Saturday, June 27, 2009

The Great Estate Planning Fallacy -- Attorney as "Scrivener"

This past week I received an e-mail from the adult son of a client for whom I had done asset protection planning about a year ago. In his e-mail, "Frank" asked me, "how much would it cost to revise my will and do the other documents, such as a health care proxy?" Frank, who has never been married and has no children, had attached a copy of his will to the e-mail.

Frank is a successful entrepreneur with a net worth well into the seven figures. His existing will has numerous beneficiaries, both individuals and charities, and provides for many of the beneficiaries' shares to be held in trust.

In response to the "how much does it cost" question, I replied as follows:

For me to do planning work for you, it is not simply a matter of us sitting down and you telling me who you want to be the beneficiaries of your estate. Rather, to review and revise your planning, we would need to sit down and discuss your overall planning objectives. I would then be able to determine what planning tools (e.g., will, trusts, or other entities, health care documents, etc.) are required to satisfy your planning objectives. I would then be able to quote a fee for the counseling and design of the planning necessary to meet the planning goals. Of course you would be under no obligation to go forward with any of my suggestions or to pay any fee until retaining me for the work.

From my experience, many clients assume they “have it all figured out” until we have the conversation about what the client really is hoping to accomplish, and the planning often goes in directions the client had never contemplated. Bottom line, it is not as simple as you coming in and simply telling me what you want to do; in such a case you’d be overpaying to have me (or any lawyer, for that matter) serve as a mere “scrivener.”

I have attached our “Goals” form which will give you an idea of some of the key concepts that you should be considering in looking at your estate planning. Some of these may be ideas you’ve already thought about, but some of them may not have previously been brought to your attention.

If you would like to set up a meeting, let me know
Frank must have been satisfied with my response, as he has scheduled an appointment to review his goals and objectives.

Tuesday, June 23, 2009

Medicaid Planning 2009

Check out this SlideShare Presentation:

A familiar (and unfortunate) story

I met with a client in yesterday who is set to receive an inheritance of about $1.4 million from a trust established by her grandfather. We discussed setting up a revocable living trust as well as an irrevocable trust for asset protection/Medicaid planning purposes. This client (who is divorced) has a special needs child, and we will certainly be providing that, upon the client's death, the special needs child's share will be held in a supplemental needs trust to ensure that the child -- who is now an adolescent -- will remain eligible for governmental assistance throughout her lifetime.

My client also has a sister who will receive the same $1.4 million inheritance from grandpa's trust. This woman, like her niece, has special needs and is presently receiving governmental assistance. Unfortunately, grandpa's trust provides an outright inheritance for this woman. As a result of the inheritance, this woman will become ineligible for governmental assistance, including the all-important Medicaid benefits. To retain her eligibility, the special needs granddaughter will need to create a "payback" supplemental needs trust that, upon the woman's death, will require reimbursement to the state social services agency before any distribution can be made for the woman's heirs.

While this result may be good for taxpayers, it will not provide the optimum result for the family. Had the grandfather's trust provided that instead of an outright distribution, the share of any disabled beneficiary be held in a supplemental needs trust, then upon the granddaughter's death, the balance of the trust share could pass to other family members, rather than to the state.

While grandpa did not ensure protection of the family assets (was he even counseled about this planning option), his "well" granddaughter will be able to assure such asset protection for her own child.

Sunday, June 21, 2009

Getting the Show on the Road!

Having established my blog weeks ago, it's Father's Day and I'm finally ready to start posting. My hope with this blog is to keep readers up-to-date regarding developments and trends in estate planning, elder law and related topics. I also intend to offer commentary on interesting current events, political issues and cultural trends. I certainly hope to spur conversation and debate.

A short introduction: I am a partner with Blustein, Shapiro, Rich & Barone, LLP, a 10-attorney law firm in Middletown, New York. Our firm is soon to be moving to a brand-new building at 10 Matthews Street in Goshen; we anticipate a move sometime in early fall. I'm particuarly excited about the move because in our new space we will have a dedicated classroom where we will hold estate planning and elderlaw workshops for clients, the general public, and professional advisors. The classroom will comfortably host 22 people, and I anticipate that it will be used frequently.

Our firm web site is My practice is concentrated in the areas of estate planning, elder law and business planning (e.g. forming business entities and designing effective and practical business "exit" strategies for business owners).

The big news among the New York trusts & estates and elderlaw bar is the impending implementation of a new general durable power of attorney form. The new form, to be effective September 1, 2009, presents a sweeping overhaul of the existing statutory "short form" power of attorney. The new form includes an optional "major gifts rider" that is required to be signed by the principal if he or she wishes to authorize the agent to make gifts of the principal's assets. Such gifting powers are frequently used in "crisis Medicaid planning," and are, in my view, an essential feature.

While powers of attorney are useful planning tools, our preference is for dealing with a person's incapacity is for a well-drafted and funded revocable or irrevocable trust. Trusts simply provide more flexibility and planning protection than a power of attorney. Perhaps most important, trusts can include a "disability panel," of individuals who are authorized by the Trustmaker to declare the Trustmaker as "disabled," and transfer authority to a successor Trustee named by the Trustmaker. Powers of attorney have no mechanism for removing a principal's authority or control, often leading to scenarios where a person who suffers from "diminished capacity," may act irrationally. In but one recent example, a woman told me that her father, who sufferred from moderate dementia, has been going to the bank and giving his new healthcare aide substantial cash gifts. Even though the daughter is the agent under the father's power of attorney, there is no power to take away the father's authority and prevent him from continuing this pattern of financially harming himself. The only alternative is a costly, stressful and potentially contentious court guardianship proceeding.

If instead the father had in place a revocable living trust with a disability panel mechanism, the panel could have determined that the fahter is incapable of managing his financial affairs, with legal authority automatically transferred to a successor Trustee designated by the father in the trust document. All in all, a far better plan that leads to a more satisfactory result.