can help

If you’re involved in a committed relationship—married or not—or you just want to make sure that the people you choose are making your most important life-and-death decisions, consult with us to put these essential estate planning tools in place.

With our help, we can support you in identifying the best planning strategies for your unique needs and situation. Contact us today to get started with a Planning Session.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents, she ensures you make informed and empowered decisions about life and death, for yourself and the people you love. That’s our firm offers a Planning Session, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Start by calling our office today to schedule a Planning Session and mention this article to find out how to get this $500 session for free!

Use Estate Planning So Your Family Isn’t Stuck Paying for Your Funeral

With the cost of a funeral averaging $7,000 and steadily increasing each year, every estate plan should include enough money to cover this final expense. Yet it isn’t enough to simply set aside money in your will.

Your family won’t be able to access money left in a will until your estate goes through probate, which can last months or even years. Most  funeral providers require full payment upfront. So this means your family will have to cover your funeral costs out of pocket, unless you take proper action now.

If you want to avoid burdening your family with this hefty bill, you should use planning strategies that do not require probate. Here are a few options:

Insurance

You can purchase a new life insurance policy or add extra coverage to your existing policy to cover funeral expenses. The policy will pay out to the named beneficiary as soon as your death certificate is available. But you’ll likely have to undergo a medical exam and may be disqualified or face costly premiums if you’re older and/or have health issues.

There is also burial insurance specifically designed to cover funeral expenses. Also known “final expense,” “memorial,” and “preneed” insurance, such policies do not require a medical exam. But  you’ll often pay far more in premiums than what the policy actually pays out.

Because of the sky-high premiums and the fact such policies are sold mostly to the poor and uneducated, consumer advocate groups like the Consumer Federation of America consider burial insurance a bad idea and even predatory in some cases.


If you have any type of insurance to cover your funeral, make sure your family knows about it! These policies are often never cashed in because the family didn’t know they existed.

Prepaid funeral plans

Many funeral homes let you pay for your funeral services in advance, either in a single lump sum or through installments. Also known as pre-need plans, the funeral provider typically puts your money in a trust that pays out upon your death, or buys a burial insurance policy, with itself as the beneficiary.

While such prepaid plans may seem like a convenient way to cover your funeral expenses, these plans can have serious drawbacks. As mentioned earlier, if the funeral provider buys burial insurance, you’re likely to see massive premiums compared to what the plan actually pays out. And if they use a trust, the plan might not actually cover the full cost of the funeral, leaving your family on the hook for the difference. These packages can be risky. So choose wisely.

Payable-on-death accounts

Many banks offer payable-on-death (POD) accounts, sometimes called Totten Trusts, that you can set up to fund your funeral expenses. The account’s named beneficiary can only access the money upon your death, but you can deposit or withdraw money at any time.

A POD does not go through probate, so the beneficiary can access the money once your death certificate is issued. POD accounts are FDIC-insured, but such accounts are treated as countable assets by Medicaid, and the interest is subject to income tax.

Joint Accounts

Another option is to simply open a joint savings account with the person handling your funeral expenses and give them rights of survivorship. However, this gives the person access to your money while you’re alive too, and it puts the account at risk from their creditors.  But we know of cases where clients lost money in joint accounts they shared with relatives. In those cases, the relative’s creditors went after the money in the joint account.

Living trusts

We can create a customized living trust that allows you to control the funds until your death and name a successor trustee, who is legally bound to use the trust funds to pay for your funeral expenses exactly as the trust terms stipulate.

With a living trust, you can change the terms at any time and even dissolve the trust if you need the money for other purposes. Alternatively, if you need to implement planning strategies to protect your Medicaid eligibility, we can help with that too.

Don’t needlessly burden your family

To help decide which option is best suited for your particular situation, consult with our firm. We can put an estate plan in place that includes adequate funding to ensure your funeral services are handled just as you wish—and your family isn’t forced to foot the bill.

This article is a service of attorney Myrna Serrano Setty. Myrna doesn’t just draft documents, she helps you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Planning Session,  during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a  Planning Session and mention this article to find out how to get this $500 session for free.