With Consideration for With Consideration for Those Living With Chronic Those Living With Chronic

IllnessIllnessBy: Martin M. Shenkman, CPA, MBA, PFS, AEP, JD

CaveatsCaveatsCaveatsCaveats

Nothing in these slides or any accompanying presentation is to be considered tax, legal, investment or other professional advice. The information is merely provided for educational purposes and no action should be taken without the individual consulting his or her own tax, estate, legal, financial, investment, insurance and other advisers.

The hosts and sponsors of this program are NOT responsible for its content or accuracy

Revocable Living Revocable Living Trusts - IntroductionTrusts - Introduction What is this powerful document?What is this powerful document?

What is a Revocable What is a Revocable Living Trust?Living Trust? Also called “Living Trust,” “Loving Also called “Living Trust,” “Loving

Trust,” or “Inter-Vivos Revocable Trust,” or “Inter-Vivos Revocable Trust”Trust”

Revocable – you can change it anytimeRevocable – you can change it anytime Can be used to avoid probate but this Can be used to avoid probate but this

popular goal is not the key benefit of popular goal is not the key benefit of this techniquethis technique

Use to consolidate and manage your Use to consolidate and manage your assets during disabilityassets during disability

It is the most powerful tool to manage It is the most powerful tool to manage assets if you cannot do soassets if you cannot do so

Tips: Revocable Living TrustTips: Revocable Living Trust

Your will and power of attorney must be Your will and power of attorney must be coordinatedcoordinated

Boilerplate trusts designed to avoid probate Boilerplate trusts designed to avoid probate won’t accomplish your goalswon’t accomplish your goals

Focus of document should be protecting you Focus of document should be protecting you and communicating your wishes as your and communicating your wishes as your disease progressesdisease progresses

Tailor trustee replacement, disability and Tailor trustee replacement, disability and other provisions to the nuances of your other provisions to the nuances of your anticipated disease courseanticipated disease course

Assets must be transferred to the trust to Assets must be transferred to the trust to gain the most benefit – but some assets gain the most benefit – but some assets should not be transferred (e.g., IRA).should not be transferred (e.g., IRA).

Tailor your Revocable Tailor your Revocable Trust Planning to Your Trust Planning to Your NeedsNeeds Every person is unique – it has to be Every person is unique – it has to be youryour

plan, plan, youryour trust, and address trust, and address youryour challenges challenges Reflect your personal wishes and Reflect your personal wishes and

circumstancescircumstances Tailor the document to address your unique Tailor the document to address your unique

assets (e.g. a closely held business)assets (e.g. a closely held business)

Chronic Illness is Common Chronic Illness is Common – “Trust” Now Don’t Wait– “Trust” Now Don’t WaitChronic Illness is Common Chronic Illness is Common – “Trust” Now Don’t Wait– “Trust” Now Don’t Wait

120 million Americans are living with chronic illness or 120 million Americans are living with chronic illness or disabilitydisability

By 2020, about 157 million Americans will be afflicted by By 2020, about 157 million Americans will be afflicted by chronic illnesseschronic illnesses

26% of those ages 65-74 have had their lives significantly 26% of those ages 65-74 have had their lives significantly impacted by chronic illnessimpacted by chronic illness

50% of those age 85 and older have had some cognitive 50% of those age 85 and older have had some cognitive impairmentimpairment

9 million people are cancer survivors with various side 9 million people are cancer survivors with various side effects from treatmenteffects from treatment

A living trust plan created early after your diagnosis with a A living trust plan created early after your diagnosis with a chronic illness can protect you and your loved oneschronic illness can protect you and your loved ones

Watch Out For Watch Out For Hyperbole and Sales Hyperbole and Sales PitchesPitches There are many hucksters pushing living trusts There are many hucksters pushing living trusts

to play on peoples fears of probate and taxesto play on peoples fears of probate and taxes Only 5,600 estates a year will pay a federal Only 5,600 estates a year will pay a federal

estate tax – few are affected (but state estate estate tax – few are affected (but state estate tax may still bite)tax may still bite)

Tax savings can be accomplished in a will or by Tax savings can be accomplished in a will or by planning, a living trust is not necessary for thisplanning, a living trust is not necessary for this

Probate is not as costly, difficult or ‘evil’ as Probate is not as costly, difficult or ‘evil’ as often portrayed by those hustling trustsoften portrayed by those hustling trusts

The above detract from the most powerful use The above detract from the most powerful use of a living trust – namely managing assets in of a living trust – namely managing assets in disability disability

Revocable Living Trusts – Revocable Living Trusts – Plan your Trust Plan your Trust AgreementAgreement How to plan your trust documentHow to plan your trust document

Create Your Revocable Create Your Revocable Living TrustLiving Trust Establish a personalized (not boilerplate) living Establish a personalized (not boilerplate) living

trusttrust Include provisions to address your specific Include provisions to address your specific

health issueshealth issues Avoid probate and intestacyAvoid probate and intestacy Manage assets during disability or illnessManage assets during disability or illness

Living Trust – What do Living Trust – What do you Needyou Need Trust agreement – a contract between Trust agreement – a contract between

you and the trustee (which might be you and the trustee (which might be you, but read on)you, but read on)

Tax identification number (but check Tax identification number (but check with your CPA)with your CPA)

Documents to transfer assets to your Documents to transfer assets to your living trust once signedliving trust once signed

Paperwork to open a trust bank Paperwork to open a trust bank accountaccount

Living Trust – Naming Living Trust – Naming TrusteesTrustees Who should be trustee? Who should be trustee? Should you name two co-trustees Should you name two co-trustees

at inception?at inception? Should you be a trustee?Should you be a trustee? Who should be successor trustees?Who should be successor trustees? When should successor trustees When should successor trustees

step in?step in?

Living Trust – Different Living Trust – Different Time Periods to Time Periods to AddressAddress Your living trust might have different Your living trust might have different

provisions to address different time provisions to address different time periods more specificallyperiods more specifically

#1 You’re alive and well – you might #1 You’re alive and well – you might be a sole or co-trustee and simply be a sole or co-trustee and simply manage assets in the trust namemanage assets in the trust name

#2 You’re disabled – a co-trustee and #2 You’re disabled – a co-trustee and successor might take oversuccessor might take over

#3 After death – it will function like a #3 After death – it will function like a will disposing of your assetswill disposing of your assets

Living Trust – Special Living Trust – Special Trustee Provisions for Trustee Provisions for Chronic IllnessChronic Illness Perhaps you should remain a co-trustee Perhaps you should remain a co-trustee

to stay in control of your finances but to stay in control of your finances but have a co-trustee that can act if you have have a co-trustee that can act if you have an attack or are hospitalizedan attack or are hospitalized

Standard language removing a trustee Standard language removing a trustee who is “disabled” may not suffice who is “disabled” may not suffice perhaps the co-trustee can be authorized perhaps the co-trustee can be authorized to take certain actions alone if you to take certain actions alone if you cannot actcannot act

Consider a 30 day disability period so a Consider a 30 day disability period so a short hospitalization won’t affect itshort hospitalization won’t affect it

Living Trust – Special Living Trust – Special Distribution Provisions Distribution Provisions for Chronic Illnessfor Chronic Illness Include details as to the care and other Include details as to the care and other

decisions you want to guide or control the decisions you want to guide or control the trustees when you are not able to servetrustees when you are not able to serve

Direct the trustee to pay for medical care Direct the trustee to pay for medical care decisions authorized or directed by your decisions authorized or directed by your health care agent (to avoid conflicts)health care agent (to avoid conflicts)

If you should not serve as trustee consider If you should not serve as trustee consider a small dollar bank account outside the a small dollar bank account outside the trust to enable you to shop and spend trust to enable you to shop and spend reasonably without jeopardizing the trust reasonably without jeopardizing the trust assetsassets

Living Trusts – Hire a Living Trusts – Hire a LawyerLawyer Be very wary of internet forms – they are Be very wary of internet forms – they are

limited in how they can be tailored and won’t limited in how they can be tailored and won’t address your special circumstances (e.g. address your special circumstances (e.g. chronic illness)chronic illness)

You can fill out forms cheap on line but even if You can fill out forms cheap on line but even if the forms were good – you can’t get a website the forms were good – you can’t get a website or cheap form to substitute for decades + of or cheap form to substitute for decades + of real experiencereal experience

Hire an attorney in your state that devotes a Hire an attorney in your state that devotes a substantial portion of his or her practice to substantial portion of his or her practice to estate and trust planningestate and trust planning

If the attorney cannot tell you reasons not to If the attorney cannot tell you reasons not to use a trust, as well as reasons to use a trust, use a trust, as well as reasons to use a trust, go elsewhere – no decisions are absolutego elsewhere – no decisions are absolute

RV Tips – Planning Your Living RV Tips – Planning Your Living TrustTrust

Hire a lawyer in the state you claim is where you reside and Hire a lawyer in the state you claim is where you reside and are domiciled – that is a tie to that state to support your are domiciled – that is a tie to that state to support your position (but alone will never be enough, its just one factor)position (but alone will never be enough, its just one factor)

Rv’ers, or anyone who facing tax uncertainty as to which Rv’ers, or anyone who facing tax uncertainty as to which state they reside in (or in which they are domiciled), should state they reside in (or in which they are domiciled), should consider the address designated in their trust and which consider the address designated in their trust and which state law is indicated to applystate law is indicated to apply

Where are the assets are that will be transferred to the trustWhere are the assets are that will be transferred to the trust Where should you sign your trust – in the state you claim is Where should you sign your trust – in the state you claim is

your residence and domicileyour residence and domicile Can you use formalities for your trust that are more likely to Can you use formalities for your trust that are more likely to

be accepted in other states (e.g., 3 witnesses and a notary)be accepted in other states (e.g., 3 witnesses and a notary)

Revocable Living Revocable Living Trusts – Get OrganizedTrusts – Get Organized Keeping the confusing names of Keeping the confusing names of

legal documents clearlegal documents clear

Organize Emergency, Organize Emergency, Financial, Information and Financial, Information and Advisors InformationAdvisors Information

Without organization your trust will Without organization your trust will be of marginal helpbe of marginal help

Contact People (names, numbers)Contact People (names, numbers) Financial Information (account Financial Information (account

information)information) Passwords and Security CodesPasswords and Security Codes Documents (Estate planning Documents (Estate planning

documents, legal documents, and documents, legal documents, and more)more)

Budget and PlanBudget and Plan

Financial Information is Financial Information is Critical to Organize for your Critical to Organize for your Trust to SucceedTrust to Succeed

Title to AccountsTitle to Accounts• Change appropriate assets Change appropriate assets

to your trustto your trust• Don’t transfer IRAs, Don’t transfer IRAs,

professional practices and professional practices and other inappropriate assetsother inappropriate assets

Beneficiary designations Beneficiary designations • Coordinate with trust Coordinate with trust

beneficiary provisions for beneficiary provisions for assets transferredassets transferred

Account ManagementAccount Management• Duplicate statementsDuplicate statements• Consolidation and Consolidation and

simplificationsimplification

AutomationAutomation• Organizing recordsOrganizing records• On line paymentsOn line payments• Automatic depositsAutomatic deposits• A trust without more is not A trust without more is not

enoughenough

RV Tips on Organizing Financial RV Tips on Organizing Financial Info and Using Living Trusts Info and Using Living Trusts

Rv’ers, or anyone who travels extensively, should take Rv’ers, or anyone who travels extensively, should take extra precautions to make sure information is available extra precautions to make sure information is available when neededwhen needed

When determining where to keep accounts consider tax When determining where to keep accounts consider tax issues of residency/domicileissues of residency/domicile

Consider transferring all permitted (appropriate) assets Consider transferring all permitted (appropriate) assets to your living trust but retaining a bank account in your to your living trust but retaining a bank account in your own name in the state where you believe you are own name in the state where you believe you are domicileddomiciled

Ask an attorney in the state where you own real estate Ask an attorney in the state where you own real estate or tangible property (collectibles) if transferring the or tangible property (collectibles) if transferring the assets to your trust will be sufficient to cut tax ties to assets to your trust will be sufficient to cut tax ties to that state (it may avoid probate but not solve your that state (it may avoid probate but not solve your state income or estate tax issue)state income or estate tax issue)

Revocable Living Trusts – Revocable Living Trusts – Relationship to Other Relationship to Other DocumentsDocuments Keeping the confusing names of Keeping the confusing names of

legal documents clearlegal documents clear

Overview of Estate Overview of Estate Planning and Living TrustsPlanning and Living TrustsOverview of Estate Overview of Estate Planning and Living TrustsPlanning and Living Trusts

Powers of AttorneyPowers of Attorney• Only relevant to assets not Only relevant to assets not

transferred to your living trusttransferred to your living trust

• Why standard forms aren’t Why standard forms aren’t sufficesuffice

• Special provisions to include to Special provisions to include to coordinate with living trustcoordinate with living trust

Living WillsLiving Wills• Trustee of living trust might fund Trustee of living trust might fund

medical billsmedical bills

• Address specific health issuesAddress specific health issues

• Experimental proceduresExperimental procedures

• Organ and tissue donationsOrgan and tissue donations

•Health Proxies

• Selecting agent

• What is different for you if you live with chronic illness

•Trustee should follow agent’s health care directions

•Revocable Living Trusts

• Often the keystone of your plan

• Boilerplate forms rarely address nuances needed

• Coordinate with other documents

How does a living trust How does a living trust compare to a will and compare to a will and power of attorney? power of attorney? Will – disposes of your assets after deathWill – disposes of your assets after death Power of attorney gives an agent authority Power of attorney gives an agent authority

to handle certain legal and tax matters to handle certain legal and tax matters while you are alive and often while you are while you are alive and often while you are disabled disabled

Living trust can address both and catch Living trust can address both and catch gaps in the other documents – trustee gaps in the other documents – trustee holds legal title to your assets and may be holds legal title to your assets and may be able to act more quickly and with less able to act more quickly and with less issues than an agent under a power of issues than an agent under a power of attorneyattorney

Will: Consider a Pour Will: Consider a Pour Over WillOver Will

Revocable Living Revocable Living Trusts – Ancillary Trusts – Ancillary StepsSteps Follow up steps must be Follow up steps must be

addressed to make your living addressed to make your living trust plan workstrust plan works

RV Tips for Living TrustsRV Tips for Living Trusts

Using a living trust can consolidate assets, minimize the Using a living trust can consolidate assets, minimize the likelihood of other states claiming that their law applies, likelihood of other states claiming that their law applies, and make management of your assets easier by a family and make management of your assets easier by a family member or friend who lives at a distance from where member or friend who lives at a distance from where you are – but you have to get assets transferred to the you are – but you have to get assets transferred to the trust (watch which ones) to accomplish thistrust (watch which ones) to accomplish this

Living trusts alone will not suffice for many planning Living trusts alone will not suffice for many planning needs -- you might benefit from a limited liability needs -- you might benefit from a limited liability company to own real estate or tangibles – consult a company to own real estate or tangibles – consult a lawyer in the state where the assets are located, in lawyer in the state where the assets are located, in addition to the lawyer you hire in the state you claim is addition to the lawyer you hire in the state you claim is your domicileyour domicile

Insurance Coverage May Insurance Coverage May Have to Be UpdatedHave to Be Updated

Property, casualty, liability Property, casualty, liability insuranceinsurance

If assets are transferred to your If assets are transferred to your trust update coveragetrust update coverage

Insurance Coverage Insurance Coverage ConsiderationsConsiderations

Don’t make assumptions – get Don’t make assumptions – get every insurance coverage every insurance coverage reviewed before transferring an reviewed before transferring an asset to your trust, and at least asset to your trust, and at least every 2 yearsevery 2 years

You might need to name the You might need to name the trustee and trust as owner of your trustee and trust as owner of your home to assure proper coveragehome to assure proper coverage

Beneficiary Designations May Need Beneficiary Designations May Need UpdatingUpdating

Consider all beneficiary designations Consider all beneficiary designations for assets transferred to your living for assets transferred to your living trust – the trust is a new account and trust – the trust is a new account and you’ll need formsyou’ll need forms

Obtain copies of the forms you file and Obtain copies of the forms you file and keep them with trust recordskeep them with trust records

Note: IRA, pension (and often life Note: IRA, pension (and often life insurance) should generally not be insurance) should generally not be transferred to your trusttransferred to your trust

Revocable Living Trusts – Revocable Living Trusts – Consider Everyone Consider Everyone AffectedAffected Family, loved ones, trustees must all Family, loved ones, trustees must all

be considered to make your living trust be considered to make your living trust plan workplan work

Provide for Loved Provide for Loved OnesOnes While the discussions above focused While the discussions above focused

on using a living trust to protect you, on using a living trust to protect you, also be sure to provide for your loved also be sure to provide for your loved onesones

CommunicateCommunicate Educate and inform your Educate and inform your

fiduciariesfiduciaries Preparation of beneficiariesPreparation of beneficiaries

Communication TipsCommunication Tips

Explain your finances, family, care, Explain your finances, family, care, disease, and so forth to your advisers – disease, and so forth to your advisers – tell all so they can help properlytell all so they can help properly

Discuss with family, friends or others Discuss with family, friends or others involved in your life what help you involved in your life what help you might needmight need

Can the trustee you named really be Can the trustee you named really be counted on? Have alternativescounted on? Have alternatives

Express your wishes in face to face Express your wishes in face to face meetings and then confirm key points meetings and then confirm key points in writingin writing

Revocable Living Revocable Living Trusts – It’s a ProcessTrusts – It’s a Process Monitor, review and revise regularlyMonitor, review and revise regularly

Review, Revisit, ReviseReview, Revisit, Revise

Nothing remains staticNothing remains static– Tax and property lawsTax and property laws– Family situationsFamily situations– Assets and net worthAssets and net worth– Health Health

Revocable Living Revocable Living Trusts – Get StartedTrusts – Get Started

Planning is great – but implement!Planning is great – but implement!