Asset Protection

Monday, May 14, 2012

Reverse Mortgage News

Reverse mortgage borrowers are getting younger, and that may not be a good thing.

The age of reverse mortgage borrowers is dropping, according to a new study by MetLife. Unfortunately, reverse mortgages come with risks, so younger borrowers need to be careful.

Reverse mortgages allow homeowners who are at least 62 years of age to borrow money on their house. The homeowner receives a sum of money from the lender, based largely on the value of the house, age of the borrower, and current interest rates. The loan does not need to be paid back until the last surviving homeowner dies, sells the house, or permanently moves out.

The MetLife study found that younger borrowers are taking out reverse mortgages. Today baby boomers aged 62 to 64 make up 21 percent of reverse mortgage applicants. In 1999, only 6 percent of applicants were in this age bracket.  Of homeowners who are considering a reverse mortgage, 46 percent are under age 70.

This new trend toward younger borrowers could spell trouble. While reverse mortgages seem like a great idea, there are major downsides. The closing costs for the loans are much higher than for conventional mortgages, and younger borrowers receive less money because their life expectancy is longer. In addition, the borrower is still responsible for property taxes, homeowner's insurance, and maintenance. If the borrower runs out of money and can't pay the property taxes or homeowner's insurance, the loan will default, and the borrower could lose his or her house.

MetLife's study also found that most reverse mortgage applicants (67 percent) wanted to use the reverse mortgage to lower household debt compared to 27 percent who wanted to enhance their lifestyle and 23 percent who wanted to plan for the future. Instead of using a reverse mortgage to pay for health care that would allow borrowers to remain in their homes during their final years, borrowers are using reverse mortgages to cover short-term financial shortfalls. The MetLife study finds that strong reverse mortgage counseling is needed, and it cautions that homeowners need to consider whether to use their home equity to shore up their retirement financing or preserve this asset for major unexpected expenses in the future, such as health-related expenses that inevitably increase as people age.  (Funds for reverse mortage counseling were eliminated in last year's budget deal between Democrats and Republicans but have since been restored.) 

To read the MetLife study, click here.

For more information on reverse mortgages, click here.

Monday, May 14, 2012

More Information on Reverse Mortgages

Under our "system" of paying for long-term care, you may be able to qualify for Medicaid to pay for nursing home care, but in most states there's little public assistance for home care. Most people want to stay at home as long as possible, but few can afford the high cost of home care for very long. One solution is to tap into the equity built up in your home.

If you own a home and are at least 62 years old, you may be able to quickly get money to pay for long-term care (or anything else) by taking out a reverse mortgage. Reverse mortgages, financial arrangements designed specifically for older homeowners, are a way of borrowing that transforms the equity in a home into liquid cash without having to either move or make regular loan repayments. They permit house-rich but cash-poor elders to use their housing equity to, for example, pay for home care while they remain in the home, or for nursing home care later on. The loans do not have to be repaid until the last surviving borrower dies, sells the home or permanently moves out.

In a reverse mortgage, the homeowner receives a sum of money from the lender, usually a bank, based largely on the value of the house, the age of the borrower, and current interest rates. For example, a 70-year-old borrower with a $200,000 house in Westchester County, New York, would be able to receive a maximum loan of $110,723 (based on 2009 figures). The lower the interest rate and the older the borrower, the more that can be borrowed. To find out how much you can get for your house, use the AARP's reverse mortgage loan calculator.

Homeowners can get the money in one of three ways (or in any combination of the three): in a lump sum, as a line of credit that can be drawn on at the borrower's option, or in a series of regular payments, called a "reverse annuity mortgage." The most popular choice is the line of credit because it allows a borrower to decide when he or she needs the money and how much. Moreover, no interest is charged on the untapped balance of the loan.

Although it is often assumed that an elderly person would want to use the funds from a reverse mortgage loan for health care, there are no restrictions--the funds can be used in any way. For instance, the loan could be used to pay back taxes, for house repairs, or to retrofit a home to make it handicapped-accessible.

Borrowers who take out a reverse mortgage still own their home. What is owed to the lender -- and usually paid by the borrower's estate -- is the money ultimately received over the course of the loan, plus interest. In addition, the repayment amount cannot exceed the value of the borrower's home at the time the loan is repaid. All borrowers must be at least 62 years of age to qualify for most reverse mortgages. In addition, a reverse mortgage cannot be taken out if there is prior debt against the home. Thus, either the old mortgage must be paid off before taking out a reverse mortgage or some of the proceeds from the reverse mortgage used to retire the old debt.

Reverse mortgages are somewhat underutilized now, but financial institutions, sensing an opportunity as the population ages and people live longer lives, are expanding their reverse mortgage programs.

The most widely available reverse mortgage product -- and the source of the largest cash advances -- is the Home Equity Conversion Mortgage (HECM), the only reverse mortgage program insured by the Federal Housing Administration (FHA). However, the FHA sets a ceiling on the amount that can be borrowed against a single-family house, which is determined on a county-by-county basis. High-end borrowers must look to the proprietary reverse mortgage market, which imposes no loan limits. On October 1, 2008, a new housing law took effect that increases the borrowing level on reverse mortgages. The national limit on the amount a homeowner can borrow is now $417,000. The limit can be increased to $625,000 in areas with high housing costs.

Is a Reverse Mortgage Right for You?

While reverse mortgages look like no-lose propositions on the surface, they also have some significant downsides. First, the closing costs for these loans are about double those for conventional mortgages. Closing costs on a reverse mortgage for the $200,000 home described above would be more than $10,000. These costs can be financed by the loan itself, but that reduces the money available to you.

Reverse mortgage payments also may affect your eligibility for government benefits, including Medicaid. Generally, these payments will not be counted as income as long as they are spent within the same month that they are received. If the funds are not spent, however, they could accumulate and push your resources over the allowable limits for Medicaid or SSI eligibility. In addition, payments from reverse annuity mortgages may be counted as income for purposes of Medicaid and SSI whether or not they are spent within the month they are received. This shouldn't be treated as income, since it simply involves withdrawing equity from one's home, but the state may view it differently since the funds come in a regular monthly check. In any case, you should consult with an elder lawyer in your state if you have any concern about how a reverse mortgage will affect your eligibility for federal benefits.

Also, bear in mind that if your major objective is to safeguard an inheritance for your children, a reverse mortgage may not be a good idea. As soon as the elderly person (or the survivor of an elderly couple) dies, it will be necessary to sell the home and much -- if not all -- of the sales proceeds will have to be paid to the lender. But if you have a pressing need for additional income and have no close heirs, or if you do not intend to benefit your children or your children don't particularly want to inherit the house, a reverse mortgage can be a way to supplement income, perhaps without jeopardizing Medicaid eligibility.

Reverse mortgages are complex products and borrowers are advised to acquaint themselves with the different options available and then carefully compare competing loan offerings. Following are two outstanding Web sites to get you started in that process:

• You can learn the basics about reverse mortgages from the AARP's excellent reverse mortgage Web site. The site includes a calculator for estimating the loan for which a borrower would be eligible. Go to: www.aarp.org/revmort
• For more details, background information, and supplementary materials, visit the National Center for Home Equity Conversion site at www.reverse.org

In addition, the names of FHA-insured lenders are available from the Federal National Mortgage Association (Fannie Mae), (800) 7-FANNIE.

Monday, January 30, 2012

Gifting the House For $1: Good Idea or Not?

Sunday, January 22, 2012

Caution: Do-It-Yourself Wills

Is it a good idea to write your own will? I can’t answer that question without being somewhat biased, because as an attorney, I know that there are complex and unique issues that each family and individual faces. Therefore, it does concern me when I hear of someone writing his or her own will without an attorney’s help.

My mission as an attorney is to build a long-term relationship with each client and provide superior service to him or her. The stack of paper in a binder or folder that I eventually hand to my clients is not what they find valuable. They just find it heavy! So the question is, where is the value in working with an attorney on my estate plan? My clients tell me that they find value knowing that they have a trusted legal advisor that has taken the time to learn about their needs, their goals, and the unique aspects of their lives. Unique lives translate into unique estate plans.

When I hear about do-it-yourself estate planning, I can’t help but get nervous for the folks that use those products. Here’s what concerns me about folks writing their own will:

1. Failure to protect your assets: As an attorney, I always talk to my clients about their kids and grandkids, and I make sure that an asset protection plan is put in place. I want to make sure the client’s kids or grandkids are protected from themselves and others, including their creditors, spouses (or ex-spouses), business partners, legal judgments, etc. I can assure you that you cannot design a one-size fits all form for an asset protection plan, which is more important than ever today.
    
2. Failure to create an asset preservation plan: A will and power of attorney is important but only the start for many estate plans. A major concern for retirees and people close to retiring is making sure an asset preservation plan is crafted, so that if you go into a nursing home, the house will be safe and some assets will also be safe from Medicaid spend down.
    
3. False sense of protection: Doing it yourself and convincing yourself you only need the “simple will” may give you a false sense of protection, when in fact your situation is more complex. By complex, I mean things like second marriages, kids with financial issues, real estate under water, uncertain financial future, family conflicts, etc. I can assure you that these types of issues won’t go away when you pass on—in fact, our experience shows they only magnify if they’re not dealt with while you’re still here.
    
4. Legal issues and problems with the documents: Let’s be honest, you don’t know what you don’t know when it comes to estate planning. Work with a trusted advisor that knows what you need. Would you pull your own tooth? Do surgery on yourself? Estate planning and asset preservation is best done with the help of a professional.

Are you going to spend more money on an estate plan with an attorney? Yes. But do you really want the “cheapest” plan? Worse, are you making matters more complex by doing it yourself and saving a few bucks?

I make my living by being passionate about helping families deal with their estate planning goals, fears and hopes to ensure they leave a legacy they can be proud of, no matter what happens and when it happens. Think about estate planning as saving your family time, money, aggravation, conflict, and from your estate being unnecessarily spent down on long-term care. Then, the real value of working with a professional will be realized.  

Tuesday, December 06, 2011

Asset Preservation: Your HOME

Preserving your assets is possible even if you are about to enter into a nursing home. But the worst thing you can do is wait until you're no longer healthy to start planning. Instead, start planning while you are healthy!

Like most people, if you own a home, typically that's your greatest concern when you sit down to consider what assets are most in need of protection.

Consider an example: Jon and Mary, both 68, own a $250,000 home. They have two children. Neither has long-term care insurance. Jon's health is a source of concern, but his doctors are confident that based on current information, he will not need long-term care for at least another 7-10 years. This presents a great opportunity to plan in advance.

With our customized Nursing Home Protection+ Account solution, we can protect Jon and Mary's home from ever being taken if Jon goes into a nursing home. Even better, when Jon and Mary both pass on, the house won't be subject to estate recovery. In other words, their two children will be able to inherit the house, even if Medicaid wants to re-coup their costs by taking the house. 

This type of asset preservation requires special skills and must be done carefully after considering many factors.

If you're interested in this type of planning, please contact our office today. 

Monday, October 17, 2011

CLASS Dismissed

Last week, the Obama administration formally shut down the CLASS Program, part of the Affordable Care Act (Obamacare). CLASS would establish a long-term care insurance program that individuals could pay into and then receive a daily benefit if they needed long term care.

But, the experts figured out that not enough people would sign up for the voluntary program. Thus, it would end up becoming insolvent, adding to the deficit and costing taxpayers.

Insolvent? Adding to the deficit? Costing taxpayers a lot? Sounds like Medicaid, Medicare and other entitlement programs!

Our political leaders just can’t seem to find a way around the problem of ballooning long-term care expenses. Meanwhile, a nursing home costs approximately $8,000 per month and at least 33% of people will spend on average 3 years in a nursing home during their lives. Do the math, and that adds up to almost $300,000.

Yes, Medicaid will cover the cost of nursing home care, but only when you have nothing left. The CLASS program aimed to fix this problem, but it was a failure.

Monday, October 03, 2011

Is it time for a WILL review?

Is it time to update your LAST WILL & TESTAMENT? You don't know until you review it! We've put together a few tips this week for when it's a good time for you to pull the will out of storage and give it a review. 

1. THE WILL IS FIVE OR MORE YEARS OLD: You should review your estate plan at least every five years, even if you feel nothing has changed. It's a good habit to get into, so that you can be sure your plan works for you.

2. YOU DO NOT UNDERSTAND THE WILL: If you see parts of the will you simply do not understand, you may want to get it reviewed. Chances are, some of the sections or the language may simply be out of date.

3. YOU GET RE-MARRIED, DIVORCED, OR ARE NOW WIDOWED: The change in your marital status should prompt a will review and mostly likely require significant changes to your WILL.

4. YOUR KIDS WERE YOUNG WHEN YOU WROTE YOUR WILL: Now that the children are older, maybe out of college or even married with children, you probably have quite a few revisions to make in your will. 

5. NEW GRANDKIDS: You may wish to leave grandkids a direct inheritance, or not. But either way, you should make sure your will is reviewed when you have new grandkids. If they come into the inheritance early for some reason, you want to ensure that proper plans are made.

6. YOUR WEALTH HAS CHANGED FOR THE BETTER OR WORSE: Significant changes in your wealth should prompt a review of your will. There may be new strategies, depending on what types of assets you have and what your goals are.

Do you need a review of your Last Will & Testament? Call us to schedule a no-obligation Will review at (215) 706-0200. We'll take 30 minutes of your time and tell you whether you may need an update or not.

Monday, September 26, 2011

Estate Planning Tips

This week, I reached into my grab bag for a few best practices in estate planning. Everyone must have an estate plan because without one, you risk leaving your affairs a mess for others. Here are a few tips and ideas:

1. KEEP IT CURRENT:
   Keep your Powers of Attorney up-to-date. In the event of a disability, you want to ensure financial institutions and medical providers will accept these documents without reservation. Update them every 3-5 years.
    
2. DON’T LET PROBATE SCARE YOU:
   In Pennsylvania, don’t let the probate process scare you into writing big expensive estate plans to avoid probate. Probate is a relatively easy process in Pennsylvania compared to other states.
    
3. FOLLOW THE THREE C’S:
   In your estate plan, be CLEAR, be CONSISTENT, and be CAREFUL. Make sure you’re working with an attorney who only practices estate planning so you can rest assured knowing your plan meets this criteria. Make sure the language is clear, that nothing in the plan conflicts, and that you think through what you want your plan to say.
    
4. HOPE FOR THE BEST, PLAN FOR THE WORST:
   Estate planning is about as exciting as going to a dentist for many people. No one wants to do it, but it must be done. While you’re planning, make sure you plan for the worst-case scenario. For example, leaving your son a large inheritance and the chance that he could have creditor problems or he gets divorced and his ex-wife wants half of the estate. Yes, there are strategies we can put in place to protect an inheritance from these types of situations.
    
5. GIFT PROPERLY:
   Want to downsize, help your kids while you’re still living, or take care of the grandkids? Writing a check may make them smile, but there are other ways to make gifts, such as setting up life insurance policies inside trusts (great for asset protection) and creating a pension for life for your kids. If you want to gift, make sure you explore your options with qualified professionals. Doing so may provide multiple benefits to you and your heirs.

Monday, September 19, 2011

Five Myths About "Living Trusts"

Is the Revocable Living Trust, sometimes just called a Living Trust, the ultimate estate planning tool? It depends who you ask, and what state you’re in.

In Pennsylvania, Living Trusts aren’t used commonly as an estate planning tool. Instead, practitioners in Pennsylvania, as well as clients, tend to favor Wills as the fundamental estate planning tool.

Here are five myths about Living Trusts in Pennsylvania:

Myth #1: Living Trusts save, reduce or avoid taxes:
A Living Trust is NOT a tax reduction or avoidance strategy. You simply cannot avoid estate or inheritance taxes by using a living trust. It used to be that more people were effected by the federal estate tax, and that married couples could reduce their estate tax by using credit shelter trusts. But you could do the same thing in a Will!

Myth #2: They prevent estate challenges:
A Will is easier to challenge than a Living Trust, because a Will is probated and is public. However, just because a Living Trust isn’t probated, doesn’t mean it can’t be challenged in court. It just takes a little more time, effort and money to do so.

Myth #3: They avoid probate because probate should be avoided:
Pennsylvania probate is pretty simple, and a run-of-the-mill estate can be probated by the Executor him or herself without the help of an attorney. So probate shouldn't necessarily be avoided at all costs and you shouldn't be scared of probate in PA. Yes, living trusts avoid probate, but your living trust must be 100% funded with ALL of your stuff to do that! Even missing ONE small bank account means your loved ones will have to go through probate. Anyway, probate is not a big deal in Pennsylvania, unlike in other states such as California (yes, living trusts are popular there because probate is a COURT supervised process!).

Myth #4: A Living Trust will make things easier at the end of my life:
Not really… It is probably takes just as much work to probate the will, settle the estate, etc., as it does to manage an ongoing trust. Trusts need to comply with many rules, tax returns must be filed annually for trusts, and more. A living trust will usually require the help and services of a professional.

Myth #5: I need a living trust to shelter assets from nursing home costs:
A living trust would NOT be a good tool to use if you want to shelter some of your assets from being spent down by nursing homes. You need to use a Medicaid Asset Protection Trust, which is IRREVOCABLE, and establish and fund this trust when you’re still healthy. A living trust used in a situation like this would be a disservice to you and your family.

LIVING TRUSTS MAKE SENSE IN SOME SITUATIONS, BUT NOT ALL SITUATIONS.  Estate planning is an individual process that's unique for everyone. A qualified attorney can help guide you to what estate planning tools you need.

Want more information on what estate planning tools make sense for you? Call us today at (215) 706-0200 to schedule your complimentary visit.

Tuesday, September 13, 2011

IRA's and Estate Planning

IRA’s are increasingly becoming an important part of estate planning for middle class families, particularly those who have worked and saved their whole lives. Sometimes, you will need to live off of the income of your IRA in retirement, but sometimes you will have other sources of income that cover your life expenses.

When your IRA isn’t needed to live on during retirement, it can present great estate planning opportunities for you and your family. You can structure your IRA to leave a pension for life for your kids or grandkids, while allowing the IRA to grow tax-deferred, or if it’s a Roth IRA, tax-free.

To make sure the IRA stays safe and allows for maximum growth, an IRA Inheritance Trust is necessary to accomplish this goal.

How do you know if you need this kind of trust? Here are a few factors to consider when thinking about whether you might need an IRA Inheritance Trust:

• Size of IRA: Is your IRA worth at least over $500,000? If so, it may be a sign you should consider a trust.
   
• How many beneficiaries? If each beneficiary (a kid, grandkid, etc) may get $500,000 or more each out of your IRA, then you should consider a trust.
   
• Ages of beneficiaries: If you are leaving the IRA to several people, some older and some younger, it’s important to establish the IRA trust so that each share can be measured on his or her own life expectancy. The younger the beneficiary, the higher the life expectancy and the lower the RMD. The lower the RMD, the more ability the IRA has to grow and "stretch" out over time.
   
• Issues and challenges for beneficiaries: Are your beneficiaries spendthrifts? Are they too young for you to know if they might turn out to be? What about creditor problems, bankruptcy issues, special needs, divorces and more… These are all reasons that you want to protect and shelter the IRA in a trust for beneficiaries.
   
• Your goals: Depending on your estate planning goals and the factors above, an IRA Inheritance Trust may or may not make sense for you. It’s best to consider whether you need this type of trust with a qualified attorney who is analyzing your entire estate plan. This is simply one tool in the toolbox that can be used to effectively plan with certain cases.

Monday, August 29, 2011

Long Term Care Costs

Most people know that it’s crucial to plan for retirement. It used to be the case that saving about $1 Million would cover a typical couple, but that number seems to be ticking up rapidly. Retirement planning is a specialty, and you should see a qualified retirement planning professional.

But in addition to retirement, what many people don’t consider is the cost of long-term care, if needed, for you and/or your spouse.

Consider Genworth Financial’s annual facts and figures on the costs of long-term care:

• Assisted Living Facility (One Bedroom) $36,000 per year
• Nursing home – Private room – $97,000 per year
  
• Home Health Aide - $46,000 per year.
  

Note that these are the average costs for 2011. The costs vary depending on the provider and your needs. Also, long-term care costs increase every year, and the increases are usually significant. So not only must you plan for long-term care, you must include inflation when factoring the costs.

You have to consider your family’s health history, your health history, the amount of assets you have, and other factors when planning for long-term care. There are different planning opportunities available to preserve at least a portion of your estate and qualifying for Medicaid sooner. However, these strategies are only available to those that start planning at least five years ahead of time. But it’s hard to predict when you’ll go into a nursing home. There are strategies available for “crisis planning” but the biggest problem with waiting until there is a crisis is that what we can do today, we may not be able to do tomorrow. The laws are constantly changing for Medicaid, especially since it’s a joint federal-state program.

The bottom line is that planning for long-term care costs while you’re still healthy is advantageous for you and your family. 

Monday, August 01, 2011

Estate Recovery and Medicaid

What is Medicaid?

Medicaid is a joint state-federal entitlement program that serves several purposes, one of them being paying for the long term care (nursing home, etc.) of elderly who cannot afford such care. In Pennsylvania, Medicaid is called Medical Assistance (MA). Nursing homes cost anywhere from $80,000 to over $100,000 per year depending on the facility.

It is more difficult to qualify for Medicaid today due to the five year look-back period. You cannot make transfers or gift away your estate within five years of applying for Medicaid, otherwise a penalty period will occur that will prevent you from receiving Medicaid for a certain period of time.

Yet still, there are strategies and methods available to middle-class families to effectively qualify for Medicaid without entirely spending down an estate.

What is Estate Recovery?

Estate Recovery is the process of the state attempting to recover the cost of paying for long term care. After a person dies, if there are assets available in that person’s probate estate, the state could potentially seek recovery from those funds.

Pennsylvania has been one of the states that has limited the scope of estate recovery. If you’re married, jointly owned property (i.e., a house) with your spouse was not subject to estate recovery. Yet, federal laws allow Pennsylvania to recover from joint assets like real estate. Pennsylvania resisted putting in place a more expansive estate recovery law with such provisions.

But, state budgets are still hurting, and states across the nation are looking at ways to make cuts. One possible way to bring in more money is to expand estate recovery. In fact, the Pennsylvania legislature recently passed a law allowing the Department of Public Welfare, the agency that oversees the PA Medical Assistance program, to impose new regulations such as more stringent estate recovery rules without any oversight. If new regulations such as expanded estate recovery were to be imposed, it could cause problems for many people. We will keep you updated on the matter. Right now, there are many attorneys across the state working together to urge the governor and legislature to repeal the law granting the agency expansive powers.

How Should You Plan For Long Term Care?

It is important that you speak with a qualified attorney who can help you plan for long term care costs. There are many strategies and techniques an attorney can employ, depending on you situation and your goals. The earlier you begin planning, the better.

Monday, July 25, 2011

Special Needs Planning

One question we will always ask prospective clients: Do you have special needs beneficiaries, either for financial, medical or educational issues?

Not surprisingly, most families say yes.

When engaging in estate planning, you must protect these beneficiaries, especially if they are currently on or could go on public benefits such as SSI or Medicaid.

An individual is not eligible for Medicaid until his or her total assets are approximately less than $2,000. Yes, TWO THOUSAND DOLLARS. Almost nothing!

So what if, in your estate plan, you leave a beneficiary on Medicaid or going on Medicaid a sizeable inheritance outright? The answer is one way or another, that inheritance will likely get into the hands of the government.

A special needs trust (SNT) is a type of trust that can be used to avoid this from happening, particularly if you are leaving an inheritance for someone you know is special needs and on public benefits. We call these types of SNT’s Third Party Special Needs Trusts, because the funds from that trust are yours, managed by a trustee of your choice, and NEVER touch the hands of the special needs beneficiary. If we do our job correctly, the government won’t be able to touch those funds either.

There are also First Party SNT’s that a special needs beneficiary can establish with his or her own assets while staying on Medicaid. But any unspent assets from these trusts are subject to estate recovery, meaning the government can recover funds it used to pay for that beneficiary’s benefits. As you can see, it is more advantageous for your family to create a Third Party SNT while you can, to protect the beneficiary and also contingent beneficiaries, such as grandkids, etc.

Here are a few key ideas I’ve learned in doing special needs planning:

• Get it right the first time!
• Have a plan for where your assets will go and ensure that the beneficiary does NOT receive anything outright! It happens more than you think
• Make sure the attorney knows the special needs beneficiary’s every issue, big and small, as well as the diagnosis, etc.
• An attorney CANNOT be successful setting up an SNT without working together with a financial advisor and sometimes a CPA.

Monday, June 20, 2011

Asset Protection For Your Heirs

The question is, when you engage in estate planning, are you thinking carefully enough about protecting the inheritance you'll be leaving to your heirs?

If you leave your assets outright in a will to a beneficiary, the asset is owned by the beneficiary upon death. That means that the beneficiary can spend the asset however he or she would like. It also means that if the beneficiary is in debt, or suddenly becomes mired in debt, the creditor can come after that asset. 

How about if your beneficiary is married? 50% of marriages in the U.S. still end in divorce. You better believe your son or daughter in law will be pushing for equitable division of that inheritance.

No one wants to be involved in a law suit, but accidents happen, and we live in a litigious society. Insurance may cover up to a certain amount, but what happens after that? You can be sure that if there is a large inheritance available, an attorney will find it and come after it.

Bankruptcy, high risk professions, and other risk factors are always present as well.

You can protect against these predators and creditors for your heirs if you plan properly. Using trusts, for both non-IRA assets and IRA assets, we can potentially protect your heirs from themselves and others. 

Have you considered how to ensure your heirs don't squander their inheritance? 

If we can be of assistance, call our firm today at (215) 706-0200.

Monday, June 06, 2011

Three BIG Estate Planning Mistakes

Tuesday, May 17, 2011

50/50

As an estate planning attorney, I hear about some of the craziest, outrageous estate planning matters gone awry. But those types of cases are outliers, and although they’re interesting, they’re uncommon. It’s the typical case gone wrong that really causes problems for more families.

For instance, in one relatively straightforward estate planning matter, I have a colleague who is currently representing a sister who is being sued by her sibling (brother) over some real estate their parents left them. When their parents died, they left their two children the house as equal owners – 50/50. The parents insisted that the children never had conflicts, and that the family was close. They couldn’t imagine how this simple matter could be anything but straightforward.

However, the client’s brother unfortunately got laid off in the recession, after having a secure job at a pharmaceutical company for many years. As a result, he could no longer afford his share of the expenses of the house. and needs to sell the real estate. The client doesn't want to sell as she feels they would take a big loss, as the housing market still has not turned around in many parts of the country. She would rather wait until the real estate market has recovered. Oh, and by the way, the parents named the two children as Co-Executors, something we always caution clients against doing.

Since they cannot come to an agreement, the brother sued the client to compel the property to be sold. The parents are probably rolling over in their graves, as the two siblings duke it out in court. Guess who wins? Attorneys, who spend plenty of time on cases like these and rack up many billable hours. It may take years for this family to recover from hard feelings and the conflict. Sadly, none of it needed to happen.

If you are leaving any property to your family after you are gone, talk to your estate planning attorney about establishing provisions in your will or trust to ensure that this never happens. Some ideas including setting money aside to handle the expenses (for many people, life insurance is an excellent option in a case like this). As I always say, none of us have a crystal ball, and you simply don’t know what will happen after you’re gone. Your estate plan needs to be crafted in such a way that takes into account multiple scenarios, and most importantly, the worst case scenario so that such a scenario can be avoided.

50/50 doesn’t seem so great after all. If your plan needs a fresh look, or if you know of someone who can use some assistance with estate planning, please call our office today at (215) 706-0200.