Answering Your Questions: Estate Planning & Elder Law

Each week, attorney Bill Henry hosts a live, online community event: Thursday Q&A: Estate Planning & Elder Law.

If you’re interested in learning about how to plan for your future needs and costs through estate and long-term care planning, these weekly discussions will greatly benefit you.

In a Q&A-style forum, Bill takes questions from people around Colorado. The weekly event is a unique opportunity to receive practical information about powers of attorney, Medicaid planning, wills and trusts, and so much more.

Check out the recorded broadcast from the May 26, 2020 event.

Questions?

Schedule some time to talk with a member of our estate planning and elder law team.

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(note: Below is a transcription of the conversation.)

All right, Bill Henry here from Robinson & Henry, sorry about the delay. A few technical issues. So today we’re answering questions that we’ve gotten throughout the week on various Estate Planning and Elder Law topics.

So, if you’ve got anything you’d like me to answer, feel free to post it in the Q&A, or in the comments, and I’ll do my best to answer it. I

f we don’t get to anything during this live event. We hold them once a week and then also, we will try to follow up with you afterwards to get your questions answered.

Question 1: Will a trust help me avoid estate taxes?

So the first one, we have here, was from John this week, and he had a question on avoiding Estate tax. And whether or not if he puts his asset into a Trust, if that’s gonna help him avoid Estate tax.

Well, it’s a great question. I get it all the time. And so the first thing we have to think about, whenever we’re talking about avoiding tax, and putting our assets into a Trust, is what type of Trust are we creating.

The Trust to Avoid Taxes

So for the most part. For most people, a Revocable Living Trust does not help them avoid Estate tax.

So to avoid Estate tax, you need to typically use an Irrevocable Trust. So you might have heard terms like an Irrevocable Life Insurance Trust, or Medicaid Asset Protection Trust. Those Trusts, part of their design, is to help avoid Estate tax.

Will the Estate Tax Apply to You?

Now, having said that, we’ve got to talk about, well do we need to worry about the Estate tax?

So currently the Estate tax exemption is. The current Estate tax exemption is $11.4 million, and that’s per spouse.

So if you’re married you basically have about $22 and a half, $23 million of Estate tax exempted. So as you can imagine, most people do not need to worry about that.

Be Aware of Ever-Changing Tax Laws

Having said that, in 2026 that Estate tax exemption, or the credit, changes from that $11, actually I think it’s $11.5 million dollars this year. And it’s adjusted from inflation.

It changes down to five million dollars adjusted from inflation. So if you have a sizable Estate and you’re married, you probably will. Can only have about 10 million dollars, starting in 2026.

We of course have no idea what they’re gonna do with the tax laws. They change them all the time. So it’s just important to kinda keep on top of that. So, I guess the short answer there, John, for a long awaited answer. Is it depends on what type of Trust you set up. And you have to really decide whether or not that tax ability of the Estate is a concern that you need to worry about.

Colorado Estate Tax? 

And then finally, everyone in Colorado should know, there is no, currently there is no Colorado Estate tax.

Questions 2: How long does the estate planning process take?

Another question. This is from Chris. Chris in Aurora. And his question is, how long does the Estate Planning process take?

And I answer that in every single one of my consultations that I do. And it really depends. And it depends mainly on whether or not a Trust is involved.

What the Process (Usually) Entails

Design Meeting

So a typical Estate Planning process, that at least I go through. And we go through, or the attorneys here at our firm, go through with our clients, is that the first step, after a client signs up, is that we’re gonna do what we call a design meeting.

And that’s a process where we sit down, typically with a white board, really map out everything that’s gonna happen in the Estate.

And where do you want your property to go, or one of the children are gonna get the assets, things of that nature. And decide do we need a Trust or do we need a Will.

Well, if you have a Will-based plan, it’s a little simpler because we don’t have to do what’s called, Funding. So if you think about a Trust like a bucket, at the end, after we create this Trust, that’s not the end of the process.

We’ve got to take another step. We’ve gotta get everything that we have inside of the Trust. Well, that requires us to retitle all of your assets. So for example, a house would need to get retitled into the name of the Trust from your own individual name. A life insurance policy might need to update the beneficiaries to be the Trust. Bank accounts need to get changed. There’s a whole process that even after we do the signing, that we still have to do to get the Trust funded.

So the answer would be, for most clients I’d say 60 days. Most clients are done with their entire Estate Planning process.

Address Medical Needs & Other Issues

And of course for clients that have some sort of a medical issue. Or there’s some sort of immediate need, like a vacation, well sometimes of course we need to accelerate that whole process. So partially it’s depended upon your personal circumstances. But I would say for most clients, it’s about 60 days. So great question, Chris.

Question 3: How frequently should I update my will?

Let’s see. Let’s see here. We got another one, Candice. Here we go. Candice, how frequently should I update my Will?

I guess, like a good attorney, it really depends, Candice, on how frequently you should update your Will.

If You Move to Another State

If you move from out of the state, that would be a good reason to at least have your Will looked at. Most Will’s that attorney’s prepare throughout the United States, are good in every state. But there are significant differences on how states treat assets.

So for example, in California it’s what’s called a Community Property Estate. And so the way assets are divided amongst spouses is much different from how we do it in Colorado.

Major Life Events

Aside from that, if you’ve had a major life event. So someone, for example, has passed away that was a beneficiary, or perhaps a birth in the family. Or maybe the personal representative, or executor that you’ve chosen, they no longer really fit the bill, and you need to appoint someone else. Well, that will be a good reason to have it looked at as well.

Wills Do Not Expire

So, there’s no expiration date on a Will. So it really just depends on your own personal life circumstances.

For us, at Robinson & Henry, we like to talk to our clients at least once a year, just to see, has anything changed. To make sure that we can keep all the Estate Planning documents up to speed. So, really really solid question, Candice. Thanks for that.

Question 4: How do I ensure my ex does not my money if I die?

Let’s see. Ronny, Ronny from Denver. Really, really solid question on this. How do I make it so that my ex, my ex wife I assume we’re talking about. Can’t get any of my money, if I were to die.

So, the scenario there is, if you are married and then you’re eventually divorced. You get a divorce. And you wanna leave your assets to your children, but you wanna make sure that you ex-spouse does not get your money.

Ex’s are Automatically Disinherited

Well, in Colorado ex’s are automatically disinherited, if there’s a divorce.

But, if You Have Minors…

But having said that, if you have minor children. And those children are in the care of your ex spouse, well even if, perhaps, the ex spouse isn’t entitled to the money, that doesn’t mean that they’re not gonna have a lot of access and use of that money, because they’re taking care of the children.

So for example, if in your Estate Planning documents you say, “Well, I want my kids to be taken care of. “Their health, their medical issues or education.”

Well, who’s the one making those requests? It’s the guardian of the children, or your ex. If they’re the biological parent of those kids.

Create a Trust for Your Children

So how do we avoid that? It’s the classic example for using a Trust. That we would put all the assets into a Trust, and then from there, with all the assets inside of the Trust, we can now decide who’s gonna be the trustee. It can be someone that you decide, that you trust. Whether it’s a family member, or somebody independent. Or a friend.

And they now have control of your assets, to make sure that your ex can’t get access to it. And that it’s only being used for what you want it to be used.

Now, when we set up these type of Trusts, I always recommend to the extent possible, to give the trustee, that’s independent from your ex, a lot of discretion. So that way your ex can’t, on behalf of the children, try to force distributions out of the Trust. We really want that money to be set aside for the children. So really common question we get. Again, it’s a classic use of Trusts. It’s a great great use of Trusts in that case.

Question 5: Does my mom have to sell everything to qualify for Medicaid?

So great question. Darlene, okay. So Darlene has a question on nursing homes. Let me see here, let me read it for you. So she has her mother in a nursing home, and she’s paying all the bills out of her savings. And she is under the impression that you have to sell everything. So she’s referring to all of her mother’s assets, before her mom could qualify for Medicaid.

Very common, I could tell you even over the weekend I answered a question just like this. So fantastic question, Darlene. Thanks for asking it.

And so the answer is no. You do not need to sell all of your assets, or all of, your parents don’t have to sell all of their assets to qualify for Medicaid.

Breaking Down Complex Rules

And so the rules are really complicated. Let’s talk about it at high level.

So the first thing is, many assets are exempt. And so if it’s an exempt asset, or a non countable asset. That means that you can qualify for Medicaid, even if you have the assets.

Home & Property Exemptions

So an example would be a house. So if your mother, Darlene, was living in a house and she’s now in a nursing home. So long as she has the intent to return home, even if it’s unlikely, but just saying that she wants to return home. Well, that’s good enough to exempt that house.

Now there’s a lot of different rules around how much equity can be in the house, and things of that nature. Or that house can be physically located. But just know that there’s assets like houses, and cars, and things of that nature, that aren’t counted whenever we’re trying to calculate Medicaid.

And then on top of that, Darlene, what we also have is that even if the asset would be countable, there’s often times ways where we can reduce the amount that is countable. Save money for the family, qualify the person, or your mother for Medicaid.

So the best thing you can do in these cases always, because it’s so fact intensive, is to talk with an Elder Law attorney about qualification and what that would look like. And what the options are. A great, really great question.

Question 6: How do I ensure my wishes are carried out?

All right, Brad in Commerce City. He wants to know, let’s see here. He doesn’t want to be on life support. And his concern is, well. What if, I don’t wanna be on life support, but I’m afraid that my family’s gonna keep me on life support forever.

And I think with the pandemic, and everything that’s going on. This is a pretty common question everybody really needs to be thinking about is, well if I was in an end of life situation. What do I want to have happen? And I think that’s what Brad’s talking about. He knows what he wants to have happen. He doesn’t want to be on life support.

Here’s the Document You Need

So the question is, how can he ensure that that happens? Well, the document in Colorado that we use for those type of decisions, is what’s called an Advanced Directive for Medical and Surgical Treatment. Other people, or it’s often termed, A Living Will. That’s another name for it. Other people may have heard the term, Five Wishes. And the document that I’m talking about is different than a Do Not Resuscitate order.

Don’t Confused It With a DNR

So a Do Not Resuscitate order, or DNR, is an order when the paramedics come and whether or not they’re gonna perform CPR. We’re talking about something a little bit different.

I am in a persistent vegetative state. The doctors say that I’m not gonna come out of this state. What do I want to have happen? Do I want to be on a feeding tube? Do I want to be on a ventilator? For how long? And again, the key here is that I’m not expected to ever recover, because if I am, well then of course I want the ventilation, I want the feeding tube, whatever it is. This is really a truly an end of life decision.

Put Someone in Charge

So the answer, Brad. Is that we use that Advanced Directive to say, this is what I want to have happen. And we make that legally binding. And then we also want to put in there, we want to do another document called a Medical Power of Attorney.

And that is the person that’s going to be in charge of my medical decisions.

So if you don’t believe that your family is gonna make the proper decisions for you, well then you wanna use a Medical Power appointment, to appoint someone that you think will fulfill your wishes.

And then on top of that, we also want to do this Advanced Directive to say, I don’t wanna be on life support, or I wanna be on life support for just so many days. So that’s how you can avoid that whole situation. Good question.

Question 7: What can I do to prepare for my mom’s future memory care?

All right, David from Parker. So he says that his mom is starting to get forgetful. She’s still living independently. But she, but he excuse me. Anticipates that she’s gonna need care at some point. And so he wants to know what should he do to get ahead of the ball. And to really get things prepared. Really, really good question from David.

Get Proper Documents in Order

Medical Powers of Attorney

So what do we do in this scenario? There’s a few things. So just like we were talking about before, with Brad. We want to make sure that we have our Medical Powers of Attorney in place for mom. So we wanna make sure that she’s got all that in place, so you can make decisions for her.

Financial Power of Attorney

You also wanna have a Financial Power of Attorney in place. And then finally, we wanna talk about whether or not we need to do any sort of Medicaid planning. So that’s planning, where we’re gonna plan on mom’s behalf, ahead of time.

Consider a Trust

And we’re going to say, okay we’re gonna put mom’s assets into a Trust. And we’re gonna do this to do some sort of planning, or pre-planning to protect mom’s assets from the nursing home care costs. So three different things, really four.

Advanced Directive

We didn’t say the Advanced Directive. So just to summarize, what were those four things be. We wanna do a Medical Power of Attorney. We wanna do a Financial Power of Attorney. We wanna do a Living Will, Advanced Directive. And we wanna talk about putting Trusts in place to protect mom’s assets from the nursing home.

Question 8: How do I make my estate plan iron clad?

Okay, so let’s see here. Next we have, Jim from Littleton. And this is sort of our final question here. So Jim from Littleton, how do I make my Estate Plan iron clad?

How a Clause Can Help

So what his concern is, is that someone, that is his children or whoever the beneficiaries are, are gonna have a big fight at the end of the day. Well, the way we would do that is, we’re going to use something called, a No Contest clause, or also called a Interim clause.

And all that says is that if anyone challenges our Will, and anyone challenges our Trust, then they are completely cut out. They get nothing.

And so by doing that, what happening is we create this intensive that says, “Well, if I go to the attorney and I go, well should I challenge this Will?” The attorney’s gonna say, “You can but just so you know, there’s a chance you will get nothing.” Particularly if you lose this challenge.

So you don’t want to do that. And that helps to really tempt down that in fighting between the family. Then of course we wanna make sure our Will is very clear. We wanna make sure our Trusts are very clear.

f we’re disinheriting, we wanna be very careful of how we do that, because those are the type of things that often times will give rise to battles and fights. And we wanna avoid that. We don’t want attorney’s on for everyone getting paid. And then of course, who the intended beneficiaries not get paid. It’s a really good, really good question.

Question 9: How does a healthy person plan for future long-term care?

Well, looks like we got one more here, I think that we’ll answer, this is Carrie in Highlands ranch. Okay, what she’s saying a little bit different that David’s question from before. But they’re healthy and they’re thinking about, how could they plan, in the future, for their potential need for a nursing home. Is there anything that they can do ahead of time.

Get Your Documents in Order

Well again, just like we mentioned with David. We wanna get our Financial Power’s of Attorney in place. Our Medical Power’s of Attorney. We want the full typical Estate Planning documents.

Consider Long-Term Care Insurance

If you’re young enough, you may wanna look into long term care insurance. ‘Cause that can often times be a way to pay for care. And then if you don’t have long term care insurance.

Protect Your Assets

And you don’t feel like that’s really the viable option at this point, then the conversation needs to turn around whether or not we want to do some sort of a Irrevocable Trust to protect our assets from the nursing home and those exorbitant cost.

That is a really in-depth question. It depends on what your. How much assets you have. What type of assets you have. And what that would look like in terms of your control and your ability to take money out of the Trust. And to do things like that.

But really, the most important thing is that you’re thinking about it now, and that you’re planning ahead of time. You’re getting the documents in place so you can avoid a conservatorship, or a guardianship, or we have to go to court to try to get someone, give someone the legal authority to make decisions over you.

So great, really good that you’re thinking about it. I think all of us should think about that long before we ever need it. So that way, what we want happens. And we don’t have to rely on what other people might want for us.

So that’s all the time I have today. So thanks so much for all the questions. They were really fantastic. If you’ve got any other questions, feel free to submit them. And we’ll make sure we hit them in our next live seminar.

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