Trusts for the Average Person Trusts for the Average Person

130 Pages·2014·1.43 MB·English

An explanation of the Deficit
Trusts for the Reduction Act, a draconian law that
has a huge effect on nursing home
Average Person planning
The Optimum Estate Plan An overview of how the "Optimum
Estate Plan" can benefit the average
Trusts for the
A practical guide to avoiding probate, person
nursing-home costs and estate taxes
What legal documents you need to
pass your assets to your
In this book we de-mystify estate planning. beneficiaries in the most efficient
We explain the proper use of wils, trusts, and economical way Average Person
durable powers of attorney and advance
medical directives. We show you how these How to avoid potentially costly
documents work, and how they can be used guardianship proceedings in the
most effectively to pass your assets to the event of incapacity
next generation, and to keep your family
from having to institute guardianship The pros and cons of wills, and why
procedings. a living trust might be right for you The
We give you a layperson's explanation of the
How Medicaid Trusts work to shelter
Medicaid eligibility provisions of the Deficit
Reduction Act of 205. This law made it much asets from potentialy devastating Optimum
nursing home costs
harder to protect your assets from a nursing
home stay and to become eligible for
Medicaid, and contains provisions that can be An in-depth explanation of the
a trap for the unwary. complex and confusing Medicaid Estate Plan
rules
Many families have children with disabilities
who cannot, or should not inherit money or An overview of special needs
property directly. In the worst case, a child planning for children with disabilities
receiving government benefits who inherits
assets can lose both the assets and the How to protect the inheritance of
benefits. We explain how a special needs persons with addictions, gambling A practical guide to avoiding
trust can safeguard the inheritance, and problems and creditor/divorce
maintain the child's government benefits. issues
probate, nursing-home costs
Similar issues arise regarding children who How to create and protect a lasting
have creditor/divorce problems, addictions or legacy using your IRA assets and estate taxes
gambling problems. We show you how you
can leave an inheritance for these persons How to avoid the "Widow Tax" and
and protect the inheritance from being lost as Social Security tax traps
a result of their problems.

This book is full of useful ideas that clarify
the estate planning process and make it easy I S B N 9 7 8 - 0 - 9 7 8 9 8 4 5 - 1 - 9
to digest for the general audience. Readers Edward D. Beasley, JD, LLM
will learn how to protect themselves and their
families from catastrophic financial loss to a David H. Ferber, JD
nursing home stay and will learn how to
streamline and simplify the process of Gregory B. Gagne, ChFC
passing assets down to the next generation. 9 7 9 >8 8 0 4 9 5 7 1 8 9
Trusts for the Average Person Beasley & Ferber, PA Affinity Investment Group, LLC
The Optimum
Estate Plan
A practical guide to avoiding
probate, nursing-home costs
and estate taxes
Edward D. Beasley, JD, LLM
David H. Ferber, JD
Gregory B. Gagne, ChFC
Copyright © 2008 by Beasley & Ferber, PA, and Affnity Invest-
ment Group, LLC. All rights reserved. No part of this book may
be reproduced in any form, electronic or mechanical, includ-
ing photocopying and recording, or by any information storage
or retrieval system, without prior written permission from the
copyright owners unless as allowed by federal law.
Library of Congress Control No: 2008903351
ISBN-13: 978-0-9789845-1-9
ISBN-10: 0-9789845-1-X
Printed in the United States of America by Mennonite Press, Inc.
Newton, Kansas
Book Design by Sandi Nelsen
Published by Beasley & Ferber, PA, Concord, New Hampshire,
and Affnity Investment Group, LLC, Exeter, New Hampshire.
For Additional copies, send $24.95 plus $3.00 shipping and
handling per book to:
Beasley & Ferber, PA
55 Hall Street
Concord, NH 03301 [phone]
or
Affnity Investment Group, LLC
18 Hampton Road, Unit 7
Exeter, NH 03833
[phone]
Dedication
his book is dedicated to the memory of my late father,
T Abraham Ferber, who had the foresight to have his le-
gal affairs put in order when he was healthy enough to do
so, thereby making my job infnitely easier at the time of his
passing.
David Ferber
Table of Contents
About the Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii
Chapter 1: The Genesis of the Optimum Estate Plan. . . . . . . 1
Chapter 2: Wills and Revocable Trusts. . . . . . . . . . . . . . . . 7
A. The Last Will and Testament . . . . . . . . . . . . . . . . . .7
B. The Revocable Trust as a Will Substitute . . . . . . . . .14
C. The Revocable Trust - Minimizing Estate
Taxes for Married Couples . . . . . . . . . . . . . . . . . . . 16
D. Special Nursing Home Issues . . . . . . . . . . . . . . . . .17
Chapter 3: Durable Financial Powers of Attorney. . . . . . . . 19
Chapter 4: Advance Directives: Living Wills and
Medical Powers of Attorney. . . . . . . . . . . . . . . .27
Chapter 5: The Medicaid Rules in General. . . . . . . . . . . . . 31
A. The Difference Between Medicare and Medicaid . . .31
B. Three Ways of Paying for Nursing Homes . . . . . . . 32
1. Long-Term Care Insurance . . . . . . . . . . . . . . . .32
2. Private Payment . . . . . . . . . . . . . . . . . . . . . . . . 34
3. Medicaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
A. Applying for Medicaid . . . . . . . . . . . . . . . . 34
B. Medicaid’s Financial Requirements
General Rules . . . . . . . . . . . . . . . . . . . . . . . 39
v i Trusts for the Average Person
4. Division of Assets for Married Couples . . . . . . . .41
5. Treatment of Income for Married Couples . . . . . .43
6. The Spend-down . . . . . . . . . . . . . . . . . . . . . . . 44
Chapter 6: The Medicaid Transfer of Asset Rules and
the Defcit Reduction Act . . . . . . . . . . . . . . . . . 47
Chapter 7: The Irrevocable Medicaid Trust . . . . . . . . . . . . . 53
Chapter 8: Putting Assets into Children’s Names . . . . . . . . 57
A. Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
B. Loss of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
C. Tax Problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
Chapter 9: Crisis Medicaid Planning for Married Couples. . . 61
Chapter 10: Federal and Massachusetts Estate Taxes . . . . .65
Chapter 11: Trusts For Children with Special Needs . . . . . . 73
A. Special Needs Trusts for Children
with Disabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .74
B. Trusts for Children with Other Special Needs . . . . . .79
Chapter 12: Summary of Optimum Estate
Planning Documents. . . . . . . . . . . . . . . . . . . .81
1. Revocable Trust . . . . . . . . . . . . . . . . . . . . . . . . . . .81
2. Irrevocable Medicaid Trust . . . . . . . . . . . . . . . . . . 81
3. Pour-over Will . . . . . . . . . . . . . . . . . . . . . . . . . . . .82
4. Durable Power of Attorney . . . . . . . . . . . . . . . . . . 82
5. Advance Directives . . . . . . . . . . . . . . . . . . . . . . . . 82
Trusts for the Average Person vii
Chapter 13: The Social Security Tax Trap. . . . . . . . . . . . . . 85
Chapter 14: The “Widow Tax Trap”. . . . . . . . . . . . . . . . . . 89
Chapter 15: The “Stretch” IRA. . . . . . . . . . . . . . . . . . . . . .91
Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Potential Pitfalls . . . . . . . . . . . . . . . . . . . . . . . . . . . .95
Chapter 16: The “Stretch” ROTH IRA. . . . . . . .. . . . . . . . . 97
A quick review of current tax brackets (2008) . . . . . .97
How the Stretch ROTH Technique works . . . . . . . . .102
Chapter 17: Net Unrealized Appreciation. . . . . . . . . . . . .105
A. NUA Explained . . . . . . . . . . . . . . . . . . . . . . . . . 105
Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Option 1: Normal roll-over approach . . . . . . . . 106
Option 2: NUA roll-over approach . . . . . . . . . 106
B. Benefts of NUA . . . . . . . . . . . . . . . . . . . . . . . . . 107
C. Drawbacks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Chapter 18: What to do from here?. . . . . . . . . . . . . . . . . .109