Category Archives:Estate Planning

Planning for Beneficiaries with Special Needs

Chances are you know someone with special needs or know someone who has a family member with special needs. Such special needs can arise due to a mental or physical defect existing at birth or an injury occurring later in life due to an automobile accident, drug and/or alcohol abuse, injury on the job (including an injury suffered while serving in the military), or the onset of dementia.

Disabled Americans have access to several programs providing both emotional and financial support to help them and their families thrive. When you have a disabled person in your family, it is important to make sure that your own estate plans are crafted in such a way so that the disabled family member continues to have access to all such support programs.

Special Needs planning often includes protecting assets for the benefit of loved ones, who, for whatever reason, are not able to manage an inheritance properly OR would be negatively affected by the direct receipt of an inheritance.

A Wife with Dementia

A husband might come to see me if he is worried about his wife. She has been having some memory issues and is no longer able to manage money on her own. He and his wife have had several wonderful years together and he wants to make sure that her needs are met after he’s gone, but if he were to pass away first, what would she do with the family savings? Who will make sure the money is used properly for her care? Who will protect the assets from future long-term care costs?

A Paralyzed Son

A mother might come to see me if she is worried about her son. Her son was injured in a car accident a few years ago, which left him partially paralyzed. She has been taking care of him since the accident, but realizes that there may be a time in the near or distant future, when she cannot care for him like she is now. The mother wants her son to inherit from her, just as her other children will someday, but she also wants to make sure that he continues to enjoy the same governmental support that has helped them both cope since the accident. Who will take care of him after she’s gone? Who will make sure his inheritance from her is used properly for his care? Who will protect the assets from future long-term care costs?

An Autistic Granddaughter

Grandparents might come to see me if they are worried about their young granddaughter’s health care needs. Recently diagnosed with Autism, their oldest granddaughter’s future ability to manage her own health care decisions and finances is unknown. The grandparents want their children to inherit equally, but also want to make sure that if their granddaughter inherits directly from them, that their granddaughter’s inheritance is managed by someone that they trust. They want to make sure the funds are used specifically for her education and health care needs and NOT on frivolous things. If their granddaughter is already receiving governmental benefits, they certainly do not want to disrupt that!

Without proper planning in these situations, special needs beneficiaries (like the wife, the son, and the granddaughter, above) would likely NOT be entitled to as many support programs as they would otherwise receive. If ineligible due to poor planning (or no planning), the burden for providing equivalent services would fall to family and friends. Most clients want far more control over their futures and want to ensure that they do not become burdens on their family and friends.

If you or someone you know has a family member with special needs planning or special needs trusts, please have them reach out to us. Together, with proper insight and planning, we can minimize the strain that a special need might otherwise have on the family’s mental health and finances. We are your lawyers, every step of the way.

Empowering Yourself through Powers of Attorney

Power of AttorneyWhen people ask me what area of law I practice, I tell them that, among other things, I practice Elder Law. That response often has me answering a follow-up question: “What is Elder Law?” The definition that I have carefully chosen to give in response focuses on empowerment. I help older adults proactively manage their futures.

When people envision growing older, some may look forward to retirement—traveling, spending time with grandkids, focusing on old hobbies or taking up new ones. They have a clear picture of independence—a joyous graduation from the daily grind they remember from their working years, raising children. However, that clear picture may be dulled by a fear that such independence may be short-lived, as the loss of physical mobility, mental sharpness, sight or hearing may require dependence on others to get by. There are cartoons that poke fun at old age, likening it to a reversion back to infancy, when we were all entirely dependent on caregivers.

While we did not have much control over who our caregivers were as infants, as adults facing the POTENTIAL future need for assistance from others, we certainly DO have the power to choose NOW. As an Elder Law attorney, I draft legal documents in which my clients choose WHO has the authority to help them with future potential needs, WHEN that authority will become effective, and WHAT decisions the chosen individuals will be allowed to make.

Durable Power of Attorney

A Durable Power of Attorney (or DPOA, for short) is the document signed by a client that designates an agent (called an Attorney-in-Fact, or AIF, for short) to help the client make legal and financial decisions. The document can be drafted to allow the agent to be able to help immediately or only upon the incapacity of the client. The document can be drafted to be very wide in scope, allowing the agent to help the client with just about anything OR can be limited to just a few certain transactions.

Health Care Power of Attorney

A Health Care Power of Attorney (or HCPOA, for short) is the document signed by a client that designates a series of agents (called health care agents or healthcare proxies) to help the client make health care decisions. The document generally takes effect only upon the client becoming unable to make sound healthcare decisions for him or herself. The client, however, can choose what health care decisions the agents or proxies can make in the client’s behalf. A well-chosen health care agent should be a person you trust, who KNOWS your health care issues and concerns, and is willing and able to follow your wishes. The health care agent or proxy may be called upon to make end-of-life decisions for you, so it is important that you trust your agent enough to discuss your feelings regarding end-of-life openly and honestly.

Guardianship Proceedings

If you are not blessed with family or friends you trust enough to help you with legal, financial, or health care decisions, or you never sign a Durable Power of Attorney or Health Care Power of Attorney granting them the authority to assist you, the court system does have a procedure for appointing an individual to help you if you are found to be unable to help yourself. This procedure involves an interview by a representative of the court system, who helps the clerk of court determine if you are incompetent. If you are determined to be incompetent, it is the clerk of court who decides who will assist you with health care decision (called a Guardian of the Person) and who will assist you with legal and financial decisions (called a Guardian of the Estate). The clerk can only choose among the individuals who have applied to be Guardian…or if no one has applied, the clerk can choose a governmental agency (like the Department of Social Services or the Public Administrator for the county) to serve as Guardian.

Being a rather independent person myself, I tend to encourage my clients to name Attorneys-in-Fact or Health Care Agents themselves, if at all possible. Signing such forms is one of the simplest and quickest ways to take charge of your own future. At some point, we all may need a little help from friends and family. Why not choose who those friends and family will be? Just like the attorneys at Coltrane, Grubbs & Orenstein, those attorneys-in-fact and health care agents will be with you, every step of the way.

My Parent is Getting Elder Law Advice. Why Am I in the Lobby?

As an Elder Law attorney, it is rare that my clients show up alone. Most have familyDoor Knob members (usually their adult children) along, who are there to offer emotional support, moral support, and, often, a safe ride to and from the appointment. The adult children who show up are usually quite intricately involved in their parent’s long term care planning and estate planning. If you are that adult child, you may have legal questions of your own to ask. Shouldn’t you be included in the legal consultation? After all, isn’t it important that you understand the role you may be playing in your loved one’s future?

Please Don’t Be Offended!

There are several reasons why an Elder Law attorney needs to meet with her older adult client one-on-one for at least part of the legal consultation. So please don’t be offended or surprised if you are politely dismissed from the room. In order to stay compliant with the rules and guidelines of the State Bar, attorneys must ensure that proper client protections are followed. Before real legal advice should be given out, the attorney must to do the following things: 1) identify the client; 2) uncover any potential conflicts of interest; 3) protect confidentiality, and 4) determine competency.

Client Identification

Attorneys must make VERY clear to the entire family–who IS the client and who is NOT the client. The “family” or the “situation” cannot be the client. The client is the individual whose interest are most at stake in the legal planning or legal problem. The client is the one—the only one—to whom the attorney has professional duties of competence, diligence, loyalty, and confidentiality. This is especially important in Elder Law, because adult children may be VERY involved in the legal concerns of the older adult and may even have a stake in the outcome. While it is possible, in some circumstances, for an attorney to represent two clients at once (most commonly, a married couple), it is quite rare. By the end of the consultation, the attorney should identify and confirm for ourselves and for all others present, that our client is the older adult… and ONLY the older adult. This is true regardless of who drove the car to get here, who made the appointment, and who wrote the check for the consultation fee.

Conflicts of Interest

Attorneys must actively avoid conflicts of interest. This means that in most situations, an attorney will usually only have one client in a transaction. Often, parents and children will have different interests in the outcome of a situation. It may be in the best interest of the child for the parents to gift them large sums of money or real estate. However, it may not be in the best interest of the parents to make such large gifts and threaten their own financial security and ability to provide for their own long term care. An attorney could not represent both the children and the parents in this situation. Sometimes joint representation is possible, even with potential conflicts of interest, but it is more likely that we will be representing only the older adult whose interests are at stake. I do the best job for the older adult client by representing only him or her. This is especially true if my client wants to discuss a power of attorney, a last will and testament, or planning for long term care.

Confidentiality

Attorneys have an obligation to keep information and communications our clients share with us confidential. That means that we cannot share client information with other family members without the client’s approval. Some clients want all information shared and family member actively involved in discussions; some merely want family members to be given general updates; and some want complete confidentiality. A client may not feel comfortable expressing his or her desires regarding confidentiality when others are in the room for fear that they will offend their loved ones. In all cases we strive to keep our clients—and whomever they choose to involve—fully informed of the issues, options, consequences, and costs relevant to their concerns, and to be responsive to their goals and objectives.

Competency

Elder Law attorneys often work with clients whose capacity for making decisions may be diminished. Attorneys must treat clients with diminished capacity with the same attention and respect to which every client is entitled. This means meeting privately with the client and giving him or her enough time to explain what he or she wants. We find that the greater majority of older adults who come for legal consultations are able to tell us what the problem is and how we can help. Sometimes we’ll need to ask relatives for details such as addresses or dates or phone numbers, but even people in the early stages of dementia can usually communicate well enough to give us direction. Assessing a client’s capacity to make decisions is part of our getting to know the client. While most clients can explain a problem and discuss concerns and issues, there will be some clients who cannot. Speaking privately allows us to find this out. When family members answer ALL the questions, it makes it difficult for us to determine our client’s level of understanding.

 

Meeting one-on-one with our clients is essential to making sure that we are protecting our clients’ best interests. Most of the family members and friend who arrive with a client understand the importance of that one-on-one consultation and, when asked to wait in the lobby, do so willingly and respectfully. They know that family and friends who maintain some distance from the legal counseling and document signings are far less likely to be accused by other family members of undue influence. We don’t want our clients’ choices, and the documents they sign, to be undone one day in the future because we allowed family members to be too involved in the consultation and the legal process. That’s a court case we (and you) would rather avoid.

What Exactly is Probate? Estate Administration in NC

Will ProbateProbate is the process of administering a decedent’s (deceased person’s) estate.  The word “probate” comes from a Latin word, probare, which means “to prove.”  After your death, the person who approaches the clerk of court to begin administering your estate must first “prove” either of two things:  1) that your Will, if you have one, was the last one you’d done and that it was validly executed or 2) if you had no valid Will, that he or she can testify, under oath, about the family members you left behind—your heirs at law.

Once the Clerk of Court has verified that the decedent is, in fact, dead and has verified the decedent’s beneficiaries and/or heirs at law, the administration process begins.  If there is a Will, the Executor named in the Will is sworn-in.  If there is no Will, an administrator is sworn-in.  The Executor or Administrator is swearing (or affirming) to do the following things:  1) find out what assets the decedent had, 2) find out what debts the decedent owed, 3) pay costs of administration of the Estate out of the available assets, and 4) distribute the balance of what remains according to the Will or according to the law of the State.

Categorizing Assets into Probate and Non-Probate

One of the most tedious parts of administering an Estate can be discovering the assets of the decedent.  While many Executors or Administrators know about a decedent’s financial affairs because they were once the decedent’s caretaker, that is not always the case.  Some Executors/Administrators have very little knowledge of the decedent’s financial affairs and must resort to monitoring the decedent’s mail to see what financial information arrives.  One of the first tasks of an Executor/Administrator is not only to discover what assets the decedent had at the time of his or her death, but also to categorize those assets into “probate assets” and “non-probate assets.”

Basically, probate assets are the assets that will be reported to the Clerk of Court, be used primarily to pay costs of administration and valid debts, and then will be distributed among the beneficiaries and/or heirs of the decedent according to the Will or state law.  Non-probate assets will generally pass to beneficiaries directly and will not be subject to costs of administration and or debts of the decedent.  How do you know which is which?

Which Assets are Non-Probate Assets?

Non-probate assets are those which name designated beneficiaries (either by contract or by law).  The most common examples include:  a bank account held joint with survivorship with another individual, a parcel of real estate held joint with right of survivorship with another individual, an account which lists a Pay-on-Death (POD) or Transfer-on-Death (TOD) beneficiary, an annuity with a named surviving beneficiary, or a life insurance policy with named surviving beneficiaries.  For each of these assets, the decedent, during his or her lifetime, indicated specifically who the beneficiary of each asset would be.  As long as the named beneficiaries survive the decedent, the beneficiaries will generally take the assets upon death either automatically or by submitting a beneficiary claim form.  These assets will generally not be subject to the claims of the decedent’s creditors.

Which Assets are Probate Assets?

If you cannot prove that an asset is a non-probate assets (i.e., if you cannot prove that there is a named surviving beneficiary) then the Clerk of Court will generally consider the asset a probate asset.  The most common examples of probate assets include:  a bank account in the sole name of the decedent, a brokerage account in the sole name of the decedent, or parcel of real estate in the sole name or the decedent, an interest in a vehicle (even if shared), and accounts and/or policies which do not have surviving beneficiaries named or which list “the Estate” as beneficiary.  Because the decedent, during his or her lifetime, did not indicate specifically who the beneficiaries of each asset would be, the Clerk of Court will oversee the asset, use it to pay administrative costs and debts, and then distribute it according to the Will or state law.

What are Probate Fees?

Since the Clerk of Court must dedicate its courthouse staff to oversee the distribution of probate assets, the Clerk charges what is referred to as a “probate fee.”  The probate fee is a small percentage of the date-of-death value of the personal property assets determined to be “probate assets.”  In North Carolina, the probate fee is currently 0.4%.  With proper planning ahead of time, you can arrange your assets to reduce potential probate fees and reduce your future estate’s exposure to creditors’ claims.

In addition to drafting sound legal documents, such as Last Wills and Testaments, Durable Powers of Attorney, Health Care Powers of Attorney, and Living Wills, a good Estate Planning attorney will also ask you what you own, how you own it, and what beneficiary designations you’ve made (if any).  The answers to all of these questions will help you make better decisions about the passing of both your probate assets and non-probate assets to your beneficiaries and/or heirs at law.  As your assets, your needs, and your beneficiaries change, a good Estate Planning attorney will be with you every step of the way.

What Happens if I Die without a Will in North Carolina? Intestacy and the Need for NC Estate Planning

NC Flag CashIt is a common misconception that if a resident of North Carolina dies without a Will, the resident’s assets will be taken by the State of North Carolina. While there IS such a thing as the State taking unclaimed assets from a deceased person’s estate (“escheat”), it rarely ever happens.

Intestate vs. Testate in NC

Individuals who die with a valid Last Will and Testament are said to have died “testate,” meaning that they affirmatively described who should benefit from their estate assets.  On the other hand, individuals who died without a valid Last Will and Testament are said to have died “intestate,” meaning that they have NOT affirmatively described who should benefit from their estate assets. That being said, an individual can die partially testate and partially intestate. For example, let’s say that Betty, a widow, dies owning a house, a car, and a two (2) bank accounts. If Betty leaves a Last Will and Testament that gives her house to her daughter and her bank accounts to her son, but says nothing about who gets her car, then she will have died “intestate” with respect to the car.

North Carolina Intestacy Law

If you die intestate or partially intestate, making no clear decision as to should receive such assets, the State of North Carolina steps in to make that decision for you. Generally speaking, if you are a resident of North Carolina at the time of your death, state law directs that any and all such assets which have no clear beneficiaries (including your personal property and real estate located in North Carolina) shall be given to your family members. These family members are referred to as your “heirs at law.”

Heirs at Law

Your heirs at law cannot be determined until you are dead. However, for the purposes of this example, let’s pretend that you have just passed away suddenly. In order to determine your heirs at law, you would need to draw a family tree, including your grandparents, aunts and uncles, parents, brothers and sisters, your spouse, children, and any grandchildren or great grandchildren that you may have, who are still living. Please include both biological and adopted family members, as state law treats them similarly. With this family tree in front of you, you will find it easier to read NC state law about heirs, found here: http://www.ncleg.net/EnactedLegislation/Statutes/HTML/ByArticle/Chapter_29/Article_2.html.

When does the State of North Carolina Take your Property?

If after reading the state law, applying it to your own family tree, you do not have ANY heirs at law (meaning that you do not have any living grandparents, aunts and uncles, parents, brothers and sisters, spouse, children, grandchildren or great-grandchildren), then and only then will your property escheat to the State of North Carolina. If you are one of the rare few who have no heirs at law, it is extremely important that you have a Last Will and Testament upon your death, naming beneficiaries that YOU choose. As your family tree changes and as your wishes change, NC Estate Planning attorneys at Coltrane, Grubbs & Orenstein are with you, every step of the way.

 

What is the difference between an Attorney-in-Fact and an Executor?

Will and PenA great deal of what I do as an Estate Planning and Elder Law attorney is to provide my clients with as much control over their futures as possible.  While we’d like to think that we will always enjoy the control we have today, we must acknowledge that there is a possibility (even a certainty) that, one day, we will have far less control over A LOT of things. If your competency begins to wane, who do you trust to help you?  When you pass away, who do you trust to settle your financial affairs and distribute your assets?  Who do you want benefiting from your assets and when? These are all questions that an Estate Planning and Elder Law attorney can help you address. The following is a general review of the two (2) most common legal documents I draft for my clients and the two (2) most common roles created by those documents for your trusted friends or family members.

A Power of Attorney is a legal document in which you designate a trusted individual (or series of individuals) to help you manage your legal and financial affairs during your lifetime, if you are unable to do so. The individual you name to help you is your Attorney-in-Fact. The authority of your named Attorney-in-Fact to help you manage such matters terminates upon your death.

A Last Will and Testament (usually referred to as a Will) is a legal document which specifies how you want your assets distributed and to whom. In your Will, you also designate an individual (or a series of individuals) that you trust to gather your assets, find and pay your creditors, if any, and ultimately, follow your instructions when distributing your remaining assets among your beneficiaries.  The individual you select to carry out your wishes and settle your financial affairs after your death is referred to as your Executor (or Executrix). The individual you name as your Executor has no control over your financial affairs during your lifetime, because your Will has no effect at all until your death. Only upon your death and only upon being sworn-in by the Clerk of Court, does your Executor have the authority to settle your financial affairs according to your Will.

It is important to look ahead and plan ahead for the unexpected turns your life may take. In such times, it is never more important for you to have trusted friends and family members by your side, helping you every step of the way. 

Do I NEED a Revocable Living Trust?

Living TrustMany of my clients have heard national financial gurus like Suze Orman emphasize that a Revocable Livings Trust (or RLT, for short) is an essential part of ANY complete Estate Plan.  Well, that is not quite true.  When clients ask me whether they NEED an RLT, my lawyerly response is, of course, “it depends.”


Trusts, including RLTs, can be very flexible and effective tools for protecting assets and addressing various client concerns.  RLTs, specifically, are touted as excellent tools for avoiding probate fees.  Most clients give this as the #1 reason why they are interested in an RLT at all.

RLTs can do MUCH more than that, of course, but if my clients are interested ONLY in avoiding probate fees, I would be remiss in my duty to them if I did not present OTHER (less expensive) ways to reduce (or eliminate) probate fees. 

The probate fee in NC is currently 0.4% of the value of all probate assets and is capped at a maximum fee of $6,000.  So, in NC, if your probate estate is worth $500,000 dollars, the clerk will charge a probate fee of $2,000.  If you are paying an attorney more to draft an RLT that it would save you in probate fees, then only the attorney is benefiting!

Since the bulk of my clients’ estates are in retirement plans, brokerage accounts, and life insurance policies, my favorite tip for reducing their exposure to probate fees is to encourage them to designate beneficiaries on their  retirement plans accounts (§401(k)s, §403(b)s, traditional IRAs, Roth IRAs, annuities, etc.) and life insurance policies.  If their named beneficiaries survive them, then the funds in those accounts pass directly to those beneficiaries and do NOT incur probate fees.  I don’t know of a single company that charges its clients to make or change beneficiary designations; making such changes usually involves filling out and mailing in a form.

Every client is different; every family is different.  An RLT may be a great solution for some, but not for others.  Please talk with an experienced and knowledgeable Estate Planning attorney in your area to determine if having an RLT makes sense for you.